Official figures have confirmed that for the month of December, the service industry across Australia managed to halt all together, as companies reported a fall in new orders and suppliers cut back on deliveries.

A fall of 2.5 points to a reading of 50 was recorded by the performance of services index, a further drop from November's recorded fall of 2.3, as has been confirmed by the Commonwealth Bank of Australia and the Australian Industry Group.

A number of below 50, means that the industry has started to shrink.

The weak demand for services has come after central bank Governor Glenn Stevens announced his plans to hike the benchmark lending rate on December 01 for the third consecutive month.

The report released “confirms that the recent improvement in the services sector lacks traction and adds weight to arguments for a pause to interest rates. The business environment remains a challenge for many firms, particularly those in the consumer-related sectors of retail trade", said Australian Industry Group Chief Executive Heather Ridout.

In October, the index had managed to rise to hit a 19 month high before recording declines in November and December.