By Martin Vedris
SYDNEY, NSW: In a case of woeful timing and an overactive imagination, the Reserve Bank justified its second consecutive interest rate rise, risking putting the Australian economy into reverse. But retailers bank dollars not justified economic theory and consumers can’t spend money they don’t have.
The Reserve Bank today issued a statement in a bid to justify its decision to hit the Australian economy with a second interest rate increase in two months as we all prepare to head into the Christmas spending season — the peak spending season of the year.
On Tuesday 3 November (as the country was largely preoccupied with the euphoria of the Melbourne Cup), the Reserve Bank Board plotted to raise the cash rate by 25 basis points to 3.5 per cent, effective 4 November 2009.
In its Statement on Monetary Policy released today, the RBA said “there is still a long way to go before conditions could be described as normal” and “One area of continuing weakness in the business sector is commercial property”.
Yet despite this, they still raised interest rates, knowing that interest rate increases are the brakes on the property industry.
The RBA also stated that “Growth in household spending has been slower over the second half of 2009” and that “The general softness in labour demand over the past year has led to a significant slowing of wage growth”.
Still, the RBA turned Scrooge and turned the screws on the economy, stating that “the Board has judged it prudent to lessen the degree of monetary stimulus” and therefore raise interest rates.