Reserve Bank Interest Rates Unchanged For Now
Posted September 1st, 2009
and last modified May 23rd, 2012
The somewhat feared interest rate hike by the Reserve Bank of Australia has not eventuated as yet. announced today by the RBA, the interest rates are safe for now at 3%. Despite some promising signs of economic growth worldwide, many believe this to be a slow going process, spanning well into 2010.
Despite the upwards rise, effects of the crushing global economy is still showing – and will most likely continue to do so – on global financial balance sheets.
While consumer spending in Australia has been stronger than anticipated it is unlikely we see massive growth until next year at the earliest. Some say that investment opportunities might perform better than expected over the course of the next year.
On the other hand we are still facing an unemployment crisis. A weakened demand in labour force has not helped the overall situation. Credit growth also remains modest with housing credit solid and a rise in the cost of dwellings in recent months.
Business borrowing activities are slow as companies have sought to reduce leverage in an environment of tighter lending standards. While large firms were able to access credit, smaller companies felt the full force of the credit tightening.
The RBA’s Board judgement is that the present accommodative setting of monetary policy remains appropriate for the time being. It will continue to adjust monetary policy so as to foster sustainable growth in economic activity and inflation consistent with the target.
Despite the room for a deep breath right now it is highly likely still that the RBA will hike rates before the year has come to an end. When this is going to happen is just about any one’s guess right now.
On the downside for our economy, a negative export performance is expected to shave at least 0.2 percentage points from the second-quarter GDP result, when it is announced tomorrow.
The current account balance, published today, shows a blow out in the second-quarter deficit to $13.3 billion because of falling trade volumes and prices.
Source: RBA
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