Economists urge a rate raise

Will the Greek financial crisis give the RBA an excuse to put a hold on increasing the cash rate. Economists have indicated the RBA may loose it’s nerve to move the official cash rate next week despite the comments of the assistant governor Guy Debelle’s playing down Greece’s impact on the Australian economy.

Another senior economist told AFR that Greece and the forthcoming Henry tax review “could be used as excuses for a pause”. However, she said that fundamentals should prevail. “With commodity prices continuing to rise, confidence remaining strong, further jobs created and inflation pressures rising, another hike next week looks prudent.”

Bankwest chief economist Alan Langford stated a pause would “only be a brief reprieve” for home borrowers.

Australia is in a unique situation compared with the rest of the western world.  Australia was the only western economy to have been spared a recession and we have picked up where we left off before the GFC. Compare interest rates in the UK 0.5% since March 2009. In the EU it’s 1% and the US is at 0–0.25%.

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