rates kept on hold

RBA keeps rates on hold



Jesse Hogan
June 7, 2006 - 9:30AM
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Homeowners have been spared a second consecutive interest rate rise after the Reserve Bank's confirmation this morning the benchmark cash rate is unchanged.

The bank's board made its decision at its monthly meeting yesterday, but chairman Ian Macfarlane — in keeping with tradition — did not reveal the outcome until 9.30am today.

The decision to keep interest rates steady at 5.75 per cent was expected, with 23 leading economists surveyed prior to the announcement all predicting rates would be unchanged.

It also allayed concerns the Government's $36.7 billion income tax cuts revealed in last month's federal budget would increase inflationary pressure on the Australian economy and trigger another rise.

The bank's decision to lift interest rates at its last meeting caused variable rate home loan repayments in Victoria to increase by an average of $8 a week.

At the time, Mr Macfarlane said increasing levels of consumer spending, household debt and wage growth, combined with a spike in petrol prices, had pushed inflation to 3 per cent, a level not expected until later this year.

"These domestic and international trends have added to inflationary pressures in an economy that has been operating for some time with rather limited spare capacity and low unemployment," he said.

All but two of the economists surveyed by Bloomberg expect rates will remain steady until at least the end of the year, with the two predicting a 0.25 per cent rate rise only.

Australia's gross domestic product figures will be released at 11.30am today by the Bureau of Statistics, and are expected to show increased economic growth on the back of solid consumer spending.

The median forecast of the 23 economists is that the GDP results will show a 0.8 per cent increase in growth - up 0.3 per cent on the December quarter result.

theage.com.au, with Bloomberg