Rate rise chances firm for April

The Reserve Bank's own measures of credit growth suggest we might well be in for an interest rate rise as early as the coming week at the RBA's April board meeting. In February, the annual rate of credit growth hit 15 per cent, on the back of a 1.4 per cent rise during that month. It was last at this level in October - and the RBA lifted rates in November before the combined effects of three interest rate rises in six months began to bring credit growth rates down. But the rise has resumed in 2007 and is now back to 15 per cent, suggesting the economy has shrugged off last year's rate rises and is again heading north, unchecked by monetary policy. RBA rate action in recent years shows it is not very comfortable with credit growing at current levels. Housing credit has edged up above 1 per cent a month and personal borrowings are also showing similar growth, but, like last October, it's business credit where the big lift is, surging 2 per cent in February alone. Add the latest credit figures to the already stated inflation concerns by Assistant Governor Malcolm Edey earlier this month. Against the backdrop of a jobs market still growing strongly and the recent solid economic growth figures, it would seem the RBA has its case for a further interest rate rise. The question is, could we see a second rate rise this year to stem the economic tide? In an election year, that would certainly set the cat among the Canberra pigeons. Each 0.25 percentage-point increase in interest rates adds about $17 to borrowers' monthly home loan repayments for every $100,000 of borrowings.