Reserve keeps interest rates on hold

The Reserve Bank has delivered some badly needed relief to mortgage holders, deciding today to leave official interest rates on hold.

For the first time since February, the RBA board did not use its monthly meeting to lift rates which now stand at 4.5 per cent.

In a statement, bank governor Glenn Stevens said the issues around sovereign debt in Europe and its impact on financial markets were a major reason behind the move.

He said the impact of these on the wider economy were still to be determined, arguing global growth is still expected to be around trend for the rest of this year.

But Mr Stevens signalled interest rates were likely in the future on the back of the return of the mining boom.

“In Australia, with the high level of the terms of trade expected to add to incomes and demand, output growth over the year ahead is likely to be about trend, even though the effects of earlier expansionary policy measures will be diminishing,” he said.

“Inflation appears likely to be in the upper half of the target zone over the next year.

Consistent with that outlook, and as a result of actions at previous meetings, interest rates to borrowers are around their average levels of the past decade, which is a significant adjustment from the very expansionary settings reached a year ago.”

The decision followed new figures from the Australian Bureau of Statistics which showed retail sales growing 0.6 per cent in April and a 14.8 per cent collapse in dwelling approvals.

However, the retail sales – while stronger than expected – were pushed up by food sales which jumped 1.3 per cent. Once this sector, which accounts for 40 per cent of all sales, is excluded retail was up just 0.1 per cent.

Other ABS figures showed government spending is holding up the economy and will add about 0.8 percentage points to tomorrow’s GDP result. Without that burst, the economy may have actually contracted in the March quarter.

CommSec chief equities economist Craig James said the figures showed the RBA had no option but to leave rates where they are for some time to come.

“Given the latest round of data, there are good reasons for the Reserve Bank to leave rates on hold for the next few months,” he said.

“Not only are retail sales holding at very weak levels, but the housing sector is showing signs of consolidation.”

Treasurer Wayne Swan says the Reserve Bank’s decision to leave the official cash rate unchanged is a “welcome relief”.

“This news will be welcome relief to Australian families and businesses around the country, who are of course doing it tough,” Mr Swan told parliament minutes after the decision was announced.

The national accounts for the March quarter are due for release on Wednesday.

“I have every confidence that with right polices in place, our economy can continue to be one of the best in the world over coming years,” Mr Swan said. Consistent with that outlook, and as a result of actions at previous meetings, interest rates to borrowers are around their average levels of the past decade, which is a significant adjustment from the very expansionary settings reached a year ago.”

“Not only are retail sales holding at very weak levels, but the housing sector is showing signs of consolidation.”

“Source  :  www.thewest.com.au

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Rates now closer to normal, RBA boss says

Reserve Bank governor Glenn Stevens has signalled interest rates are on their way back up with mortgage rates likely to edge up between half and a full percentage point.

Giving evidence to the House of Representatives economics committee in Canberra, Mr Stevens said the RBA’s focus continued to be on what mortgage rates were offered by commercial banks rather than on the Reserve’s official cash rate.

He said given the commercial banks had lifted rates over and above what the RBA had done, there was still about a half and a full percentage point to go before mortgage rates were back to what the Reserve would consider close to their long term average.

“There’s a little distance to go yet before I think you could characterise the setting of interest rates as normal or average,” he said.

The RBA surprised markets by leaving official rates on hold at its February meeting.

Mr Stevens said on top of the Reserve’s own lift in official rates, the commercial banks actions had effectively delivered three and a half interest rate rises to mortgages cases, and in the case of Westpac customers, four rate hikes.

He said one of the advantages of lifting rates as the RBA did in the last three months of 2009 was that it could hold rates in February and get a clearer picture of how the economy was travelling.

“You get that luxury when you can wait a little a bit further down the line,” he said.

Mr Stevens said Australia had performed much better than even the RBA had expected out of the global recession.

But he warned that meant the economy was now heading into an upswing stronger than otherwise would have been the case.

“With the economy having had only a mild downturn with begin the upswing with less spare capacity than would typically be the case after a recession,” he said.

“There’s less scope for robust demand growth without inflation starting to rise again down the track.

“Monetary policy must be careful not to overstay a very expansionary setting.”

