Interest rates nearing normal levels: RBA

April 13, 2010 By Leave a Comment

The Reserve Bank has signalled its recent aggressive approach to interest rates may be nearing an end, saying official interest rates are not too far away from what policy-makers consider to be “normal” levels.

RBA assistant governor Guy Debelle has told a Senate inquiry into finance for small business, the economy has been recovering well and the Reserve Bank is trying to ensure the current pace of growth can be sustained.

Last week, the Reserve Bank raised the official cash rate to 4.25 per cent, marking its fifth rate rise since last October.

Dr Debelle says at that current setting, the cash rate is closer to average levels.

“We are deciding that the situation where we needed historically low interest rates is no longer necessary, so we’re moving back to something around about average levels, which is not far away from where we are at the moment,” he said.

When asked by the South Australian Senator Annette Hurley whether the Reserve Bank was trying to rein in demand by raising interest rates, Dr Debelle said that was not the case.

“We’re not trying to depress demand, we’re trying to make it grow at a sustainable pace,” he said.

The central bank has previously said that normal or average rates would be somewhere in the vicinity of 4.25 to 4.75 per cent.

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Australian economy growing around trend – RBA

April 12, 2010 By Leave a Comment

SYDNEY, April 12 (Reuters) – The Australian econmy is growing around trend and interest rates are a little below average, a top central banker said on Monday.

Guy Debelle, assistant governor of the Reserve Bank of Australia, was speaking at a Senate inquiry into finance for small business. He also said the central bank took the high Australian dollar into account when setting interest rates.

The central bank has raised rates five times in six policy meetings, taking the cash rate to 4.25 percent.

(Reporting by Cecile Lefort; Editing by Mark Bendeich)

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Australian small business loan rates around average

April 12, 2010 By Leave a Comment

SYDNEY, April 12 (Reuters) – Interest rates for small businesses in Australia are at around the average for the past decade, a top central banker said on Monday.

Guy Debelle, assistant governor of the Reserve Bank of Australia, was speaking at a Senate inquiry into finance for small business.

(Reporting by Cecile Lefort; Editing by Mark Bendeich)

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Reserve Bank indicates more rate hikes on the way

March 26, 2010 By Leave a Comment

The Reserve Bank says the economic outlook for Australia appears considerably brighter than that of many other advanced economies.

The RBA says the current debt problems in Europe highlight the fact that many governments have a long way to go to escape their financial predicaments.

In a speech to the Australian Industry Group economic forum in Sydney, the Reserve Bank’s assistant governor, Philip Lowe, said many countries are dealing with large deficits and an ageing population is putting pressure on budgets.

Dr Lowe said in the years ahead, significant steps will have to be taken to bring public finances into line.

“The flexibility that they have to determine the timing and size of these steps is limited by the fact they went into the current downturn with already high levels of debt,” he said.

“As a results of the poor starting point, many are now treading a very narrow path.

“On the one hand, tightening fiscal policy in the very near term risks derailing the recovery, while not doing so risks a damaging loss of confidence.”

The RBA says its quick response to changing economic conditions has given it the flexibility to deal with any potential global economic upsets and that, while the outlook for Australia is mostly positive, there are still risks.

Dr Lowe says the RBA’s preference in regard to monetary policy is to act quickly, then take time to evaluate and make further adjustments if necessary.

“The alternative of waiting to see how these myriad risks evolve before adjusting policy runs the significant downside of moving too late, particularly given that the economy is starting this upswing with less spare capacity than in previous upswings,” he said.

“Fortunately in Australia we’ve had the policy flexibility to respond to changing events, and so far this has served us very well.”

The Reserve Bank also again indicated it will keep raising interest rates until they reach a more normal level.

“The important thing is the level of interest rates that borrowers face, not the cash rate,” Dr Lowe said.

“At the moment the mortgage rate is still around 50 basis points below the average of the last decade and a half.”

