Reasons for 6th interest rate increase since October 2009

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20-year interest rate trend in Australia

The Reserve Bank of Australia has increased interest rates by 25 basis points today for the sixth time since October 2009’s 49-year low of 3%, bringing the cash rate to 4.5%. The RBA cited increasing demand from the reviving mining boom as being one of the reasons for the rate increase. On a broader note, the increase was mainly due to signs of a strengthening domestic economy, falling unemployment rate and price increases. Property prices increased by 20% in Australian capital cities in the year to March 2010, the biggest jump in 20 years according to the Australian Bureau of Statistics report on 3 May 2010.

Credit for housing has been expanding at “a solid pace”, even though new housing loan approvals have decreased over the last 5 months as the effects of the sharp interest rate rises took effect and the First Home Owner’s Grant tailed off.

“Nonetheless, at this point the market for established dwellings is still characterised by considerable buoyancy, with prices continuing to increase over recent months”. the central bank said.

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