Rates hold to hurt business

IT'S that time of the month when mortgagees, credit card holders and others in debt watch anxiously to see if the Reserve Bank of Australia changes the rate.

The RBA's decision to keep the cash rate on hold at 4.25% will be good for people in debt, but not so much for businesses.

Capricorn Investment Partners financial advisor Justin Baiocchi said people were still carrying a fair bit of debt, leaving less demand for services or goods.

"If they are not getting relief from the Reserve Bank, they are forced to cut their spending," he said.

The last rate cut was in December and it was cut by 25 basis points.

"Consumer confidence is at a very low level," Mr Baiocchi said.

"That also translates into less demand for goods or services."

He said businesses in small towns would be struggling as a result.

Mr Baiocchi said there were some controversial comments against the RBA's decision.

"The RBA is of the view that the resource boom is more than offsetting the weakness in the rest of the economy," he said.

Mr Baiocchi said comments included the boom's benefits were not widespread, but concentrated.

He said even within those concentrated areas, the money wasn't necessarily translated to more money being on groceries.

"Certain people are doing very well because they are on high money," Mr Baiocchi said. "And some businesses are doing well. But it's not necessarily filtering down to the average Joe."

He said he did not think big banks would go against the RBA's rate hold this month.

Topics:  business, interest rates, rba




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