Interest rates up 0.25%, hits working families
May 4, 2010
The Board of the Reserve Bank of Australia this afternoon has raised its cash rate by 25 basis points to 4.5%, the third straight month it has done so and the sixth increase since October.
The interest rate hike takes interest rates back their highest level since the end of 2008.
The hike was widely expected, especially as the announcement was only one day after a report indicated property prices in Sydney had risen around 20% in the last 12 months.
The 0.25% rise will add around $46 per month to the average working family’s mortgage of $300,000.
The governor of the Reserve Bank, Glenn Stevens justified the banks positions, saying that Australia’s terms of trade are rising by more than earlier expected, and would probably regain the peak seen in 2008.
In an indication that the speech was written before last Sunday, when the Federal Government slapped on 40% tax on the big miners, Mr Stevens said that this would add to incomes and ‘foster a build-up in investment in the resources sector.’
Mr Stevens also acknowledged, and ignored, mitigating conditions against an interest rate rise.
”New loan approvals for housing have moderated over recent months as interest rates have risen and the impact of large grants to first-home buyers has tailed off,” Mr Stevens said.
”Nonetheless, at this point the market for established dwellings is still characterised by considerable buoyancy, with prices continuing to increase over recent months.”
Further, Mr Stevens said that while Europe was racked with uncertainty over the unfolding Greek debt crisis, it was not having a contagion effect outside Europe.
Referring to inflation, Mr Stevens said that while inflation was down from 2008 peaks, it was expected be within the top end of the target 2-3% range over the coming year.
The interest rate hike takes interest rates back their highest level since the end of 2008.
The hike was widely expected, especially as the announcement was only one day after a report indicated property prices in Sydney had risen around 20% in the last 12 months.
The 0.25% rise will add around $46 per month to the average working family’s mortgage of $300,000.
The governor of the Reserve Bank, Glenn Stevens justified the banks positions, saying that Australia’s terms of trade are rising by more than earlier expected, and would probably regain the peak seen in 2008.
In an indication that the speech was written before last Sunday, when the Federal Government slapped on 40% tax on the big miners, Mr Stevens said that this would add to incomes and ‘foster a build-up in investment in the resources sector.’
Mr Stevens also acknowledged, and ignored, mitigating conditions against an interest rate rise.
”New loan approvals for housing have moderated over recent months as interest rates have risen and the impact of large grants to first-home buyers has tailed off,” Mr Stevens said.
”Nonetheless, at this point the market for established dwellings is still characterised by considerable buoyancy, with prices continuing to increase over recent months.”
Further, Mr Stevens said that while Europe was racked with uncertainty over the unfolding Greek debt crisis, it was not having a contagion effect outside Europe.
Referring to inflation, Mr Stevens said that while inflation was down from 2008 peaks, it was expected be within the top end of the target 2-3% range over the coming year.
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