RBA Says Rate Hikes Won’t Cause Australian Households Financial Hardship

Post by Sharat on October 20, 2009 · Under Australian Economy, banking, interest rates · Comment 

A senior official from the Reserve Bank of Australia has said that the current policy of tightening official interest rates will not result in financial hardship for Australian households.

RBA Assistant Governor, Philip Lowe, speaking at a conference said that the prospect of further interest rate hikes should not cause home buyers and mortgage borrowers to much difficulty.

“I think most borrowers understood that the setting of monetary policy we had over the last year was unusual. As interest rates rise, I think most people have factored that into their budget considerations, so we are not expecting that to cause budgetary difficulties.” Dr Lowe said.

Dr Lowe, responding to criticism from some quarters over the decision taken by the RBA to raise official interest rates by 25 basis points earlier in the month, said it was now appropriate for Australia to return to normal fiscal policy.

“There are always criticisms when interest rates go up, and actually there were criticisms on the way down,” he said.

“I think the big point here is the settings of interest rates that we had were put in place at a time where there were very serious people, respectable people, who argued that the world economy could be going to a situation like the 1930s.”

Dr Lowe added that there had been a material change in the state of the global economy, and though risk and uncertainty remained, they were nothing like the kind that existed earlier in the year.

“And as those risks and as those uncertainties diminish; it is entirely appropriate that we go back to a more normal setting of monetary policy.” Dr. Lowe said.

Dr. Lowe said he was optimistic about the prospects for the Australian economy, citing strong growth continuing in Asia, which would boost demand for Australian resources, which would result in increased investment in the commodities sector.


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