At its first meeting for 2012, the Reserve Bank of Australia (RBA) has decided to leave the official cash rate on hold at 4.25 per cent.
The decision to leave rates unchanged comes as a surprise with economists, future traders and betting agencies all expecting a drop in the official cash rate.
13 out of 14 economists had predicted a rate cut when surveyed by the Australian Associated Press prior to the RBA announcement. Online bookmaker sports-bet.com.au was also offering only a $1.25 return on a $1 bet that rates were coming down, but were paying out more than $2 on any of the banks passing the cut on in full.
The decision to leave interest rates steady will not be welcome news for those businesses suffering the effects of a strong Australian dollar currently sitting near decade old highs. The strength of the local currency is expected to continue with both European and American central banks slashing their rates to just above zero. Our local rate of 4.25 per cent would be considered a premium for overseas investors who must have been impressed by our country's ability to ride out both the GFC and Euro debt crises.
Making matters worse for those in industries sensitive to a stronger Aussie dollar is that the Chinese driven resource boom is expected to put further upwards pressure on the local currency.
The move to leave rates unchanged should draw out more critics of the central bank. In a recent speech at the RBA, Federal Independent MP Bob Katter said that his Katter's Australian Party was concerned that the bank's brief was too narrow and it was not making fair decisions for all Australians. (More From Yahoo!7 Finance: RBA Must Be Answerable To Public: Katter)
Katter called for the removal of independent control of the central bank and wants interest rates lowered to around 2 per cent.
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61 Comments
Ride out the GFC, you must be kidding, our stock market has the worst record of all the western countries since Nov 2008 our market is up 9%, Europe, where all the drama is, Germany is up 35%, Britain 34%, the US where they were having difficulties paying their mortgage payments on $14 Trillion and had a subsequent credit downgrade is up 38%, the NASDAQ a staggering 68% (just for info in 2008 our marketed ended 50% down, the US only 38% down)..........And it is pure and simply the AUD being so high while Europe and the US have had the luxury of a low currency for going on 4 years (they are enjoying every bit of the European Debt Crisis and the US is enjoying every bit of their GFC and debt crisis), while ours has been at all time highs for the 4 years, its sending us straight to that Abyss Europe & the US was apparently going to. The RBA has a responsibility to our economy not to the 4 banks, I can only foresee a rate cut to levels of Europe and the US will save us - get our dollar back to a sustainable level 80cents, economics 101 shows that a high currency over a long period destroys economies.
1 Replyhigher the dollar ,lower economy . high dollar is Australian pride ,hut You can not eat it
Replyhi RUDY , GLAD YOU ARE BACK ,,,I have a problem posting on yahoo main page since they changed a format ,, it is not working
ReplyThe RBA is controlled by our 4 big banks. At all costs protect the profit.$$$$$ that is their motto. And for those comments that say 0.25% does not matter on a loan - Sorry but yes it does, collectively overall in the process of lowering the rates. Why cant Australia have the same interest rates fixed at 4.8% for 30 years like the USA & Japan? Because our economy is controlled by the filthy rich & their greed. Vote as many independants into the senate as you can.
ReplyLucky.i'm back hope you are "ok".Banana's here 0.99 cent's a kilo.from Rudolph.
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