New Year interest rate outlook confirmed by latest GDP data

More evidence this week that borrowers will be facing further interest rate rises in the new year with the news that Australia’s economy grew by 1.6% in the September quarter which translates to annual growth of 4.5%.

Figures provided by The Australian Bureau of Statistics showed growth driven by real estate, information technology, business services, hotels and a range of other service industries. However manufacturing and mining lagged putting further pressure on the trade deficit that is now at $16.3 billion.

We note some anecdotal evidence that consumer sentiment dropped a little following the November rate rise however given the time of year, nobody doubts that consumer spending will be at anything but healthy levels over Christmas and New Year.

The sum total of figures released to date means that the Reserve Bank of Australia is very likely to increase official cash rates sooner rather than later in the New Year. However the RBA may be tempered by the knowledge that the inflation rate is treading water at just 1.1% over the previous 12 months.

As we have previously noted, there should be little surprise in store for those who have been keeping abreast of economic events as they have unfolded over the recent months. Granted – rising interest rates are never cause for cheer but one suspects that the markets, borrowers and investors must take some comfort in having a reasonable idea of what lays ahead.

Compared to the corresponding period ten years ago, this is probably a good a way as any to start a New Year. Or a new decade. Or even a new millennium!