Tuesday, September 01, 2009

Latest on Australian interest rates and economic prognosis

Australia's Reserve Bank left interest rates on hold today - but this can't last.

The news didn't filter to the forefront of the Fairfax media (the Sydney Morning Herald's analysis is relegated to the business section, and lifted from Melbourne's Age); Murdoch's Australian gives it more prominence but scant analysis (see their lead article and brief analysis), but everyone seek different devils in the detail, in this case, the RBA's statement that accompanied the 'inaction'.

In fact, analysis of the differences between phrases emitted this month and last show more heat - subtlely, but definitely - in today's release.  They all but raised interest rates, and patently flagged at least one rise in the next couple of months.

The trade deficit is worse, but business investment imports don't imply a negative.  Australia is, after all, the only major developed economy not to experience recession - which suggests bravura economic stimulus measures, albeit ones that could have been more strategically targetted (but fast action and conservative economics are not good bedfellows).  This alone can win the government next year's election - and they can be expected to ram it home.

Expect employment recovery to lag.

1 comment:

Ingrid said...

Looks like you were right. The RBA announced the new cash rate of 3.25% today.