Australian Mortgage Rates

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Damian George

New Member
Australian homeowners face steadily rising interest rates during the next two years with the Australian Reserve Bank’s cash rate reaching 5.5 per cent in 2011, economists say. The results of the Australian Business Economists (ABE) annual forecasting survey, released today, forecast the cash rate to reach 4.75 per cent in 2010, 100 basis points above its current level of 3.75 per cent.

The central bank raised the cash rate by 25 basis points last week, its third consecutive monthly increase. The ABE committee, which is meeting in Sydney, expects 5.5 per cent would be the peak for the cash rate in the current cycle. ‘‘A few committee members felt that a higher cash rate was appropriate,’’ chairman Stephen Halmarick said in releasing the survey. ‘‘Those that believed this were the ones that generally had a higher median forecast for economic growth and/or inflation in 2011.’’

The median forecast for gross domestic product growth in 2009 was 1.2 per cent, rising to 2.6 per cent in 2010, followed by 3.5 per cent in 2011. Increased growth in 2010 is expected to come from positive private consumption, dwelling construction, business investment and inventories. The economists expect the unemployment rate to peak at 6.2 per cent in 2010, shy of the government’s 6.75 per cent prediction. The jobless rate is expected to be 5.7 per cent in 2011, against the October rate of 5.8 per cent.

Inflation is expected to return to to the middle of the RBA’s two to three per cent target band in 2010 before nudging up to 2.7 per cent in 2011. A majority of members felt it was not necessary for the government to wind back its stimulus measures. ‘‘The stimulus to the consumer has passed, while the stimulus in the form of infrastructure and capital expenditure would add to the productive capacity of the economy in the long run,’’ Mr Halmarick said.

Still the committee was almost unanimous that forecasts in the mid-year budget review were too pessimistic and that the economy would do better and government revenues would be revised higher.

RBA Governor Glenn Stevens is due to address the ABE annual dinner tonight.
 
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KateMelb

New Member
Inflation is expected to return to to the middle of the RBA’s two to three per cent target band in 2010 before nudging up to 2.7 per cent in 2011.
Well, we've just hit May 2010 and inflation is now at 2.9 per cent, the highest rate of inflation in 15 months, with no sign of any slow down soon. So much for the above prediction!
 
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