Mr Stevens said the resources sector in particular was looking to grow quickly, with the terms of trade likely to head back to the record highs seen in 2008 this year.

He also highlighted the strength of Australia’s sovereign debt position, hosing down fears the country was carrying too much debt.

“Australia’s position is by any measure very strong indeed,” he said.

The governor also played down fears raised by Opposition finance spokesman Barnaby Joyce that Australia could default on its debts.

Mr Stevens said Australia had never defaulted before and there were no signs it would now.

“I very much doubt there ever will be,” he said. 

“Monetary policy must be careful not to overstay a very expansionary setting.”

Mr Stevens said the resources sector in particular was looking to grow quickly, with the terms of trade likely to head back to the record highs seen in 2008 this year.

He also highlighted the strength of Australia’s sovereign debt position, hosing down fears the country was carrying too much debt.

“Australia’s position is by any measure very strong indeed,” he said.

The governor also played down fears raised by Opposition finance spokesman Barnaby Joyce that Australia could default on its debts.

Mr Stevens said Australia had never defaulted before and there were no signs it would now.

“I very much doubt there ever will be,” he said.

Source www.thewest.com.au

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Shark attack Star of Courage humbling for WA woman

It was calm and still the day an Albany woman driven by instinct swam out to save the life of a fellow surf club member who had been attacked by a shark off Western Australia’s south coast.

Joanne Lucas’ bravery in doing so has earned her the Star of Courage, a bravery award which will presented by the Governor-General Quentin Bryce.

The 54-year-old mother of three had arrived at Middleton Beach, Albany, early on May 10 last year, ahead of a surf club event.

“It was very still and calm, and the sun was shining, and there were dolphins flipping about, a whole pod of dolphins …” Ms Lucas said.

But a short time later, a woman ran up the beach telling her a man had been attacked by a shark.

“I said: `No, no, it’s the dolphins’ and she said: `No it’s a shark’,” Ms Lucas said.

Ms Lucas said running down to the beach, driven by instinct and adrenalin, she stripped off her tracksuit pants and swam 80 metres to where fellow surf club member Jason Cull was critically injured, barely able to swim or tread water.

“It was a completely instinctive thing. I didn’t think: `There’s a shark out there maybe I shouldn’t go out there’,” she said.

“I just thought I’ve got to get this guy out and I’ve got to get him back in.”

All the while, the shark manoeuvred around the scene, with Ms Lucas fearing the frantic splashing of two nearby swimmers trying to scare it away would steer the shark toward her and Mr Cull.

She said she kicked harder and made it to shore where Mr Cull was treated for his injuries.

His leg was completely ripped open from his ankle right up to his knee and he had been “nipped” on the other knee, Ms Lucas said.    

Ms Lucas said she was happy to see Mr Cull now back on his feet and cycling around the place.

Being awarded the star of courage was humbling, she said.

“I’m very honoured and humbled to receive this.”

Ms Lucas said she was quickly back on the beach after the attack.

“It hasn’t turned me off the ocean at all,” she said.

“I actually scan the ocean before I go in now …”

The governor-general is expected to present the star of courage to Ms Lucas at a ceremony early next year.

Source www.watoday.com.au

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Interest rates on hold

The Reserve Bank of Australia (RBA) left interest rates on hold at 3 percent as predicted.                                                

A  survey by AAP had expected the RBA to leave the cash rate at the lowest since 1960.

Treasurer Wayne Swan said last weekend that it was obvious that rates will rise, while Minister for Financial Services, Chris Bowen, warned yesterday that rates can’t stay low forever.

Some economists believe the first rate rise could come this year, but the general view is that rates will remain on hold until the middle of next year.

In a statement released after the announcement, governor Glenn Stevens said the risk of “severe contraction” in the Australian economy had abated.

“Economic conditions in Australia have been stronger than expected a few months ago, with both consumer spending and exports notable for their resilience,” the statement says.

“Measures of confidence have recovered a good deal of ground.”

The statement adds: “The board’s judgment is that the present accommodative setting of monetary policy is appropriate given the economy’s circumstances.

“The board will continue to monitor how economic and financial conditions unfold and how they impinge on prospects for sustainable growth in economic activity and achieving the inflation target.”

 

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