Analysts forecast on Monday that the Reserve Bank of Australia will not increase interest rates for the rest of 2011. They based their prediction on reports that inflation rate dropped 0.1 per cent in August.

For the first six months of 2011, prices of fruits and vegetables went up because of low supply caused by the natural calamites that hit Australia in summer. As a result, inflation rate grew 0.3 per cent in July.

Adding the August inflation rate showed that consumer price index increased 2.9 percent, still lower than the 3.2 percent from January to July 2011. The August rate falls within the upper end target set by the Reserve Bank of Australia (RBA), which is from 2 to 3 per cent.

"The signal from our inflation gauge so far is that the acceleration in prices evident in the first half of this year may have taken a breather in the September quarter," The Herald Sun quoted TD Securities head of Asia-Pacific research Annette Bleacher.

"Looking ahead, we have confirmation that an outsized resource-led private investment boom remains on track, and productivity remains extremely weak, hence inflation pressures remain firmly tilted to the upside for 2012," Ms Bleacher said.

Besides Ms Bleacher, 11 other economists surveyed by Herald Sun agreed that RBA would keep the benchmark lending rate at 4.75 per cent when the reserve bank's board meets on Tuesday and releases its monthly interest rate decision.

Despite the forecast, the Victorian Employers' Chamber of Commerce and Industry (VECCI) even asked the RBA to reduce key lending rates. The chamber cited businesses' struggle with the effect of the rising Australian dollar, higher labour costs and ongoing international uncertainty as the reasons behind their request.

"While there isn't much that can be done about many of the international factors affecting Australian business at the moment, the RBA can ease cash flow pressures on small business by cutting interest rates," VECCI Chief Executive Mark Stone told The Sydney Morning Herald.

"Reducing interest rates would also provide a fillip to consumer confidence, which is essential to the profitability of small business," Mr Stone added.

Mr Stone proposed that for the federal government to make up for a interest rate reduction, it could improve labor productivity through a review of workplace regulations, cut in expense and debt, return to a budget surplus and reduce red tape.