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NEWS AND VIEWS
Australia

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Interest Rate Fears

 Wednesday, 10th May, 2006

Australia has an independent Reserve Bank when it comes to fixing interest rates but that does not stop the Governor of the Bank and the Secretary of the Treasury having a chat together about future intentions of the Government. I expect they do that frequently in a free and rank way.

Hence if last week's quarter of a per cent rise in rates was what the Governor recommended to his Board, (and it almost certainly was), it was based on a foreknowledge of Treasurer Costello's tax cuts .

Provided the consequences of those cuts, taken in conjunction with the impact of greater home loan repayments and higher petrol prices, is as expected by the Governor, there is no reason to think a further interest rate rise is imminent.

I will be punting on rates staying the same for quite some time and will be writing on this subject in the betting section of the website later in the week.