Australian Services Sector Contraction Slowed in March on Rates

By Jacob Greber

April 3 (Bloomberg) -- Australia’s services industry shrank last month at a slower pace as the lowest benchmark interest rate in 45 years and cash grants increased demand for property.

The performance of services index rose 3.4 points from February to 35.6, Commonwealth Bank of Australia and the Australian Industry Group said in Sydney today. The index was below 50 for a 12th month, indicating the sector is contracting.

Central bank Governor Glenn Stevens has slashed borrowing costs by a record four percentage points since September to stoke an economy that unexpectedly shrank in the fourth quarter for the first time in eight years. Demand for new homes has strengthened after the government tripled a grant in October for first-time buyers of new dwellings to A$21,000 ($15,000).

“Confidence remains under siege from rising unemployment and an uncertain outlook for the domestic and world economies,” said Heather Ridout, the industry group’s chief executive.

Today’s report, which is based on a poll of about 200 companies, is similar to the U.S. non-manufacturing ISM index. It measures sales, new orders, deliveries, inventories and employment for companies such as banks, real estate agents, insurers, restaurants, transport companies and retailers to compile the overall performance of services index.

The speed of contraction slowed in five sectors, including property and business services, “which appears to have benefited from a boost to the first homebuyers grants and cuts to the official interest rate,” the report said.

To contact the reporter for this story: Jacob Greber in Sydney at jgreber@bloomberg.net