Rates to peak in 2011?
December 8, 2009
Economists predict the official cash rate set by the Reserve Bank of Australia to peak at a level around 5.5 per cent in 2011.
The annual forecasting survey by Australian Business Economists (ABE), released this week, shows expectations of the cash rate steadily rising toward 4.75 per cent by the end of 2010, before climbing a little further in 2011. Currently, the cash rate stands at 3.75 per cent - 0.75 per cent off its lows after three consecutive monthly hikes. Interest rates remain well below the peak of the last cycle, however, when the cash rate surged to 7.25 per cent in 2008.
“A few committee members felt that a higher cash rate was appropriate,” Chairman Stephen Halmarick said upon releasing the survey, according to the AAP. “Those that believed this were the ones that generally had a higher median forecast for economic growth and/or inflation in 2011.”
The median forecast for GDP growth in 2009 was 1.2 per cent, rising to 2.6 per cent in 2010 and a robust 3.5 per cent in 2011. This growth would be helped by a lack of unemployment pressure, with economists expecting the unemployment rate to peak at 6.2% (it currently stands at 5.8%). Indeed, it appears that even this may be pessimistic given recent data although Thursday’s jobs figures will provide a clearer picture.
“The stimulus to the consumer has passed, while the stimulus in the form of infrastructure and capital expenditure would add to the productive capacity of the economy in the long run,” Mr Halmarick added.