Rates on Hold … For Now!

Inflation Watch
Yesterday, the Reserve Bank left the cash rate unchanged at 4.75%. And these graphs will help to explain their current dilemma.

For the time being, the RBA’s focus is upon “inflation excluding volatile items” — mainly because of the various natural disasters, both here and overseas.

Headline inflation (at 3.8%) is well above the top end of the RBA’s preferred 2% to 3% range. And it would have been even higher, were it not for the Australian dollar remaining above parity — currently hovering at around $US1.03.

There has been a growing trend away from part-time to full-time employment, which will help to boost household incomes and consumer confidence.

This in turn will quickly start to flow through into higher turnover for retailers.

Advertised job vacancies have surged noticeably in Victoria, Queensland and Northern Territory. And official figures for March due out tomorrow are expected to confirm significant job growth compared with February.

Bottom line: After an expected pause following the recent disasters, the massive rebuilding activity now under way will once again start to fuel Australia’s strong economic growth.

As such, the RBA will soon need to take pre-emptive action again — perhaps as early as next month, but certainly by mid year.

You are now pretty much at the bottom of the Commercial property cycle across Australia. Therefore, if you haven’t already done so … now would be the ideal time to bolster your portfolio and ride the upturn.

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