Reserve Bank of Australia Governor hints at mortgage interest rate rise
02/03/2012 
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Mortgage interest rates are more likely to rise than fall in the future, Reserve Bank of Australia Governor Glenn Stevens told a parliamentary committee today.
Asked whether interest rates were more likely to rise given the central bank’s interest rate outlook, the Governor said “Yes that’s right.”
Mr Stevens is fronting the House of Representatives Economics Committee in Perth today.
Mr Stevens also said that the financial markets response to last week’s quarterly monetary policy statement by pricing in only a 20 per cent risk of another interest rate rise was not a problem.
“We wanted to say that it is too early to declare victory yet, and there are still some forces around that give us cause for thought, and we have to be very watchful on those,” Mr Stevens said.
The Governor disagreed that official interest rates don’t change in federal election years.
“If in August it needs to be done, it will be done,” he said in response to a question.
Mr Stevens said there will be big changes in the consumer price index (CPI) over the next year.
“We will see some very big movements during the coming months,” he said.
“The CPI will fall from over three per cent to less than two per cent over the next nine months as falling petrol and banana prices have their effect.
“The CPI headline inflation rate will then go back up again, we think to about 2.75 per cent around this time next year.”
Mr Stevens also said the central bank welcomed an easing in the inflation rate in the December quarter but warned the figures may not reflect the true situation.
He said the data may include some “statistical noise” and that inflation could be “a touch higher than expected”.
But if future consumer price index reports continued to suggest that inflation was falling, it would “make life a whole lot easier”, the Governor added.
Mr Stevens said there was a risk inflation would remain high if consumer demand rose.
He noted that the three interest rate hikes of last year were still working through the economic system and the household sector.
Mr Stevens said the Australian economy expanded at a moderate rate in second half of 2006.
The Governor also said demand for labour is strong and there’s evidence that the trend will continue.
“The economy continued to expand at moderate pace through the last part of last year,” he said.
“Consumer demand picked up.”
Mr Stevens said a drop in petrol prices was helping support demand.
Source: AAP
Rick Adlam has been helping clients with home loan finance since 1985 when he was home consultant with AV Jennings. Rick started Equity Home Loans in 1996 to help homeowners become property investors. Rick currently consults in the development of Mr Mortgage for mortgage brokers and HomeMate for new home buyers.
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