My prediction is that they will increase (probably by 0.25% - the RB doesn't like giving too much of a shock all at once.)
Interest rates rose in May and August by a total of 0.5%.
Current economic data includes:
- an increase in the number of full-time jobs
- an increase in retail spending so far of 6% over the last 12 months
- an increase in prices of 4% over the last 12 months
- an increase in "average weekly earnings" of 3.5%
- an expected recession within the farm sector, which will drive regional towns and cities towards recession
- a 13.8% increase (over the last 12 months) in housing debt, but a slight decline in new housing approvals for August
Australia has traditionally also had
- a high marginal propensity to spend. That is, we tend to spend most of whatever extra money we get. Many received tax cuts in the budget this year, and the number of people receiving the "baby bonus" has increased.
- large increases in retail spending over the Christmas/New Year period.
Despite the recession (official or otherwise, I believe it exists) in many rural and regional centres, I think the increased inflationary pressures from an expanding workforce, capital investment expenditure and retail demand will heavily influence the Reserve Bank.
I think interest rates will rise in November.
The Analyst
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