Don’t doubt the RBA bravehearts

The Reserve Bank has taken a cautious view on interest rates by holding off on raising rates for April. But borrowers should not assume they have seen the end of rate rises.

Much has been said of the supposed political pressure the RBA board is under not to raise rates. Take it with a grain of salt. It is the range of indicators pointing in opposite directions that is behind the RBA's decision to hold rates for now.

Borrowers shouldn't count on the fact that the May RBA meeting coming just before the Federal Budget means there will be no rate change. If the board think rates should rise in May, they will very likely lift them.

And if you doubt the independence of our central bankers, reference the complaint to the electoral commission over the Government's interest rate claims during the last election.

The buoyant jobs figures for March that have emerged since the RBA meeting emphasise the difficulty the bank faces in setting rates amidst conflicting economic signals.

With another 58,000 people finding a job last month, albeit most of them part-time, you'd be forgiven for thinking the economy was in a growth surge. The RBA will be concerned that such job creation will casue more shortages in key skills areas that will force up wages, and inflation.

However, economic growth figures were so flat over the December quarter as to suggest that the last thing that might be needed rising interest rates.

Add to that the RBA's concerns over the accuracy of the official house prices data. Insight into the direction of the housing market be it boom, bust or steady-as-she-goes is vital to interest rate deliberations.

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