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RBA set to announce rates decision -

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RBA set to announce rates decision

Reporter: Phillip Lasker

PHILLIP LASKER: Has he or hasn't he? The Reserve Bank Governor, Ian Macfarlane, and his board met
today. The interest rate decision will be revealed in the morning.

HEATHER RIDOUT, AUSTRALIAN INDUSTRY GROUP: I believe the bank is keen to put up rates by another 25
basis points. They've indicated a tightening bias and they're keen to do it and they're worried if
they don't do it tomorrow they may not get a chance.

PHILLIP LASKER: Because there's a view the RBA wants to stay clear of the headlines in the lead up
to the May federal budget. It's a budget likely to be boosted by increased petrol excise courtesy
of record-high oil prices. Although that was not the Prime Minister's focus as he lobbied against a
rate rise, saying rising fuel costs were already doing the Reserve Bank's bidding.

JOHN HOWARD, PRIME MINISTER: That is something that's having a direct impact on consumer demand,
because if you have to spend all those more dollars a week on petrol you don't have it to spend on
something else. That's ordinary common sense. That is one of the factors that I am sure the Reserve
Bank will take into account.

PHILLIP LASKER: But should the RBA choose to ignore the Prime Minister and raise rates, the federal
opposition has its own take. It will be because of federal government policy - their spending
spree.

WAYNE SWAN, SHAWDOW TREASURER: Their $66 billion spending spree during the election campaign and
their inattention to the skills crisis.

PHILLIP LASKER: People like nickel producer Mark Ashley is facing the sort of skills crisis that
makes the Reserve Bank nervous about inflation.

MARK ASHLEY, LIONORE MINING INTERNATIONAL: Well, we're seeing wage increases of between 10 per cent
to 20 per cent per year in some instances at the moment.

PHILLIP LASKER: But today's Chamber of Commerce and Industry survey shows business conditions and
confidence still sound, but deteriorating. It's a trend confirmed by the National Australia Bank's
Alan Oster who puts out a business survey often referred to by the Reserve Bank.

ALAN OSTER, NATIONAL AUSTRALIA BANK: After it peaked around about October-November last year, it
started to erode away. I think you need to be a little bit careful - there a lot of seasonal
factors there - but at the end of the day, I think business conditions and confidence is basically
eroding at present.

PHILLIP LASKER: The Reserve Bank Governor said earlier this year that Australians would have to get
used to growth rates starting with 2 per cent or 3 per cent rather than 3 and 4 per cent. But
what's making many so nervous is the last growth rate started with 1 per cent. And the previous
rate rises are making their mark on borrowers and consumers. Phillip Lasker, Lateline.