Queensland’s peak business lobby group says the latest interest rate rise may halt a full scale economic recovery.

The Reserve Bank increased official interest rates by 0.25 of a percentage point to 4.25 per cent yesterday.

But Chamber of Commerce and Industry Queensland (CCIQ) says the increase was not needed now.

CCIQ president David Goodwin says the nation’s private sector needs a boost.

“Probably 75 per cent of the growth in GDP [gross domestic product] last year was stimulus-boosted, so really the Chamber’s sort of looking to see that the Reserve Bank stay on pause for a while, let some momentum pick up in the private sector, before pulling the wind out of the sails with interest rate rises,” he said.

No ‘breathing space’

Master Builders, the state’s peak body for housing and construction, also says an interest rate rise has taken away the breathing space that both industries needed.

Dwelling approvals rose in Queensland in February mainly because of public sector projects, but privately funded approvals fell.

Master Builders spokesman Paul Bidwell says yesterday’s rate rise is a setback.

“Our survey of members across the state reflects that the builders are optimistic at the latter part of this year, so the next few months are going to be tough,” he said.

“”What we need is some breathing space for the industry to stabilise and the interest rate rise, it just doesn’t help in that regard.”

Mr Bidwell says private sector approvals need to rise.

“What we are waiting for is the upgraders – those people who want to upgrade their homes, as well as the investors, to step back into the market,” he said.

“At the moment, conditions aren’t right for that to happen and unfortunately with the Reserve Bank increasing interest rates, that doesn’t help matters in that respect.”

Housing pressure

The Real Estate Institute of Queensland (REIQ) says the latest interest rate rise will put more pressure on the housing market.

It says the state’s housing market was already “correcting” before yesterday’s interest rate rise.

REIQ spokeswoman Pamela Bennett says the increase was not needed.

Ms Bennett says the decision will put more strain on first home buyers, investors, and people who want to upgrade their homes.

“There’s certain sectors of the market that just can’t take that pressure,” she said.

“I believe that small business operators will be even further impacted, which will affect employment and it has an ongoing effect.

“It also makes a considerable impact on small business – finance is already tight for them and having another 25 base points rise is just putting pressure on them.”

However, a University of Southern Queensland (USQ) academic says the latest interest rate rise should not affect employment in small and medium businesses.

Professor Allan Layton says the rate is still historically low and he does not expect it to lessen consumer confidence.

“Interest rates rises increase the cost of doing business but also if economic activity is quite buoyant, there’ll be a whole lot of reasons why businesses will want to retain their staff and maybe add to their staffing levels as the economy really starts to pick up again,” he said.

Retirees happy

But independent retirees say not everyone is unhappy with the Reserve Bank’s decision as they rely on income generated by investments.

The Association of Independent Retirees Gold Coast president, Bill Kendall, says members were severely affected by the global financial crisis and any rate rise is welcome.

“We look at it that it’s helping us to slowly get over the financial meltdown over the last two years,” he said.

“The independent retirees lost a lot of money in the meltdown and these increase in the interest rates are slowly going to help in getting over that problem.

“The problem is that we’re looking for income – everything seems to be going up in price nowadays so we’re looking for income all the time and also with some kind of capital growth to keep our capital, to preserve our capital, until actually we can carry on for another 20 years of retirement.”