 Another interest rate hike in May?
The minutes of the Reserve Bank of Australia's (RBA) April board meeting on Tuesday will be scrutinized by economists for indications of another interest rate hike in May.
The RBA increased the cash rate by 4.25 per cent during the April meeting, while another interest rate hike in May means propelling an increase for three months consecutively, economists argued.
The economists have been expecting that RBA will take a more "gradual" approach in putting rates back to the "average" level.
According to JP Morgan chief economist Stephen Walters the minutes should show how fretful the RBA officials are on the effect of inflation. Data recently released may intensify RBA governor Glenn Stevens’s concern on housing, said Morgan. The data shows the fastest pace in residential land price hike since 2004 --rising this year at 14%.
Chief economist Harley Dale of the Housing Industry Association (HIA) said that “the sharp 14 per cent annual rise in land prices was despite new house prices - excluding land - rising 2.8 per cent in the year with building materials increasing by just 1.0 per cent and labour rates falling marginally.”
Meantime, the HIA-RP Data report showed the mid-price of raw land swelled by 2.2 per cent in the last quarter of 2009.
During the sudden increase of house price, the land values constantly develop at a faster rate than the increase on construction costs and general rate of inflation, according to Dale.
If the situation prolongs the recovery is expected to freeze, the housing shortage will deteriorate, and rentals will continue to hike which could have been avoided in the first place, explained Dale.
Join the discussion on Interest Rates - Up or Down?
|