After raising interest rates three times in quick succession in late 2009, the Reserve Bank of Australia (RBA) increased interest rates again in March – the first rate hike for 2010.
According to the Australian Bureau of Statistics (ABS), retail sales rose a higher-than-expected 1.2% to $20.14 billion in January – up from $19.91 billion in December. After the ABS announced strong growth in retail sales, the Reserve Bank decided to raise the official cash rate to 4.00%, marking the fourth rate rise in five RBA meetings.
Stronger Australian Economy
The Australian economy was stronger than economists expected in late 2009. RBA governor Glenn Stevens said “The rate of unemployment appears to have peaked at a much lower level than earlier expected. Labour market data and a range of business surveys suggest growth in the economy may have already been at, or close to trend for a few months.”
Mr Stevens also said that “Investment in the resources sector is very strong. Credit for housing has been expanding at a solid pace, and dwelling prices have risen significantly over the past year. New loan approvals for housing have moderated a little over recent months, however, as interest rates have risen and the impact of large grants to first-home buyers has tailed off.”
With the risk of recession passing, Mr Stevens said “Lenders generally raised rates a little more than the cash rate and most loan rates rose by close to a percentage point. Nonetheless, interest rates to most borrowers remain lower than average.”
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