Rate cut may help construction industry

Derek Rose
(Australian Associated Press)

 

Historically low interest rates now in place in Australia will be a particular boon to the construction, manufacturing and retail sectors, economists say.

The Reserve Bank of Australia cut rates by 25 basis points to 1.25 per cent on Tuesday, meaning businesses will pay lower costs to borrow money.

Industry research company IBISWorld said on Wednesday that the rate cut would help the construction industry with improved conditions for house and multi-unit apartment construction.

It will also help land development and real estate companies as well as some retail companies, IBISWorld projected.

“A lower cash rate will help curb weakening consumer spending,” IBISWorld analyst Tommy Wu said.

Car dealerships and furniture retailers will likely benefit, Mr Wu said.

Australian Industry Group chief executive Innes Willox said that industry leaders were hoping the rate cut led to renewed economic momentum.

“There are clear pockets of slowing demand as a result of drought, decline in housing construction, falls in house prices, tightening business credit, rising energy prices and concerns about global trade tensions,” he said.

At 1043 AEST the industrial sector of the ASX 200 was up 1.37 per cent, along with a broad rally in the market.

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