Interest rates pose threat: advisor

THE Reserve Bank is applying a heavy-handed approach to the economy, warned CPA Australia after the recent announcement of a further 0.25 percentage point increase in interest rates.

The interest rate increase places the Australian economy in a precarious position according to CPA Australia small business advisor Kerrie Clayton.

“This is the third interest rate rise in six months and the economy isn’t getting a chance to cool down.

“While economic growth remains robust, business investment is in decline, retail sales are low and forward employment indicators are subdued.

“The Reserve Bank is attempting to slow the economy but the Federal Government’s proposed tax cuts may well have an expansionary impact.

“To avoid further risk of exacerbating inflationary pressures, the Federal Government should tighten its purse strings in the upcoming budget.

“Small business will wear the brunt of this latest interest rate increase.

“Small businesses are already feeling the pinch with higher borrowing costs, cash flow squeezes and a decline in business investments.

“In the longer term, the rising interest rate will see small business facing weaker domestic demand.

“With the Reserve Bank’s efforts to slow down the economy, small business may soon be saying goodbye to the buoyant conditions they are currently experiencing.”