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RBA reluctant to regulate credit card fees

March 16, 2010 By Leave a Comment

The Reserve Bank says it is undecided on whether direct regulation or increased competition is needed to reduce the transaction fees that credit card companies charge.

During a speech to a cards and payments conference in Sydney this morning, the RBA’s assistant governor Malcolm Edey said the central bank is a reluctant regulator when it comes to credit cards.

He says the central bank is undecided as to whether it should step in to force another reduction in the transaction fees.

He says credit card interchange fees – the fees banks charge one another when purchases are made by credit card – have fallen since the RBA’s changes three years ago.

In that time they have gone from 95 basis points, which is almost 1 per cent, to an average of 50 basis points, which is half of 1 per cent.

But Dr Edey says even with that reduction, interchange fees are still too high.

“The Reserve Bank is a reluctant regulator. We’d prefer to see fees being held down by competition rather than direct regulation,” he said.

“We believe there’s been good progress in promoting competition over recent years, but it’s not yet clear whether that will be sufficient.”

In August last year, the RBA deferred a decision to make a further reduction on interchange fees to 30 basis points.

“Our general mandate with respect to the payments system is to promote efficiency and stability,” Dr Edey said.

“That includes taking measures to stop fees from rising too far above efficient levels. But our preference is to do that when we can by promoting competition rather than by direct regulation of fees.”

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RBA warns of housing, worker inflation risk

March 11, 2010 By Leave a Comment

The Reserve Bank has said one of Australia’s greatest challenges in the years ahead will be to boost the supply of new houses and skilled workers, so the economy can grow without sparking inflation.

In a speech to an urban development conference in Sydney, the Reserve Bank’s assistant governor, Philip Lowe said Australia has entered the current period of expansion with considerably less spare capacity than was originally thought to be the case.

“Elsewhere, the challenge is to get private demand to grow on a sustainable basis, so that it can catch up with the supply potential of the economy,” Dr Lowe said.

“In contrast, for Australia, the main main task is to expand the supply side of the economy so that demand can grow solidly without causing inflation to rise.”

Dr Lowe says if the mix of housing being built does not change to suit the growing population, a greater share of GDP may need to be devoted to housing.

He says the need for more housing also raises the issue of a potential worker shortage.

“If housing construction is very strong, at the same time the resources sector is expanding, there will obviously be competing demands for a range of skilled workers and specialised services,” Dr Lowe said.

“Managing these competing demands and ensuring the adequate supply of workers with appropriate skills is a significant challenge for us.”

Dr Lowe added that Australian house prices could rise even further and drive a greater crisis in affordability, unless the supply of new homes is addressed.

He says bottlenecks in the construction of new homes are curbing supply and increasing price pressures.

“Further adjustments in housing prices and rents are likely to occur to balance the supply and demand,” he said.

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‘China, India will continue to grow at fast pace for a long time’

February 18, 2009 By Leave a Comment

Sydney, Feb 18 (ANI): China and India would continue to grow at a fast pace for a long time, boosting demand for Australian raw materials.

Australia’s Reserve Bank Assistant Governor of Economics Malcolm Edey said today that China and India had “long way to go” before they caught up to industrialised countries.

“China and India until the recent crisis were growing at extremely high rates. They have got plenty of scope to do that for a long time,” The Australian quoted Edey, as saying.

Edey said demand for Australian resources would continue to grow “which is going to be very good for Australian incomes”, and would help offset the impact of an aging population on economic growth.

“China and India and other parts of the developing world have a long way to go to catch up and as they catch up they are becoming a bigger and bigger part of the world and that’s a very powerful influence in increasing global growth prospects,” he said.

“I think that force will continue to operate in the long run, but we are seeing very severe short-term effects from the global financial crisis working against that at the moment.”

China ranks as Australia’s biggest trading partner, while India’s importance has grown in recent years. India is now Australia’s 11th biggest trading partner. (ANI)

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