Innes Willox … call for rate cuts
Australia's manufacturing sector contracted for the 11th straight month in January, prompting a call for further interest rate cuts.
The latest Australian Industry Group Australian Performance of Manufacturing Index (Australian PMI) was down 4.1 points to 40.2 in January.
Readings below 50 indicate a contraction in activity.
A cautious outlook, soft demand and the strong Australian dollar were cited as factors affecting growth in the month.
New orders across manufacturing contracted for the eleventh consecutive month – down 6.3 points to 39.4.
The only sub-sector to record an expansion was wood and paper products, which recorded an index level of 63.7.
Australian Industry Group Chief Executive, Innes Willox, said successive interest rate reductions by the Reserve Bank of Australia (RBA) have not yet turned conditions around.
“The rate cuts to date have not offset the combined impacts of the substantial contraction in fiscal policy along with the structural challenges due to more intense international competition, the high dollar, ongoing increases in energy costs and increasingly uncompetitive unit labour costs, Mr Willox said.
“Fortunately, the Reserve Bank has scope to further reduce interest rates to help reverse the slowing in the domestic economy."
The RBA cut the cash rate 1.75 percentage points between November 2011 and December 2012, bringing it to its current level of 3.0 per cent.
