Australian central bank raise borrowing costs
18 August 2009
The Australian central bank said its decision on when to raise borrowing costs from a half-century low will need to balance the risk of stoking inflation with prematurely killing off confidence and demand. “A particular source of uncertainty was whether the recent growth in household spending was due mainly to temporary” government handouts, “in which case it would probably soon fade,” policy makers said in minutes of their Aug. 4 meeting. The bank cut a forecast this month that the economy would contract 1 percent this year, saying it is now expected to grow 0.5 percent.“If the economy evolved as anticipated in the forecasts, the bank would in due course need to adopt a less expansionary policy stance,” the minutes said. Policy makers also noted that house prices recorded a “very strong increase” in the June quarter, driven by demand from first-time buyers and low mortgage rates.