Days of low rates, may soon be over, as a rebound in the economy restrains the Reserve Bank from reducing interest rates further.
The central bank's July minutes released yesterday showed that the Australian economy is stronger than previously first thought. With interest rates at an all time low, and middle income earners benefiting, from the recent federal government's stimulus programs, inflation may return to the headlines during the coming year.
A report recently released has suggested that interest rates will be raised again in 2010 and 2011.
Chris Richardson director of Access Economics felt that while the Reserve Bank may cut interest rates one more time, to help the banks cope with their borrowing costs, and with the possibility of better unemployment figures next year may be the start of a recovery.
The Government is expecting unemployment to research 8.5 per cent during the next financial year, while Mr. Richardson however, feels that the jobless rate could reach 7.5 per cent in 2010 up, from 5.8 per cent at the present time.
Despite these figures, Treasurer Wayne Swan said that the Federal Government will not alter their unemployment forecast. Mr. Swan told ABC Radio that the Government would not be revising the forecast until the mid-year Economic and Fiscal outlook is due out at the end of he year. Mr. Swan stated that investment in infrastructure would help booster the economy, and rejected claims for a third wave of cash payments being called for by trade unions.
Mr. Richardson felt that there might be one more rate cut before Christmas. The Reserve Bank left interest rates on hold at three per cent in July.
Access Economics stated that a rebound in Australia's second biggest trading partner China, major bulk commodities, could spare the commodities states of Queensland and Western Australia from the worst aspects of the global crisis.
Inflationary pressures, which usually govern the direction of interest rates, are showing further signs of easing.
The Australian dollar rose above 80 cents in June for the first time in eight months, helping to reduce imported production costs.
Economics are also expecting consumer price index data for the June Quarter to reveal signs of easing. The business outlook report that when the world is awash in money it sees inflation in the recovery.
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