Interest Rates and The Economy

By Dave Lamari

There are many signs in the economy now pointing towards rates moving a little more aggressively than first thought.

The common belief is that this will be in the order of 1 – 1.5% in the next 12 – 18 months. The fixed rate movements are anyone's guess, but it is safe to say that if the variable rates are higher in 12 months, the short term rate son the fixed side will move accordingly.
 
Movements in variable rates have finally started and there are signs that this will continue at least in the short term (the Reserve Bank Governor is stating this quite clearly, rather than ‘double talking’ around it).
 
Fixed rates – These will follow (or lead) suit with Variable rates. These are not directly looked at by banks in line with Reserve bank moves, but rather moved as banks please and normally align with other banks in the interest on competitiveness.
 
Property and Rent prices – As with 18 months ago, there are signs that what effected rent and property prices back then (interest rate increases, inflation etc) are soon to re-enter the economy. This however does include a positive side. Rates are moving due to signs of a strengthening economy and with that normally comes better public sentiment and jobs growth (and maybe property price growth J).
 
Too Much Stimulus? - http://www.eurekareport.com.au/iis/iis.nsf/lpages/RWIE-7N92AE?opendocument