Banks differ over rate rises Australia holds steady after NZ increased official

Monday 9 August 2004

The handling of the New Zealand and Australian economies by their respective reserve banks was shown in sharp contrast yesterday when the RBA left its central interest rates unchanged at 5.25%.

By The Landlord

While the Reserve Bank of New Zealand has lifted interest rates four times this year, from 5% to 6%, the Reserve Bank of Australia has kept its interest rate steady at 5.25% for a seventh consecutive board meeting.

The RBA last raised interest rates in two 0.25% moves in November and December last year. Only in March did the Reserve Bank of New Zealand not lift its official cash rate (OCR), then catching economists by surprise.

RBC Capital Markets senior economist Su-Lin Ong said an Australian rate rise was still on the cards, but low inflation and an upcoming federal election had kept the RBA from lifting rates yesterday.

"While there is no doubt that credit growth remains far too strong and housing sector-related developments are demonstrating a degree of resilience, we also note that inflation remains low and the RBA's key measures of core inflation are running at the bottom of the 2% to 3% target range.

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