Wednesday, September 02, 2009
(Yes I know this is different from what I wrote earlier. Try to work why.)
The Reserve Bank has given borrowers just months to get their affairs in order ahead of a rate rise, declaring that the present low interest rates are appropriate only "for the time being" a qualification absent from its previous announcements and designed to indicate that a rate hike is imminent.
Treasurer Wayne Swan yesterday accepted the inevitability of a rate hike, telling reporters in Canberra "rates are at emergency levels right now, and of course at some stage in the future they can be expected to move".
The statement released after yesterday's board meeting also replaced the usual reference to the need to "monitor conditions" with a reference to the need to "continue to adjust" monetary policy, the first such reference since rates were last moved in April.
Opinion among analysts yesterday coalesced around a rate hike at the Bank's November Melbourne Cup day meeting followed by another in December, pushing the Bank's cash rate up from its historic low of 3 per cent to 3.5 per cent, and pushing the standard variable rate to 6.3 per cent; adding $90 per month to the cost of servicing a $300,000 mortgage by Christmas...
The board of the Bank is itself uncertain about the timing of the
hike, but has not ruled out an earlier hike next month if economic
data continues to surprise on the upside.
The Bank will be paying special attention to the economic growth
figures for the June quarter to be released today and to the
August employment figures to be released next Thursday as it searches
for signs of a even stronger than expected recovery.
It believes Australia's economy is already performing more strongly
than it expected, enabling it to move rates away from their present
"emergency setting" in the months ahead.
If it sees signs that the economy is even stronger, it'll remove the
low rates more quickly. Only serious signs of renewed weakness would
encourage it to leave rates at their present 50-year lows.
The Bank was buoyed yesterday by news of a further 7.7 per cent
increase in building approvals in July, the fifth such increase in six
In NSW approvals surged 19 per cent, spurred by a 47 per cent
jump in approvals for new apartment buildings.
Trade figures showed Australia's export income tumbling 13 per cent in
the June quarter on the back of sharply lower prices, but export
volumes were up an encouraging 1 per cent and import volumes up 2 per
Treasurer Wayne Swan said the figures highlighted the fragility of
Australia's economic recovery and cast doubt on whether today's
economic growth figure would be positive.
"We certainly hope it will be positive," he said. "But what these
figures absolutely underscore, is the importance of keeping in place
our economic stimulus."
"If the stimulus were withdrawn now, as the Opposition wants, that
would be a recipe for much higher unemployment. There can be no room
for complacency in the global environment in which we find ourselves."
Published in today's SMH and Age