RATE RISE TO TAKE HEAT OUT OF SYDNEY MARKET
SYDNEY's runaway house prices were partly to blame for yesterday's surprise increase in interest rates. With its 0.25 per cent increase, the Reserve Bank of Australia is only the second central bank after Israel to begin increasing borrowing costs. The move will add nearly $50 a month to repayments on a $300,000 mortgage and it came as a shock to economists and property experts. The RBA pulled the trigger too soon, experts said.
Unemployment was still rising. The Australian ecomomy was barely growing. And the global picture was still worrying. Why not wait? "They are being very pre-emptive," TD Securities global strategist Stephen Koukoulas said. "They are anticipating the economy will recover and this housing bubble will get out of control. "But there's now clearly a risk of a double-dip recession."
Commonwealth Securities' economist Savanth Sebastian said: "There are signs that the global economy is not out of the woods. "The RBA did have the option of holding back" and waiting for more evidence that the worst was over.
source: daily telegraph
