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THE market odds have moved firmly against an interest rate rise by the Reserve Bank in February.

The sharp change in direction, which began on Tuesday after the central bank revealed its December 1 meeting minutes, accelerated yesterday following a speech by RBA deputy governor Ric Battellino.

Mr Battellino signalled that rates could stay on hold when the RBA next meets in February, saying the “overall stance” of monetary policy was “back in the normal range”.

His comments, at the Australian Finance & Banking Conference in Sydney, surprised the markets, triggering a slump in the Australian dollar to below US90.

Last night the dollar was hovering around US89.70.

Financial market betting on a 25-basis point rate hike in February retreated from a 67 per cent chance to 45 per cent.

Mr Battellino said that although the cash rate still seemed “unusually low” at 3.75 per cent, monetary policy was back “in the normal range” because the current level of deposit, housing and business lending rates made the cash rate equivalent to a “before the crisis” level of 4.75 per cent.

“Taking these considerations into account, it would be reasonable to conclude that the overall stance of monetary policy is now back in the normal range, though in the expansionary segment of that range,” he said.

The deputy governor’s remarks were made half an hour after the Australian Bureau of Statistics revealed economic growth in the September quarter was weaker than expected.

The national accounts showed GDP edged up just 0.2 per cent in the three months to September, half the pace of growth expected by the market, for an annual rate of 0.5 per cent.

The main drag on growth was a slump in exports which coincided with a jump in imports.

However, demand from households, businesses buying more equipment and government investment was solid.

ANZ acting chief economist Warren Hogan said the GDP figures indicated there was little urgency to get official interest rates back to a neutral setting, adding that Mr Battellino’s comments had “dealt a solid blow” to the prospect of substantial gains in the cash rate over coming months.

“Put another way, the emergency setting for interest rates has now been removed and policy will be adjusted as and when required by economic conditions,” he said.

Westpac chief executive Gail Kelly told reporters after the bank’s annual meeting in Melbourne yesterday that the RBA was likely to raise rates “very carefully” in 2010.

However, she said the official cash rate was not quite yet at a “normal” level.

Mrs Kelly said she remained cautious about the economic outlook while the bank’s chairman Ted Evans said a “V-shaped” recovery for Australia was unlikely.

“It will be a long recovery and that’s what our plans are based on,” he said. 

Source  :  www.news.com.au

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THE receiver of ABC Learning Centres has sold the childcare group’s UK arm for an undisclosed sum.

ABC’s UK business, called Busy Bees Group, was purchased by Singapore-based company Knowledge Universe Education, Chris Honey of McGrathNicol said today.  abc

Mr Honey said Busy Bees Group, which is the UK’s largest children’s nursery group, will continue to be operated by its existing senior management.

“As receivers, we are very happy with the value realised for this business, and are pleased to have sold it to an internationally respected childcare provider,” he said.

He said Busy Bees Group was in a similar situation to ABC’s business in New Zealand, as it was not itself in receivership and had continued to trade profitably.

Mr Honey said the sale of the ABC in New Zealand was progressing well and that strong interest from a number of bidders had led to an extension of the sale timetable.

Mr Honey said no decision had been made yet on a timetable for the sale of the Australian business.

“The ABC Learning centres in Australia continue to trade well, with the focus remaining firmly on providing high quality childcare, driven by the local ABC centre staff at a community level,” Mr Honey said.

ABC, Australia’s largest childcare centre operator, went into administration and receivership in November 2008, owing more than $1 billion.

Source www.news.com.au

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