Effective from October 7, 2009 official interest rates will rise by 25 basis points to reach 3.25 per cent. The rate rise represents the first rise in official interest rates since March 5, 2008 and helps bring to an end the downward cycle in official interest rates.
Printing Industries says in justifying the rate rise the RBA cites stronger than expected economic conditions in Australia as well as the recent pick up in consumer and business sentiment.
The RBA is also forecasting much stronger global economic growth especially amongst Australia’s trading partners.
According to the RBA, with economic growth in Australia expected to be close to trend during 2010, it is now prudent to start gradually lessening the stimulus provided by monetary policy to increase the sustainability of growth in economic activity and keep inflation consistent with the target over the years ahead.
Hagop Tchamkertenian, national manager for policy and government affairs at Printing Industries says while no serious economic commentator was expecting the generational low interest rates to remain forever, it would have been preferable to maintain the low rates until the first quarter of 2010.
He says, “The Australian economy has performed better than any other industrialised economy during the most recent global economic downturn due to the fact that our monetary and fiscal policies became expansionary at a very early phase. Both the Government and the RBA took pre-emptive action.”
Tchamkertenian continues, “The real question now is whether the current growth is sustainable and if it is whether it will be close to trend. The International Monetary Fund’s latest economic forecasts place projected growth for Australia at 2.0 per cent during 2010. The projected growth rate for the global economy is 3.1 per cent.”
Tchamkertenian also says the RBA has now signalled that interest rates will gradually be adjusted upwards until they reach what is deemed to be the “neutral rate” at 5.0 per cent.
He adds, “Rising interest rates will impact negatively on the printing and associated industries as these industries rely on retail and consumption activity.
“Our internal research is also showing that business in our industry will also be impacted by rising interest costs as almost 27 per cent of our survey respondents (Printing Industry Trends Report) have indicated that they will be increasing their business borrowings over the next 12 months.”
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