RATES TO STAY UNTIL 2012 SAYS SUNCORP BOSS

Written on the 27 July 2011

RATES TO STAY UNTIL 2012 SAYS SUNCORP BOSS

A STRONGER than expected CPI increase for the June quarter won’t cause the RBA to raise interest rates, says Suncorp Bank general manager David Marshall.

Figures released today show CPI growth at 0.9 per cent and the annual rate at 3.6 per cent – higher inflation than forecast yet Marshall says it won’t be a contributing factor to interest rate decisions this month.

He highlights brewing uncertainty overseas and the continued economic impacts of natural disaster both locally and abroad as likely to keep rates stable.

“My personal opinion is that interest rates will remain steady until at least the start of the next calendar year,” says Marshall.

“Indicators at home remain strong. Inflation is relatively in check, we have a resurgent mining and energy sector, low unemployment and predictions of strong economic growth toward the end of 2011.

“However, we are still facing a very dynamic market and the RBA will no doubt be watching the volatility in international markets very closely. All eyes are currently on the United States and whether Washington can reach an agreement on lifting their debt ceiling by the 2 August deadline.

“While uncertainty continues to shroud European and United States markets, we should feel confident in Australia’s resilience to changes overseas. Australia has weathered economic events well in the past few years, both overseas and at home.”

Marshall says the volatility in the US and Europe markets will have a much lesser impact on the domestic economy than consumer behaviour.

“In isolation the US and European debts won’t have as big an impact as some people think. The US has been struggling for years but I’m confident they’ll sort it out,” he says.

“But you can understand why people are feeling uncertain. We have this two or three-speed economy where resources and mining are still going strong. However that sector is punching well above its weight for the (relatively small) amount of people it directly employs.

“Unless your one or two steps down the food chain the resources boom won’t pass on any benefits.

“The first indicator towards economic recovery is in retail activity and if the consumer market begins spending more freely. I’m quite confident conditions will improve towards the end of the year and this will start being reflected in retail spend.”


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