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The Reserve Bank has again left the official cash rate on hold at 3.5 percent, citing on trend inflation and growth as well as a rise in the number of businesses applying for credit.

According to RBA Governor Glenn Stevens, the majority of indicators suggest growth is running close to trend thanks to large rises in capital spending in the resources sector. The story is similar for inflation.

“Inflation remains low, with underlying measures near 2 percent over the year to June, and headline CPI inflation lower than that,” Stevens said.

Stevens said as a result of the Board’s earlier decisions, borrower interest rates are slightly below their medium-term averages, the effect of which is beginning to be felt in financial systems.

“The impact of those changes is still working its way through the economy, but dwelling prices have firmed a little and business credit has picked up this year,” he added.

Commenting on the rates decision, Australian Retailer’s Association executive director Russell Zimmerman said recent retail trade figures from the Australian Bureau of Statistics show many households are beginning to feel the financial pinch again.

“July figures showed household budgets were stretched to the limit as the effects of taxes and revenue hikes introduced in the federal budget were felt for the first time,” he said.

“For retailers moving in their stock for spring, consumers under undue mortgage stress could lead to disastrous consequences, especially since the sector is currently seeing little relief from issues affecting business viability such as tenancy, wages and the GST threshold,” he added.

Retail trade fell 0.8 percent in July, but most economists were expecting it would only dip by 0.2 percent.

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Lorna Brett

Lorna Brett

Lorna was Dynamic Business’ Social Web Editor in 2011/12. She’s a social media obsessed journalist, who has a passion for small business. Outside the 9 to 5, you’re likely to find her trawling the web for online bargains, perfecting her amateur photography skills or enjoying one too many cappucinos. You can follow her on <a href="https://twitter.com/#!/dynamicbusiness">Twitter @DynamicBusiness</a>

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