ID :
10236
Tue, 06/17/2008 - 18:43
Auther :
Shortlink :
https://oananews.org//node/10236
The shortlink copeid
Borrowers may be spared further pain
Canberra, June 17 (AAP) - Federal Labor's first budget in 13 years has won the backing of the central bank as one that fights inflation.
The minutes from the Reserve Bank of Australia's (RBA) last board meeting suggest borrowers are likely to be spared further interest rate pain amid more signs consumer demand is slowing.
The RBA noted that higher interest rates had cooled demand, saying that on current policy settings, the "necessary moderation in demand growth was likely to occur".
Retail spending has been flat while demand for labour had moderated, the minutes said.
But in a much-needed boon for the federal government, facing growing voter anger about rising petrol and food prices, the minutes also reveal support for the budget in terms of its ability to fight inflation.
The RBA said the budget surplus, as a ratio to gross domestic product (GDP), was "noticeably higher than expected".
"Measured in terms of the change in the surplus, fiscal policy was expected to impart a mildly contractionary effect on the economy in 2008-09," the minutes said.
The vote of confidence should also boost Labor's ability to sell itself as an economically-responsible government.
It will also provide the federal government with further ammunition to attack the opposition over its plans to block a number of budget measures in the Senate.
The coalition's control of the upper house ends at the end of next week when its one-seat majority of three years expires.
Prime Minister Kevin Rudd on Tuesday warned the opposition against employing delaying tactics in the Senate, saying doing so would put upward pressure on inflation.
"The government earlier this year indicated what its plan of attack was on inflation and a core element of that plan of attack on inflation goes to responsible economic management by delivering a substantial government surplus through the budget," Mr Rudd told parliament.
The opposition's delaying tactics in the Senate would cut the surplus by $300 million, he said.
Federal Treasurer Wayne Swan said the minutes confirmed inflation remained a key challenge. "In this country we do need to tackle inflation, to put downward pressure on interest rates, because it's inflation that eats away at the living standards of families and strangles growth," he told parliament.
Westpac chief economist Bill Evans said the tone of the minutes suggested it was likely rates would remain on hold until the first half of 2010, but may then start to fall.
"The tone of these minutes is somewhat more dovish than what we saw in May, mainly because there was no specific reference to spending considerable time discussing the case for a rate rise," Mr Evans said.
"It is also true that the new economic themes that are raised in these minutes are all consistent with evidence of a slowdown, although clearly ... there is profound concern that this slowdown will be threatened by the terms of trade boost."
There have been concerns raised that the rivers of gold flowing into the country as a result of the commodities boom will boost the amount of cash in the economy and add to inflationary pressures.
There were further signs on Tuesday of the impact of higher interest rates with data showing the number of new homes being built had fallen by 3.3 per cent in the first three months of the year.
The minutes from the Reserve Bank of Australia's (RBA) last board meeting suggest borrowers are likely to be spared further interest rate pain amid more signs consumer demand is slowing.
The RBA noted that higher interest rates had cooled demand, saying that on current policy settings, the "necessary moderation in demand growth was likely to occur".
Retail spending has been flat while demand for labour had moderated, the minutes said.
But in a much-needed boon for the federal government, facing growing voter anger about rising petrol and food prices, the minutes also reveal support for the budget in terms of its ability to fight inflation.
The RBA said the budget surplus, as a ratio to gross domestic product (GDP), was "noticeably higher than expected".
"Measured in terms of the change in the surplus, fiscal policy was expected to impart a mildly contractionary effect on the economy in 2008-09," the minutes said.
The vote of confidence should also boost Labor's ability to sell itself as an economically-responsible government.
It will also provide the federal government with further ammunition to attack the opposition over its plans to block a number of budget measures in the Senate.
The coalition's control of the upper house ends at the end of next week when its one-seat majority of three years expires.
Prime Minister Kevin Rudd on Tuesday warned the opposition against employing delaying tactics in the Senate, saying doing so would put upward pressure on inflation.
"The government earlier this year indicated what its plan of attack was on inflation and a core element of that plan of attack on inflation goes to responsible economic management by delivering a substantial government surplus through the budget," Mr Rudd told parliament.
The opposition's delaying tactics in the Senate would cut the surplus by $300 million, he said.
Federal Treasurer Wayne Swan said the minutes confirmed inflation remained a key challenge. "In this country we do need to tackle inflation, to put downward pressure on interest rates, because it's inflation that eats away at the living standards of families and strangles growth," he told parliament.
Westpac chief economist Bill Evans said the tone of the minutes suggested it was likely rates would remain on hold until the first half of 2010, but may then start to fall.
"The tone of these minutes is somewhat more dovish than what we saw in May, mainly because there was no specific reference to spending considerable time discussing the case for a rate rise," Mr Evans said.
"It is also true that the new economic themes that are raised in these minutes are all consistent with evidence of a slowdown, although clearly ... there is profound concern that this slowdown will be threatened by the terms of trade boost."
There have been concerns raised that the rivers of gold flowing into the country as a result of the commodities boom will boost the amount of cash in the economy and add to inflationary pressures.
There were further signs on Tuesday of the impact of higher interest rates with data showing the number of new homes being built had fallen by 3.3 per cent in the first three months of the year.
