A benign labour force report for February will probably be sufficient for the Reserve Bank of Australia (RBA) to leave the official cash rate unchanged next month, economists say.

The jobless rate edged up to 5.3 per cent in February from a downwardly revised 5.2 per cent in January, with the number of people employed barely rising.

This was the first rise in the jobless rate since peaking at 5.8 per cent last October.

Just 400 jobs, seasonally adjusted, were added to the workforce in February, Australian Bureau of Statistics data showed on Thursday.

“This is a steady result,” Employment Minister Julia Gillard told reporters in Canberra, adding employers move to taking on more full-time employees and reducing part-time work.
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The last two of the big four banks have stepped into line with their peers and matched the interest rate rise by the Reserve Bank of Australia (RBA).

Both National Australia Bank Ltd (NAB) and Westpac Banking Corp announced on Wednesday they would lift their standard variable rate on home loans by the same extent as the RBA’s quarter of a percentage point increase on the cash rate.

NAB also said its strategy of matching the RBA previously has led its mortgage volumes to soar.

Group executive personal banking Lisa Gray defended the bank’s retail strategy of maintaining low interest rates and cutting fees, saying NAB had experienced a surge in mortgage applications in February.
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Two of Australia’s biggest banks have announced 25 basis point interest rate increases on home loans, moving in lock-step with the Reserve Bank of Australia’s (RBA) rate hike.

Commonwealth Bank (CBA) will raise its interest rates on standard variable loans to 6.86 per cent on March 5 and ANZ Banking Group Ltd will increase on the same day to 6.91 per cent.

The announcements came after the RBA raised the official cash rate by 25 basis points to 4.00 per cent on Tuesday - the highest level in a year.

Three of the big four banks copped a public backlash in December for imposing bigger interest rate rises than those of the RBA, especially Westpac Banking Corporation.
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Housing commentators have warned that more rate rises are to come after the central bank increased the cash rate on Tuesday .

And if banks pass on the full rise, homeowners can expect to pay an extra $47 each month on an average $300,000 mortgage, they say.

The Reserve Bank of Australia (RBA) raised the cash rate by an expected quarter of a percentage point to 4.00 per cent, the highest since February 2009.

Mortgage Choice senior corporate affairs manager Kristy Sheppard said more rate rises were likely this year.

“Look at this increase as a taste of things to come for 2010,” Ms Sheppard said in a statement.
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Today’s interest rate increase is a reminder to mortgage holders to shop around if they are looking to refinance their home loan, according to the Mortgage and Finance Association of Australia.

“Changes to the official interest rate can present an opportunity to borrowers to get a better deal,” said Phil Naylor, Chief Executive of the Mortgage and Finance Association of Australia (MFAA).

“There are a whole range of factors above and beyond the interest rate which can determine whether a home loan suits your circumstances.

“Consumers should remember that what was the most suitable mortgage 12 months ago is not necessarily the most suitable mortgage now.
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The central bank will have to raise the cash rate above 4.5 per cent this year, but there is no indication when the first increase will occur, economists say.

The Reserve Bank of Australia (RBA) this week surprised financial markets by leaving its key cash interest rate unchanged at 3.75 per cent.

It said in a statement on Friday it was waiting to see the economic impact of three official rate hikes in the final quarter of 2009 and accompanying rate increases by commercial lenders before deciding whether to move again.

The RBA continues to expect an improvement in economic growth over the next two years as domestic demand increases.

In its statement, the RBA outlined its central forecast for the economy to grow at around 3.25 per cent and 3.50 per cent in 2010 and 2011, which would be much stronger than 2009.
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By Jill Fraser for Lending Central

Another cash rise this week is almost a done deal following the latest inflation figures, and with a growing number of Australians using credit to make ends meet the indications are that many people are about to experience deep financial pain.

A survey conducted by the credit reference agency Dun & Bradstreet shows that four in ten Australians are using credit cards to pay bills and remain afloat.

Findings from Dun & Bradstreet’s Consumer Credit Expectations Survey, which focused on Australians’ expectations for savings, credit usage, spending and debt performance over the March 2010 quarter show that 43% of Australians expect they will need to use their credit card to pay for otherwise unaffordable expenses in the coming months and one in three are concerned about their expenditure over the Christmas period, indicating that some households continue to face financial difficulties despite the economic recovery.
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The central bank will almost certainly raise the official interest rate this week as it tries to keep inflationary pressures in check, and moves towards a more normal policy setting in 2010.

All of 16 economists surveyed by AAP believe the Reserve Bank of Australia (RBA) board will vote to lift the cash interest rate by 25 basis points to four per cent at its meeting on Tuesday.

It will be the fourth hike in as many meetings. The RBA board did not meet in January.

