RBA gets pat on the back

By webmaster 11 January 2011 | 1 minute read

The Reserve Bank is currently doing a very good job of managing the Australian economy, according to HSBC.

HSBC chief economist Paul Bloxham said the recent spate of soft economic data suggests the RBA is achieving what it has long set out to do – slow growth in interest rate sensitive parts of the economy to make way for the mining investment boom.

Retail sales rose only modestly in November, following a fall in October – reflecting the impact of monetary policy, with the RBA's interest rate rise, combined with the boost to mortgage rates by the commercial banks.

It also reflects that households have been spending in other ways. With a strong Aussie dollar, greater confidence in the internet and better priced goods available from elsewhere in the world, Australian households have seemingly been buying more goods from sources outside the retail survey.

With all this data in mind, Mr Bloxham said the Reserve Bank will be looking to hold the official cash rate steady at 4.75 per cent until at least the second quarter or 2011.

“It is around this time that the labour market should tighten up and incomes will be boosted by the high level of commodity prices, forcing the Reserve Bank to raise rates further to constrain household spending,” he said.

RBA gets pat on the back
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