RESERVE BANK: WEAK CASE FOR RATE RISE
Announcement posted by Wilkinson PR 06 Sep 2010
The three successive interest rate increases in the first half of this year are still flowing through the economy, according to accountancy firm Chan & Naylor.
The three successive interest rate increases in the first half of this year are still flowing through the economy, accordingtoaccountancyfirm Chan&Naylor.
“The housing sector has cooled and inflation is modest at 3.1 per cent. Much of the world remains in economic crisis, so it suggests the Australian economy is exceptionally well placed,” said Sal Carrero,ChiefExecutive, Chan&Naylor.
“In our view further increases to the cash-rate would be unwarranted in an environment where the housing market and inflation are both subdued. Any rate increase would also added unnecessary hardship to the many small to medium business owners who are suffering the double impact of subdued activity and relatively high interest rates compared to the majority of borrowers.
M
r Carrero said weekend auction clearance rates have indicated for several months that housing is more subdued than earlier in the year.The main risk factor in the Australian economy has been unsustainable increases in house prices and this is largely under-control and falls in line with the long term cycle,” Mr Carrero.
Mr Carrero said that the inflationary pressures in the housing sector are in the rental market and are a product of poor urban planning and land release strategies.
“The growth in rental prices reflects high market demand and points to broader problems with the planning system. We’re simply not building enough houses.
“The solution to rental shortages is a combined approach of urban consolidation and the strategic release of land accompanied by appropriate provision of essential infrastructure,” Mr Carrero concluded.