Another rate rise to end the year, a few more howls and cries of complaint as banks follow with mortgage rate increases.
In fact the biggest howl came from Westpac which went the gouge with a rise of 0.45%, compared with the rate rise of 0.25% (to 3.75% for the RBA’s cash rate).
Business, which has seen higher rate rises from Westpac and other banks in the past will only pay 0.25% more.
And yet mortgages are generating all the growth in Westpac’s loan portfolio at the moment, not business where lending remains weak.
Other banks will be tempted to follow.
But the RBA decision was the third rate rise in as many months and the bank now heads for a break until the next board meeting in early February.
Bank deposit rates from the likes of Westpac will of course be slower to rise than the higher mortgage rates (and business rates) which will apply from this Friday.
But with the RBA certain to push rates higher in 2010, retirees and others looking at their fixed interest investments can afford a small smile in the knowledge that they will see higher returns over the next year with rates set go up by at least 1%, according to some estimates.
The RBA must be doing the right thing because there’s still no sign the two rate rises up till yesterday, have knocked the economy from the path of tentative recovery.
The news was anticipated, although there was less confidence among some analysts and economists about this rate decision than about the ones in October and November.
Then there was unanimity and although most market economists forecasted a rise, several wavered in the last couple of days.
It continues the move by the RBA to return monetary policy to a more normal footing where rates are set to try and reflect a growing economy and its strains and pains, not cushion the impact of a sharp (and dangerous) slump in activity that was feared a year ago in the wake of the Lehman Brothers failure and the implosion of global financial markets, banks, world trade and the most major economies.
Judging from the post-meeting statement from RBA Governor Glenn Stevens, the rise won’t be the last and the timing remains a month-to-month proposition, depending heavily on the normal flow of data on things like retail sales, employment, building approvals, investment, etc.
Now the central bank has December and January to wait before there’s another chance at the first meeting for 2010 in early February, with the September quarter economic growth numbers a major part of that with their release in two week’s time tomorrow.
Earlier the October building approvals showed a 0.6% fall for the month, driven down by another sharp fall in non-private dwelling approvals as developers again found it hard to get finance for their projects.
But private home approvals were up for the 10th month in a row with a solid 5% increase recorded.
Along with another rise in house prices in October, according to RPData/Rismark, the RBA had more evidence that the economy, especially property, is growing very solidly and perhaps needed another nudge from a rate rise.
Mr Stevens finished the statement with this final paragraph (which is the key to understanding each statement).
"With the risk of serious economic contraction in Australia having passed, the Board has moved at recent meetings to lessen gradually the degree of monetary stimulus that was put in place when the outlook appeared to be much weaker.
"These material adjustments to the stance of monetary policy will, in the Board’s view, work to increase the sustainability of growth in economic activity and keep inflation consistent with the target over the years ahead."
That leaves the question of future rate rises completely up in the air and maintains the readjustment of monetary policy since it became very apparent in August- September that Australia has avoided the worst of the global slump and crunch.
The RBA Governor said "Measures of confidence and business conditions suggest that the economy is in a gradual recovery.
"The effects of the early stages of the fiscal stimulus on consumer demand are fading, but public infrastructure spending is starting to provide more impetus to demand. Prospects for ongoing expansion of private demand, including business investment, have been strengthening.
"There have been some early signs of an improvement in labour market conditions. The rate of unemployment is now likely to peak at a considerably lower level than earlier expected.
"Share markets have recovered significant ground, which, together with higher dwelling prices, has meant a noticeable recovery in household wealth"
All these are the traditional check points for the central bank, along with inflation and the currency.
There Mr Stevens said:
"Inflation has declined from its peak last year, helped by the fall in commodity prices at the end of 2008 and a noticeable slowing in private-sector labour costs during 2009. In underlying terms, inflation should continue to moderate in the near term, though it will probably not fall as far as thought likely six months ago.
"Headline CPI inflation on a year-ended basis has been unusually low because of temporary factors, and will probably rise somewhat over the coming year.
"Both CPI and underlying inflation are expected to be consistent with the target in 2010.
"The rise in the exchange rate during this year will have some i
