RBA raise interest rates

5 November 10 REIA Newsletter

At its meeting, the Board of the Reserve Bank of Australia decided to raise the cash rate by 25 basis points to 4.75 per cent, effective 3 November 2010. The Board concluded that the balance of risks had shifted to the point where an early, modest tightening of monetary policy was prudent.

REIA President Mr David Airey said If the RBA had accurately assessed market conditions it would not have increased interest rates today. Instead, the RBA has played Scrooge to homeowners in the lead up to Christmas.

The clear indicator for the RBA should have been last weeks release of the Consumer Price Index (CPI) which highlighted that the CPI inflation rate is well within Reserve Banks target zone of 2-3 per cent; therefore, there was no reason to increase rates today.

REIAs Deposit Power Housing Affordability Report has shown a dramatic worsening in housing affordability, with the average Australian now putting nearly 35 per cent of their income towards loan repayments.