Australian Services Industry Index Rises to Highest in 14 Months

A gauge of Australia’s services industry rose in March to the highest level in 14 months as interest-rate cuts boosted firms linked to household spending.

The performance of services index advanced to 49.6 from 48.5 in February, Commonwealth Bank of Australia and the Australian Industry Group said in Sydney today. The last time the reading was above 50, the dividing line between expansion and contraction, was in January last year.

The data validate Reserve Bank of Australia Governor Glenn Stevens’s decision to hold rates this year after six reductions -- totaling 1.75 percentage points -- from November 2011 to December 2012 to help buttress the economy. Policy makers are trying to stimulate industries outside mining, where investment is predicted to plateau this year, and offset the drag on the economy from a high currency.

“To see the services sector edging toward expansion is welcome news and points to the gradually growing impact of successive interest-rate reductions last year,” Innes Willox, AIG’s chief executive officer, said in a statement. “Sub-sectors closely linked to household consumption are picking up while other sectors continue to struggle.”

Australia is due to hold elections Sept. 14 after Prime Minister Julia Gillard broke with tradition and announced the date early this year. The government will deliver the budget on May 14.

Respondents to the survey “cited uncertainties surrounding the upcoming federal budget and federal election as adversely affecting confidence,” AIG said in the statement.

Today’s report showed the index’s gauge for sales surged to 50.8 from 47.7, and the reading for new orders edged up to 48.8 from 48.7. The employment indicator slid to 50.2 from 51.7, the report showed.

Selling prices rose to 45.7 from 44.3, while the wages measure dropped to 53.2 from 59.8, the data showed.

Today’s report, based on a poll of about 150 companies, is similar to the U.S. non-manufacturing ISM index. The report measures sales, new orders, deliveries, inventories and employment for companies such as banks, real-estate agents, insurers, restaurants, transport firms and retailers.

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