By CountingPips.com
The Reserve Bank of Australia increased its interest rate by 25 basis points today to 3.50 percent and raising its rate for the second meeting in a row. Today’s decision to raise the cash rate was expected by market forecastors after last month Australia became the first G20 economy to increase its interest rate since the financial crisis. The October rate increase was the first rate change since April 2009 when the RBA decreased the rate by 25 basis points to the 3.00 percent level, a 49-year low.
Australia’s Glenn Stevens, Governor of Monetary Policy, said in his policy statement that, “The global economy has resumed growth. With economic policy settings likely to remain expansionary for some time, the recovery is likely to continue during 2010 and forecasts have been revised higher. The expansion is generally expected to be modest in the major countries, due to the continuing legacy of the financial crisis.”
Australia’s economy weathered the economic crisis better than most others as a technical recession was averted and government stimulus as well as strong demand for Australian goods from China has continued to help boost the economy. In 2009, the GDP of Australia rose for the first half of the year with a 0.4 percent increase in the first quarter followed by a 0.6 percent gain in the second quarter.
Stevens commented on the Australian economy today saying that, “Economic conditions in Australia have been stronger than expected and measures of confidence have recovered. Some spending has probably been brought forward by the various policy initiatives. With those effects now diminishing, these areas of demand may soften somewhat. Some types of capital spending are likely to be held back for a while by financing constraints, but it now appears that private investment will not be as weak as earlier expected.”
