Fine-Tuning Australian Monetary Policy

The Reserve Bank of Australia’s (RBA) recent move to raise its overnight lending rate to 3.25%—the first rate hike in a G20 country in the aftermath of the financial crisis—came earlier than many onlookers would have predicted weeks or months beforehand. But the move wasn’t inconsistent with economic fundamentals.  Resilient commodity demand from emerging markets and a prompt policy response to the financial crisis saved Australia from an economic contraction as long and deep as those in the U.S. and the eurozone. Meanwhile, revivals in exports, imports, consumer demand and the housing and mortgage markets signaled to the RBA that it had space to tighten its monetary policy.

Read Full Analysis

Rights and Permissions: This content is offered for the exclusive use of RGE’s paid clients. No forwarding, reprinting, republication or any other redistribution of this content is permissible without expressed consent of RGE.

0 Responses to "Fine-Tuning Australian Monetary Policy"

  1. Greg   October 19, 2009 at 6:58 pm


  2. Guest   October 19, 2009 at 11:37 pm

    New Thread

    • Greg   October 20, 2009 at 8:32 am

      Stop trying to steal my thunder

  3. mikmak   October 20, 2009 at 1:02 pm

    I’m torn between 4.25% and 4.50% as the RBA’s peak OCR rate in 2010.

  4. Michael Fabisiak: Stern NYU   October 23, 2009 at 6:05 pm

    The RBA has indicated that interest rates cannot remain at what they considered to be at “emergency low levels” for long. They have been preparing markets for more than 2 months that interest rates will have to rise back to “neutral levels” so that a housing bubble will not be encouraged. To this effect, markets are speculating that “neutral levels” mean interest rates at around 5%. So with the unemployment rate considered to be “peaking” at around 5.8% according to the RBA Governor in his speech 3 weeks ago, given that job vacancies are rising strongly (see ANZ Job Ads, Olivier Job Vancancies, and Dun & Bradstreet’s Employment Expectations Index, which are all very bullish). I think they will hike again before Christmas. It would have been foolish not to hike in Oct, because equities and the AUD would have collapsed in a non event by the RBA because markets would have thought that the RBA does not think that the economy and earnings are that strong to warrant a rate rise at the present time.

  5. Guest123   October 27, 2009 at 8:31 pm