The Reserve Bank has given borrowers just months to get their affairs in order before a rate rise, declaring that the present low interest rates are appropriate only ''for the time being'', a qualification absent from its previous announcements and designed to indicate that a rate rise is imminent.
Treasurer Wayne Swan yesterday accepted the inevitability of a rate rise, telling reporters in Canberra ''rates are at emergency levels right now and, of course, at some stage in the future, they can be expected to move''.
The statement released after yesterday's board meeting also replaced the usual reference to the need to ''monitor conditions'' with a reference to the need to ''continue to adjust'' monetary policy, the first such reference since rates were last moved in April.
Opinion among analysts yesterday coalesced around a rate rise at the bank's November Melbourne Cup day meeting followed by another in December, pushing the bank's cash rate up from its historic low of 3 per cent to 3.5 per cent, and pushing the standard variable rate to 6.3 per cent, adding $90 per month to the cost of servicing a $300,000 mortgage.
The board of the bank is itself uncertain about the timing of the rise, but has not ruled out an earlier one next month if economic data continues to surprise on the upside.
The bank will be paying special attention to the economic growth figures for the June quarter to be released today and to the August employment figures to be released on Thursday next week as it searches for signs of a even stronger than expected recovery.
It believes Australia's economy is already performing more strongly than it expected, enabling it to move rates away from their present ''emergency setting'' in the months ahead.
If it sees signs that the economy is even stronger, it will remove the low rates more quickly. Only serious signs of renewed weakness would encourage it to leave rates at their present 50-year lows.
The bank was buoyed yesterday by news of a further 7.7 per cent increase in building approvals in July, the fifth such increase in six months. In Victoria, approvals surged 9 per cent, spurred by a 48 per cent jump in approvals for new apartment buildings.
Trade figures showed Australia's export income tumbling 13 per cent in the June quarter on the back of sharply lower prices, but export volumes were up an encouraging 1 per cent and import volumes up 2 per cent.
Mr Swan said the figures highlighted the fragility of Australia's economic recovery and cast doubt on whether today's economic growth figure would be positive. '
'We certainly hope it will be positive,'' he said. ''But what these figures absolutely underscore is the importance of keeping in place our economic stimulus.
If the stimulus were withdrawn now, as the Opposition wants, that would be a recipe for much higher unemployment.
There can be no room for complacency in the global environment in which we find ourselves.''
so the honeymoon period for property is looking like its drawing to "business as usual" for banks, stuff the investor who puts their neck on the financial guillotine in more ways than one. this attitude by Australian banks needs to cease and decist. Those who take risk are to be incouraged not cut down (LT)
