The Future for Interest Rates

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The RBA’s underlying rate of inflation rose by 3.5% in the year to September — less that what the markets and the RBA itself expected.

However, this figure needs to fall significantly for the RBA will put interest rates on hold again.

Rate Rises

Rate Rises

With low inventories and industry capacity-use levels up over 80% once more … you could well see the economy reach full capacity sometime early in 2010.

And this was highlighted in last week’s job figures — showing employers took on 24,500 new workers in October, compared with the 10,000 expected.

If unemployment falls just 1%, this will start to put pressure on inflation — despite the strong Australian dollar helping to keep import prices down. As such, the market is expecting the RBA to hike the cash rate above 4%, within the next six months.

Meanwhile, Industrial property holds firm

Melbourne Industrial Sales & Yields

Melbourne Industrial Sales & Yields

In response to a return to economic growth, Industrial property sales in Melbourne (for the 12 months to September) have held firm at around $250 million. A-grade yields started to nudge 9%; but now firming, back towards 8%.

And as the Industrial sector regains full capacity, you will start to see good growth in property values — starting first at Melbourne, then flowing out through the other capital cities.

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