 Prediction of rate rises
Australian banks are likely to lift home loan rates before the cash rate is changed, due to increased funding pressure.
The Reserve Bank of Australia has hinted that any changes upwards to the official cash interest rate are not likely until the end of the year, however the minutes from the RBA's September board meeting show they believe the banks will raise variable rates sooner.
Because of concern about the security of offshore wholesale funding, the banks have been competing aggressively for domestic retail and business deposits seen as a more stable source of funds. However, this is pushing up their interest costs.
Rumours in the market that the RBA may lift rates soon has also sparked fears that banks will raise rates soon.
RBA directors also commented that many private banks were already raising fixed rate interest levels.
Financial markets have changed their prediction of an October rate rise and now believe that is less likely. The current official cash rate of 3 per cent is not likely to remain for too much longer according to many financial experts.
Westpac chief economist Bill Evans knows the Reserve's November meeting will discuss employment figures and other financial data before deciding on rates.
He says if the unemployment figures don't get better than the last round of numbers rates are likely to remain on hold a little longer.
While much of the other data available seems to indicate that the Australian and international economy was showing signs of improvement, it is uncertain whether this is due to the massive government stimulus packages rolled our by Mr Rudd's government and historically low rates of interest. If so, this could all be false hope when the effects wear off.
RBA officials and economists are pleased with the way the Australian economy has performed, which has been surprisingly better than expected at the start of the year.
But it really is a mixed bag for our economy as recent figures for the housing market show new home construction fell, despite a growing population, to an eight-year low. Within the date, it's shown that sales of new apartment blocks was falling.
Housing Industry Association senior economist Ben Phillips says many developers are seeing a tough time currently.
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