Today's interest rate rise will increase the cost of doing business but keeping inflation in check is necessary, the Chamber of Commerce and Industry of Western Australia says.
Today's interest rate rise will increase the cost of doing business but keeping inflation in check is necessary, the Chamber of Commerce and Industry of Western Australia says.
The Reserve Bank of Australia increased rates by 25 basis points to 6.5 per cent today, citing recent strong consumer price index readings, capacity constraints and a tight labour market.
CCI Chief Economist John Nicolaou said the increase in official interest rates was "unfortunate" and would increase the cost of doing business.
However, he said the CCI supported the RBA assessment that inflation needed to be kept in check.
"It is regrettable the decision to increase rates will have an impact on many West Australian households that are struggling to service large mortgages," he said.
"However, a quarter of one per cent increase is considered modest and CCI believes a vast majority of businesses and households will be able to absorb the extra cost thanks largely to the state's booming economy."
Meanwhile, Small Business Minister Margaret Quirk has expressed concern for small business owners in the wake of the latest interest rate rise.
"The effects of five interest rate rises since the last Federal election will now start to show in the spending power of over-committed households," she said.
"While the small business sector has been enjoying the benefits of the State's buoyant economic conditions and are in a more secure position than other States to ride the wave of interest rate hikes, they should be cautious of over-commitment."
The Minister suggested small business operators re-assess their operating costs and make changes where necessary.
The full text of a CCI announcement is pasted below
Today's increase in official interest rates is unfortunate as it will add to the cost of doing business across the country.
However CCI supports the Reserve Bank's assessment that inflation needs to be kept in check.
The RBA's decision announced today to increase interest rates is necessary as a result of the strength of the national and local economies. This is particularly the case in WA where the red hot economy is causing prices and the cost of living to rise.
While any interest rate rise is going to cause pain to business and the Australian community, a far greater danger is posed by higher inflation.
It is regrettable the decision to increase rates will have an impact on many West Australian households that are struggling to service large mortgages. However a quarter of one per cent increase is considered modest and CCI believes a vast majority of businesses and households will be able to absorb the extra cost thanks largely to the state's booming economy.
It needs to be remembered why the RBA has taken this decision. The booming economy, prolonged wages growth and strong retail spending have all placed upward pressure on inflation. If these pressures are not brought under control the ongoing strength of the country's economy could be placed at risk.
Hopefully the Reserve Bank's decision to increase rates will keep ease the inflationary burden and therefore avoid the need for further rate rises.
The full text of an announcement from Ms Quirk's office is pasted below
Small Business Minister Margaret Quirk has expressed concern for small business owners in the wake of the latest interest rate rise.
"The effects of five interest rate rises since the last Federal election will now start to show in the spending power of over-committed households," she said.
"Small business can expect this latest increase to result in a tightening up of customers spending patterns.
"The decision of the Reserve Bank of Australia to raise interest rates by 0.25 per cent will impact on consumers, and small businesses need to prepare for this.
"While the small business sector has been enjoying the benefits of the State's buoyant economic conditions and are in a more secure position than other States to ride the wave of interest rate hikes, they should be cautious of over-commitment."
The Minister suggested small business operators re-assess their operating costs and make changes where necessary.
"Now is a good time for small business operators to review their financial arrangements, rationalise long and short term loans for the most cost-effective outcome, and, if necessary, adjust their profit margins," Ms Quirk said.
"Renegotiating bank finance can now be done without incurring mortgage duty on existing loan amounts, following the State Government's tax relief measures introduced in January last year."
Ms Quirk said it was likely that many Western Australians would have taken advantage of the State's high property prices and borrowed against equity, either to put into their business, or for household spending.
"Small business operators who are concerned about the impact of this interest rate rise on their business, should use the services provided by the State Government through the Small Business Development Corporation and the State-wide Small Business Centre network for impartial, confidential business advice."
