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Rates may rise to ‘normal level’: RBA

07 August 2009 Reporter

The Reserve Bank of Australia (RBA) today revealed it will consider raising interest rates to a “normal level” if further signs of a durable recovery emerge.

According to the RBA’s statement on monetary policy, the outlook for new construction in the housing market is improving, suggesting price pressures in the economy are gradually abating.

“Lending approvals… also point to strong demand by first home buyers since the start of the year, boosted by both low interest rates and the temporary increase in government grants,” the statement read.

“Housing prices in a broad range of markets have also shown renewed strength this year. Housing credit continues to be widely available, although there has been some tightening of lending standards. Unlike in many other countries, borrowing for housing continues to increase at a solid pace.”

Despite signs of improvement in the housing sector, the RBA said it would sit tight for the time being and wait and see if the recent strength of the economy is built on more than just the mountain of monetary and fiscal stimulus that has flooded the community for almost a year.

Rates may rise to ‘normal level’: RBA
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