May 05, 2010

Survey shows return to two-speed Australian economy

ABC.net.au


Australia's 'two-speed economy' is reflected in the latest private measure of the services sector.

The Australian Industry Group - Commonwealth Bank Performance of Services Index rose 3.4 points in April to 52.3, which means the sector expanded that month.

But the increase was driven by the infrastructure, construction and mining sectors, while consumer related services are struggling.

The chief executive of the AI Group, Heather Ridout, says the recent run of interest rate rises is weighing on some parts of the economy, such as the consumer sector, more than others.

"Overall I think the economy is recovering but it is not yet recovered, and we do have to really watch that some sectors aren't going to be left behind in the rush to try and put a lid on inflation or put a lid on growth," she said.

She added that sectors such as retail trade, accommodation, cafes and restaurants are still shrinking.

"Yesterday's interest rate rise coming on top of five others is certainly weighing on the [consumer-related] sector, and we would encourage the Reserve Bank now to sit and wait to see the impact of the rate rises they've got in the bank so far, because they're clearly having a big impact on consumers."