Australia Raises its Benchmark Interest Rate for a Third Consecutive Month

The Reserve Bank of Australia raised its benchmark interest rate by .25% for a third successive month in December as the nation’s economy strengthens. Governor Steven’s stated the board’s growth outlook is the same as in the November statement, with development in 2010 “likely to be close to trend and inflation close to target.” The rise comes to no surprise as 19 of the 20 economists surveyed by Bloomberg news expected the rates to advance to 3.75%, with one economist forecasting no change at 3.50%. According to the central bank, the economy has entered a “new upswing,” led by rising consumer confidence and China's demand for resources such as iron ore. At the same time, house prices have surged 10% this year, while employment climbed in October and looks to carry on into next year as the A$43 billion Gorgon natural-gas venture, with Chevron and Exxon Mobil Corp seeks to add as many as 10,000 jobs. Meanwhile, Steven’s characterized the recent rate hikes as “material adjustments” to the stance of monetary policy, instead of phrasing it as “the adjustments” as he did in the November statement. Going forward, there is a large possibility that RBA may hike rates further in February (no meeting in January) as the statements from the central bank seem to be consistent with the continuation of gradual rate hikes that have been seen since October.