Path open to further rate hikes
(20 January 2010 – Australia) Australia has side-stepped the global slump and as fiscal stimulus fades and as fears that it will dent the pace of recovery remain unsubstantiated the path to increasing interest rates remains wide open, according to a report released by HSBC.
As Australia’s policy rate continues to climb upwards from the emergency low of the global financial crisis, the HSBC report predicts that rates will reach 4.0 percent within the coming year, but will not revert to pre-GFC levels before the end of 2011.
Gross domestic product growth levels are expected to be at their lowest for the last five years when figures for 2009 are complied after a gradual decline from 4.8 percent in 2007 to 0.8 percent. GDP levels are predicted to increase over the coming two years, with to 2.8 percent estimated for 2011.
The growing GDP over the coming years could be attributed to the indication in the report that accelerating job creation will drop the unemployment rate from an expected 5.6 percent in 2009 to 5.3 percent by the end of 2010.
The report also predicted that the trade deficit will grow from last year’s low of 4.8 percent to a staggering 29 percent by the year’s end due to significantly increased imports.
The Australian dollar will to continue to rise at a rate of 2 cents a quarter before it is expected to match the US by the end of the fourth quarter of 2010.
HSBC also said that consumer confidence has started to ease back and rate hikes are giving wings to the Australian dollar, which helps to slow growth. As a result Australia’s central bank may need to proceed more carefully in 2010 after the bold moves made in the previous year.
Gross domestic product growth levels are expected to be at their lowest for the last five years when figures for 2009 are complied after a gradual decline from 4.8 percent in 2007 to 0.8 percent. GDP levels are predicted to increase over the coming two years, with to 2.8 percent estimated for 2011.
The growing GDP over the coming years could be attributed to the indication in the report that accelerating job creation will drop the unemployment rate from an expected 5.6 percent in 2009 to 5.3 percent by the end of 2010.
The report also predicted that the trade deficit will grow from last year’s low of 4.8 percent to a staggering 29 percent by the year’s end due to significantly increased imports.
The Australian dollar will to continue to rise at a rate of 2 cents a quarter before it is expected to match the US by the end of the fourth quarter of 2010.
HSBC also said that consumer confidence has started to ease back and rate hikes are giving wings to the Australian dollar, which helps to slow growth. As a result Australia’s central bank may need to proceed more carefully in 2010 after the bold moves made in the previous year.