Interest Rate Announcement - Reserve Bank of australia

[Guest Jim Scott]

The following media release has been issued today by the Reserve Bank. This comes as something of a surprise to the financial markets, as most commentators had predicted rates would be increased by 0.25% today. So the decision to keep rates on hold is very interesting.

 

I think it is likely we will see rates increase by circa 1.0% this year, drip fed gradually with the first of these likely to come next month. Beyond that, it all depends on economic data that is yet to be released...

 

Media Release

Number 2010-02

Date 2 February 2010

Embargo For Immediate Release

Statement by Glenn Stevens, Governor: Monetary Policy Decision

 

At its meeting today, the Board decided to leave the cash rate unchanged at 3.75 per cent.

 

The global economy is growing, and world GDP is expected to rise at close to trend pace in 2010 and 2011. The expansion is still likely to be modest in the major countries, due to the continuing legacy of the financial crisis, resulting in ongoing excess capacity. In Asia, where financial sectors are not impaired, recovery has been much quicker to date, though the Chinese authorities are now seeking to reduce the degree of stimulus to their economy. Global financial markets are functioning much better than they were a year ago. Credit conditions nonetheless remain difficult in the major countries as banks continue to face loan losses associated with the period of economic weakness. Concerns regarding some sovereigns have increased.

 

In Australia, economic conditions have been stronger than expected, after a mild downturn a year ago. The effects of the fiscal stimulus on consumer demand have now faded, but household finances are being supported by strong labour market outcomes and a recovery in net worth. Public infrastructure spending is now boosting demand, as is an upturn in housing construction. Investment in the resources sector is strong. The rate of unemployment appears to have peaked at a much lower level than earlier expected.

 

Inflation has, as expected, declined in underlying terms from its peak in 2008, helped by the fall in commodity prices at the end of 2008, a noticeable slowing in private‑sector labour costs during 2009, the recent rise in the exchange rate and a period of slower growth in demand. CPI inflation has risen somewhat recently as temporary factors that had been holding it down are now abating. Inflation is expected to be consistent with the target in 2010.

 

Credit for housing has been expanding at a solid pace, and dwelling prices have risen significantly over the past year. Business credit, in contrast, has continued to fall, as companies have sought to reduce leverage, and lenders have imposed tighter lending standards and in some cases sought to scale back their balance sheets. The decline in credit has been concentrated among large firms, which generally have had good access to equity capital and, more recently, to debt markets; credit conditions remain difficult for many smaller businesses.

 

With the risk of serious economic contraction in Australia having passed, the Board had moved at recent meetings to lessen the degree of monetary stimulus that was put in place when the outlook appeared to be much weaker. Lenders have generally raised rates a little more than the cash rate over recent months and most loan rates have risen by close to a percentage point. Since information about the early impact of those changes is still limited, the Board judged it appropriate to hold a steady setting of monetary policy for the time being.

 

Interest rates to most borrowers nonetheless remain lower than average. If economic conditions evolve broadly as expected, the Board considers it likely that monetary policy will, over time, need to be adjusted further in order to ensure that inflation remains consistent with the target over the medium term.

[Guest Chelseadownunder]

Hi Jim

I am amazed how many mortgage consultants are on this site now.

Hope things are going well for you.

Steve

[Guest Guest5035]

I am amazed how many mortgage consultants are on this site now.

 

Steve

 

 

The BMW'S must need replacing.

 

Stevo

[Guest Chelseadownunder]

awwwww that was a bit above the belt.

Mortgage advisers have hit the wall in the UK, probably all driving smart cars now !!!!

Isnt it weird that in this country you dont a BMW right up your *rse as in the UK.

God I miss that.......not

[The Flinns]

The BMW'S must need replacing.

 

Stevo

 

The closest I got was a BMX.

[ratters2005]

Hi Jim,

Would like to say that Jim helped us buy our first home and is busy trying to sort out another purchase for the rental market.

He certainly goes far and beyond what I would expect him to do, and takes his time to help you understand what all the options are.

Jim, Thanks for your visit a couple of weeks ago and we are looking forward to hearing from you soon.

Highly recommend Jim Scott for your Mortgage advice and to help you polish of your PG Tips

[Guest Jim Scott]

Hi Steve, all good here thanks, I hope all is well with you too. I guess there is room for all of us on this site, provided we contribute useful information and the moderators are ok with it..

 

Many thanks Ratters for the kind feedback.!

 

And for Steve, no BMW here (or BMX for that matter ). I drive an australian built car, proudly helping employ some of the folks in elizabeth.... Well, part of 1 person probably..

[Guest Chelseadownunder]

Yeh Elizabeth thats where they make the cars and take the wheels of you car isnt it LOL.

Only joking guys.......

[Guest Lulujim]

Hi Jim,

Would like to say that Jim helped us buy our first home .............Highly recommend Jim Scott for your Mortgage advice and to help you polish of your PG Tips

 

 

I agree completely. Jim helped us buy our house and sorted the whole thing out to ensure it happened without a hitch. He also recommeneded surveyors, insurance brokers etc etc.. great when you're new to a country and don't know anyone. Highly recommended and would use again without hesitation!