AAP The Australian Financial Review 03 Apr 2012
The Reserve Bank of Australia (RBA) will be responsible for thousands of avoidable job losses if it continues to sit on its hands and does not cut interest rates immediately, a major trade union says.
The central bank board will hold its monthly board meeting on Tuesday, but economists generally expect it to keep the official cash rate steady at 4.25 per cent for another month.
But the national secretary of the Construction, Forestry, Mining and Energy Union (CFMEU) Michael O’Connor says it would be "economically irresponsible" if the central bank does nothing.
"If the RBA continues to twiddle its thumbs, we are going to see manufacturing, retail, tourism and other vital sections of the economy experiencing a severe downturn," he said in a statement on Monday.
"Such a downturn will mean job losses for thousands upon thousands of Australians."
He pointed to new data on Monday showing the manufacturing sector was contracting.
The Australian Industry Group-Price Waterhouse Coopers performance of manufacturing index was at 49.5 in March, down 1.8 points from the previous month.
A reading below 50 suggests contraction in the industry.
The RBA cut the cash rate twice in November and December last year.
"After months of inaction the RBA must surely be getting the message now," Mr O’Connor said.
"The pressure applied by Australia’s comparatively monstrous interest rates has forced key sectors of the economy to breaking point."
At the same time, Federal Treasurer Wayne Swan has indicated that this year’s budget will be a tough one, meaning the current conditions demand that the RBA acts to cut rates now.
Mr O’Connor said the central bank has a duty under the Reserve Bank Act to `best contribute to the maintenance of full employment in Australia, and the economic prosperity and welfare of the people of the Australia’.
"Leaving rates on hold tomorrow would represent a clear dereliction of this duty," he said.