Debt markets are pointing to a 73 per cent chance of a February 2 rate rise, up from 61 per cent early last week,

The prediction comes after the release in January of higher than expected quarterly inflation figures and strong monthly employment data.
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Borrowers should pay extra on their home loans now to prepare for anticipated rate rises later this year, a financial planner says.

Financial markets are pricing the Reserve Bank of Australia (RBA) to lift the cash rate by at least one percentage point by the end of 2010.

Repayments on an average $300,000 home loan would rise by $193 a month if commercial banks passed on the one percentage point rise.

“We always encourage our clients to not just pay the minimum amount, but they should pay more in advance if possible,” a certified financial planner with Align Financial, Darren Johns, says.

Mr Johns says he initially encourages his clients to chart their spending and expenses.
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The major lenders are unlikely to lift mortgage rates by an amount greater than next week’s expected rate rise by the Reserve Bank of Australia, analysts say.

Southern Cross Equities analyst TS Lim said the big four banks - Commonwealth, Westpac, National Australia Bank (NAB) and ANZ Banking Group - were unlikely to raise their rates by more than the quarter of a percentage point lift in the cash rate expected by the RBA on Tuesday.

“With credit growth slowing, a lot of banks are trying to hold on to their customers, so this time around its going to be quite different,” Mr Lim said.

Most market economists tip the RBA to raise its overnight cash rate to four per cent from 3.75 per cent when its board meets on February 2.

The RBA board, as was its usual custom, did not meet in January but raised the cash rate in October, November and December, each time by 25 basis points.
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The Reserve Bank must be careful not to choke off economic recovery with another rate rise, says Queensland Treasurer Andrew Fraser.

Economists are tipping a rise in the cash rate when the Reserve Bank board meets next week.

Mr Fraser says that while the recovery is under way, confidence remains fragile.

“I think the Reserve Bank’s got a really hard road to hoe this year,” Mr Fraser told AAP.

“They’ve got to be careful not to choke off the recovery.

“We can’t overplay the strength of the recovery.
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Inflation turned out a smidgin faster than expected in the December quarter, leaving the decision on monetary policy next Tuesday finely balanced.

The consumer price index (CPI) rose by 0.5 per cent in the December quarter after an increase of 1.0 per cent the quarter before, the Australian Bureau of Statistics said on Wednesday.

The annual inflation rate, which had declined every quarter since peaking at 5.0 per cent in the year to the September 2008 quarter, picked up to 2.1 per cent from the 10-year low of 1.3 per cent previously.

The Reserve Bank of Australia (RBA) monitors two measures of underlying inflation, which cut through quarterly volatility to give a better guide to the current inflationary trend.

Those two measures posted quarterly increases averaging 0.65 per cent, with annual underlying inflation of 3.4 per cent on average, the slowest for just over two years.
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Underlying inflation is expected to have eased slightly in the December quarter but the Reserve Bank of Australia (RBA) will raise interest rates again, economists say.

The December quarter CPI, due on Wednesday, will impact the central bank’s February 2 board meeting - at which most economists are forecasting a fourth consecutive upward movement.

The CPI, which is the key measure of inflation, is expected to have risen by 0.4 per cent in the December quarter for an annual pace of 2.3 per cent, according to an AAP survey of 13 economists.

The CPI rose by 1.0 per cent in the September quarter for an annual reading of 1.3 per cent from a year earlier, the Australian Bureau of Statistics said in October.

The market expects a 25 basis point (quarter of a percentage point) rise in the cash rate which now sits at 3.75 per cent after three consecutive rate hikes in October, November and December lifted it off a 45-year low of 3.0 per cent.
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The Reserve Bank of Australia (RBA) is likely to lift interest rates for the fourth consecutive month in February, following a late 2009 boost in personal and commercial borrowing, an economist says.

Total personal finance commitments rose 1.1 per cent in November, seasonally adjusted, to $7.053 billion, from $6.959 billion in October, the Australian Bureau of Statistics (ABS) said on Wednesday.

Total commercial finance rose 4.0 per cent in November, seasonally adjusted, to $26.677 billion, up from $25.662 billion in October.

CommSec economist Savanth Sebastian said the central bank board would be encouraged by the figures ahead of its first meeting for 2010 on February 2.

“Annual lending is tracking higher,” Mr Sebastian said.
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The Reserve Bank of Australia (RBA) is tipped to raise interest rates for an unprecedented fourth straight meeting in February, after a rapid improvement in Australia’s economic position in recent months, economists say.

But the RBA has left itself room pause in 2010, after the minutes of its December 1 board meeting showed its most recent rate hike was “finely balanced” between positive economic developments and fears that confidence could be dented.

“They (the board) weighed the potential for adverse effects on confidence of a further adjustment at this time, the continuing uncertainty over the international outlook given conditions in the major economies, and the high level of the exchange rate,” the minutes of the December meeting, released on Tuesday, said.
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