PROPERTY INVESTOR LANDLORD ECONOMIC NEWS & ALERTS AUSTRALIA/NEW ZEALAND

Saturday, December 5, 2009

RBA RAISES CASH RATE 25 BASIS POINTS TO 3.75 % EFFECTIVE 2 DEC 2009

At its meeting today, the RBA Board decided to raise the cash rate by 25 basis points to 3.75 per cent, effective 2 December 2009.

Credit for housing is expanding at a solid pace, and dwelling prices have risen significantly this year. Business credit has fallen, as companies have reduced leverage in an environment of tighter lending standards, and as some lenders have scaled back their balance sheets. The decline in credit has been concentrated among large firms, which generally have had good access to equity capital and, more recently, to debt markets. Share markets have recovered significant ground, which, together with higher dwelling prices, has meant a noticeable recovery in household wealth.
The Board’s assessment of the outlook remains much as in the November Statement on Monetary Policy. Growth in 2010 is likely to be close to trend and inflation close to target.
With the risk of serious economic contraction in Australia having passed, the Board has moved at recent meetings to lessen gradually the degree of monetary stimulus that was put in place when the outlook appeared to be much weaker. These material adjustments to the stance of monetary policy will, in the Board’s view, work to increase the sustainability of growth in economic activity and keep inflation consistent with the target over the years ahead.


STATEMENT BY GLENN STEVENS, GOVERNOR MONETARY POLICY