March 8 (Bloomberg) -- Australia's central bank left interest rates unchanged for a 12th month after growth in Asia-Pacific's fifth-largest economy slowed.

Central bank Governor Ian Macfarlane and his board kept the overnight cash rate target at 5.5 percent today, as forecast by all 22 economists surveyed by Bloomberg News. The bank last raised rates in March 2005. Macfarlane in February said rates were more likely to increase than fall, though he didn't plan a move anytime soon.

Economists expect the bank will keep rates unchanged until at least June after wages rose less than expected in the fourth quarter and the economy, in its 15th year of expansion, grew at its slowest pace last year since 2001. Central banks in the U.S. and Europe have increased borrowing costs this year to curb inflation as economic growth recovers.

``Recent softer economic numbers suggest Australia's central bank is now unlikely to raise rates around mid-year as we previously expected,'' Tony Pearson, head of Australian economics at Australia & New Zealand Banking Group Ltd., said in Melbourne. ``Many industries in the economy are struggling.''

Just one of 21 economists surveyed forecasts a quarter-point rate increase by the end of the second quarter. A month ago, eight forecast higher rates by then.

The Reserve Bank of Australia doesn't comment when rates are kept unchanged. Macfarlane and his board have kept borrowing costs steady for a year.

Fed Rate

By contrast, the U.S. Federal Reserve has raised its benchmark rate 14 times since June 2004 to 4.5 percent. The European Central Bank on March 2 raised its key rate for a second time in three months to 2.5 percent. The Bank of Canada yesterday increased its main interest rate for the fifth straight time to 3.75 percent.

The Australian dollar traded near a nine-week low and bonds were little changed today. The currency bought 73.36 U.S. cents at 4:30 p.m. in Sydney from 73.34 cents before the decision was announced. The yield on the 6.25 percent bond maturing April 2005 was little changed at 5.36 percent.

Australia's A$870 billion ($644 billion) economy expanded a slower-than-expected 0.5 percent in the fourth quarter from the previous three months as consumer spending slowed and home building dropped, the statistics bureau reported last week. Growth of 2.5 percent in 2005 was the weakest in four years.

Building Slump

Consumer spending, which accounts for about 60 percent of the economy, rose 2.9 percent in the second half of last year from a year earlier, the smallest increase since the second half of 2001.

``We don't want rates to go up as it is tough for retailers out there,'' Aubrey Zelinsky, managing director of Franklins, a chain of Australian supermarkets owned by South Africa's Pick'n Pay Stores Ltd., said in an interview.

Franklins has 79 stores in New South Wales state and employs 2,500 people.

Among companies experiencing slowing demand, Coles Myer Ltd., Australia's biggest retailer, posted its weakest sales growth in at least six years in the three months ended Jan. 29. West Australian Newspapers Ltd., the publisher of Perth's only daily, last month said first-half profit almost halved as advertising demand slowed.

Boral Ltd., the largest seller of building materials in Australia, last month said profit in the six months ended Dec. 31 fell 8.8 percent as a housing slowdown cut demand for bricks and plasterboard.

Inflation Outlook

Home-building approvals granted in January slumped 1.9 percent from December to the lowest since April 2001, the statistics bureau said last week.

By contrast, business investment surged 9.2 percent in the fourth quarter from the previous three months. Miners such as BHP Billiton and Rio Tinto Group are expanding production as global demand for commodities surges, led by China.

``Business investment is the only cylinder firing in the Australian economy,'' Adam Carr, senior economist at St.George Bank Ltd., said in Sydney. ``The prudent thing for the bank to do is hold off and see how things pan out on the inflation front.''

The central bank last month lowered its forecast for underlying inflation to peak at 2.75 percent this year from a previous forecast of 3 percent. The bank aims to keep annual price increases between 2 percent and 3 percent.

Macfarlane warned that, with the jobless rate close to a 29- year low, wage increases may stoke inflation more than the central bank forecasts. A report has since shown wages rose a less-than- expected 0.9 percent in the fourth quarter after increasing 1 percent in the previous three months.

Twelve of 21 economists surveyed by Bloomberg News forecast interest rates will be kept unchanged this year, seven expect an increase by December and two a cut.

To contact the reporter for this story: Victoria Batchelor in Sydney at vbatchelor@bloomberg.net.

Last Updated: March 8, 2006 00:39 EST