An Interest Rate Reprieve — for now!

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Last week, the Reserve Bank of Australia (RBA) held its cash rate at 6.25% for the eighth month in a row — a decision welcomed by the Government and home buyers alike.

RBA July 07Inflation figures (due out later this month) could put pressure on the RBA to lift rates. However, the high Australian Dollar (at around US 85c) means that there is no external pressure on inflation, from imported goods. And, despite the higher dollar, demand for our exported commodities remains at record levels — which has in turn narrowed our Trade deficit.

Therefore, even with our GDP growing, inflation seems to have remained in check. And this is likely to continue — given the modest wage increase just granted with the Fair Pay Commission.

While the RBA has left interest rates on hold at 6.25% … our rates are still well above other major countries. That makes Australia an attractive place for overseas funds — which is causing our dollar to remain high. And you should see this situation continue for the next 4 to 5 months.

Then, as other countries start to increase their own interest rates … you will quickly see our rates follow suit.

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