Katrina Parrington

Mortgage & Finance Broker, Elders Home Loans – Northern Territory – P. 8932 8900

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  • Elders Home Loans

  • Katrina Parrington

    I am a long term Centralian resident with more than 18 years experience in the financial services industry. Initially, in Real Estate in Adelaide before pursuing a career with Elders Insurance Alice Springs and lending roles with major banking institutions where I gained extensive experience in Home Loans and Commercial Lending here in the Alice and in Darwin.

    I have a unique set of skills that ensures I understand your lending needs and can provide you with professional advice and personal service.

    Tel: 08 8953 8800
    email: katrina.parrington@eldershomeloans.com.au

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Rates to Rise – RBA Governor Says

Posted by Katrina Parrington on February 20, 2010

Rates will have to rise as Australia gears up to prosper from its proximity to a strong Asia, RBA governor Glenn Stevens says.

Mr Stevens also said further adjustments to monetary policy will be needed to ensure inflation remains consistent with the RBA’s two to three per cent target band.

“If economic conditions evolve roughly as we expect, further adjustments to monetary policy will probably be needed over time to ensure that inflation remains consistent with the target over the medium term,” he told a House of Representatives Economics Committee hearing in Canberra.

The RBA increased the rate to 3.75 per cent by December and then surprised financial markets by keeping it steady in February.

“This is a normal experience in an economic expansion: as economic activity normalises interest rates do the same.

The RBA uses monetary policy, or interest rates, to keep inflation within its target band, and as the expansion continued there would be inflationary risks.

“But it also means that there is less scope for robust demand growth without inflation starting to rise again down the track,” he said.

“Monetary policy must therefore be careful not to overstay a very expansionary setting.”

Mr Stevens said the central bank got on the offensive by raising the cash interest rate three times last year.
“The RBA was in front of the game after the rate hikes in late  2009,” he said.

However, Mr Stevens flagged the prospect of further hikes, albeit not at so fast a pace. “I don’t think we’re in emergency anymore,” he said.  “We’re closer to normal settings.”
 
Policy makers had to act during the global financial crisis to sustain confidence and to support the economy and financial system through demanding conditions, Mr Stevens said.

“By and large those efforts were successful,” he said.  “Now we must turn our attention to the challenges of managing an economic expansion.

The RBA sees gross domestic product (GDP) expanding by about  3.25 per cent in 2010 and about three per cent in 2011 and 2012, on top of real growth of two per cent in 2009.

It sees underlying inflation, its preferred measure of inflation as it removes volatile items from its calculations, moderating to about two per cent in 2010 from about three per cent in the second half of 2009.

“It is normal, given the lags in these processes, for inflation to keep declining for a while after the economy begins to firm,” Mr Stevens said.

“Issues of capacity, productivity, flexibility, adaptation to structural change and so on will once again come to centre stage, as they should.”

Household credit costs and availability were adequate, while housing prices had risen “quite smartly” over the past year. 

“That said, it seems unlikely that we will return to the easy credit conditions of three years ago,” he said.
“The world has changed, for a while at least.”
 
But Mr Stevens said while the economy’s performance was better than expected, it had left the nation with less spare capacity compared to the typical case after a recession.

The unemployment rate was low – it was 5.3 per cent in January – and while the labour market had proved flexible during the global economic downturn, there was less scope for robust demand growth.

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