Interest rates are “normal”: RBA

Interest rates are “normal”: RBA

17 December 2009 by Staff Reporter 0 comments

Interest rates are officially heading back towards ‘normal territory’, according to the RBA’s deputy governor Ric Battellino.

Speaking at the 22nd Australasian Finance and Banking Conference yesterday, Mr Battellino said the cash rate, which is currently 3.75 per cent, is still 50 basis points below the previous cyclical low of 4.25 per cent recorded in 2001.

"On the surface this might suggest that the cash rate is still unusually low. However, with other interest rates in the economy having risen by at least 100 basis points relative to the cash rate over the past couple of years, they are now above their previous cyclical lows,” he said.

According to Mr Battellino, the increased cost of wholesale funding and strong competition for deposits has pushed up commercial interest rates relative to the official cash rate.

"Taking this into account, it would be reasonable to conclude that the overall stance of monetary policy is now back in the normal range, though in the expansionary segment of that range," he said.

Mr Battellino’s comments came after the Australian Bureau of Statistics (ABS) showed that the Gross Domestic Product (GDP) had enjoyed marginal growth in the September quarter, suggesting the RBA may keep rates on hold when they meet in February.

According to data from the ABS, the GDP increased by 0.2 per last quarter.

Interest rates are officially heading back towards ‘normal territory’, according to the RBA’s deputy governor Ric Battellino.

Speaking at the 22nd Australasian Finance and Banking Conference yesterday, Mr Battellino said the cash rate, which is currently 3.75 per cent, is still 50 basis points below the previous cyclical low of 4.25 per cent recorded in 2001.

"On the surface this might suggest that the cash rate is still unusually low. However, with other interest rates in the economy having risen by at least 100 basis points relative to the cash rate over the past couple of years, they are now above their previous cyclical lows,” he said.

According to Mr Battellino, the increased cost of wholesale funding and strong competition for deposits has pushed up commercial interest rates relative to the official cash rate.

"Taking this into account, it would be reasonable to conclude that the overall stance of monetary policy is now back in the normal range, though in the expansionary segment of that range," he said.

Mr Battellino’s comments came after the Australian Bureau of Statistics (ABS) showed that the Gross Domestic Product (GDP) had enjoyed marginal growth in the September quarter, suggesting the RBA may keep rates on hold when they meet in February.

According to data from the ABS, the GDP increased by 0.2 per last quarter.

promoted content
Recommended by Spike Native Network
Listen to other installment of the Real Estate Business Podcast
reb top 100 agents 2016

With a combined sales volume of $13 billion in 2016, the Top 100 Agents ranking represents the very best sales agents in Australia. Find out what sets them apart and learn their secrets to success.

featured podcast

featured podcast
REVEALED: The 10 best agents in Australia for 2017

For the first time ever, the top 10 agents in the REB Top 100 Agents ranking are revealed in this exclusive podcast. ...

View all podcasts

Are dodgy agents being punished enough?

Yes (8.6%)
No (55%)
Only in some states (2.3%)
Not all dodgy agents are being found out (34.1%)

Total votes: 220
The voting for this poll has ended on: April 15, 2017
Do you have an industry update?