Newspaper article Sunshine Coast Daily (Maroochydore, Australia)

Rates Certain to Rise; but the Timeframe Keeps Commentators Guessing

Newspaper article Sunshine Coast Daily (Maroochydore, Australia)

Rates Certain to Rise; but the Timeframe Keeps Commentators Guessing

Article excerpt

Byline: Kim Christian of AAP

INTEREST rates are going up this year a that's the consensus among those with an eye on the market.

But commentators are split about when the screws will begin to tighten for borrowers and some benefit passed onto savers.

Bullish commentators point to the likely onset of full employment early next year as mining investment skyrockets, thereby forcing the central bank to put a dampener on the party to make sure the economic boom doesn't get out of hand.

Those with a more pessimistic view of the economy say we'll be waiting at least six months for a rate hike due to sluggish economic growth and an inflation rate that appears to be under control for the moment.

All the major Australian banks raised their lending rates by more than the Reserve Bank of Australia in November, despite widespread condemnation by the government and borrowers.

TallShip Investments head of research Ray Attrill predicts there will be a adecent pausea before the commodities boom takes off and the RBA resumes its monetary tightening.

aThat's partly because of how much the banks laid on top in November, so it looks more like one and done for now,a Mr Attrill said.

aThat was the message RBA governor Glenn Stevens was giving in his parliamentary testimony a few weeks ago.a

In the wake of the RBA's 0.25 percent interest rate rise in November, Australian shoppers have been reluctant to open their wallets, while potential property purchasers re-examine higher borrowing rates charged by the major banks.

House prices are now relatively flat, making it hard to believe that only a year ago the nation was experiencing a housing boom in the midst of then historically low interest rates.

The cash rate a year ago was 100 basis points below the current level of 4.75%.

Monetary tightening over 2010 came as the nation prepared for a commodities boom that is now beginning to break trading records because of China and India's insatiable appetite for Australian iron ore and coal. …

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