Australia’s services sector showed signs of under performing in December according to the recent Australian Industry Group/Commonwealth Bank Australian Performance of Services Index.

The services index only rose 0.2 point to 46.4, its stagnant performance an indication of the slowing real estate, finance and business services market. Moreover, services sector sales inched by 1.3 points 46.9 while the new orders sub-index moved up by only 0.3 points to 45.3.

Overall, the Australian PSI was practically stagnant with only two months considered positive last year coinciding with declining retail sales figures in the country.

"This suggests that businesses are hesitating to spend in the face of fading expectations of a pick-up in sales," Australian Industry group chief executive Heather Ridout said. "Conditions certainly remain tough in the services sector with the Melbourne Cup day rise in official interest rates clearly evident at cash registers during December."

"Other recent data have shown that nervous consumers are increasingly salting their cash away for a rainy day and paying down debt in anticipation of more RBA (Reserve Bank of Australia) rate hikes over the next year," Commonwealth Bank senior economist John Peters said. “Many companies are also being weighed down by the robust Australian dollar which continues to hover near parity with the US dollar.”

In November 2010, the Reserve Bank of Australia increased the cash rate by 0.25 percent to 4.75 percent.