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Australia April Services Industry Gauge Drops by Most in a Year

May 3 (Bloomberg) -- A gauge of Australia’s services industry dropped in April by the most in a year as sales, new orders and employment declined amid weakening domestic demand.

The performance of services index fell to 44.1 from 49.6 in March, the Australian Industry Group and Commonwealth Bank of Australia said in Sydney today. The 5.5 point drop was the biggest since April 2012 and the gauge hasn’t been above 50, the dividing line between expansion and contraction, since January last year.

Traders are pricing in a better than 50 percent chance Reserve Bank of Australia Governor Glenn Stevens will lower the benchmark interest rate to a record 2.75 percent next week after six reductions -- totaling 1.75 percentage points -- from November 2011 to December 2012. The government will deliver its budget on May 14 that is likely to contain measures to plug an erosion of tax revenue that reflects the nation’s weaker economy.

“The result highlights the low levels of business confidence, the impact of actual cuts in government spending and fears of further spending cuts in the coming federal budget,” Innes Willox, AIG’s chief executive officer, said in a statement. “In the face of general weakness across large sections of the domestic economy, now is not the time to be cutting back on aggregate spending and raising taxes.”

To contact the reporter on this story: Michael Heath in Sydney at mheath1@bloomberg.net

To contact the editor responsible for this story: Stephanie Phang at sphang@bloomberg.net

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