Hi Steve and everyone, my question is reference to what figures I should be looking at when CPI data is released by the Gov. and how this affects the interest rate rise or fall?[strum]
Corey Corby
this will explain the 3% max value of the CPI by the reserve bank of Australia
http://www.rba.gov.au/PublicationsAndResearch/Conferences/2004/Heath_Roberts_Bulman.pdf
If the CPI growth gets > 3% or looks like trending to >3 % the economy will experience what is termed unsustainable economic growth.
This is also affected by global growth as Australia is part of a global economy. Unfortunately there is a lag effect in the economy where indicators like new building approvals, consumer spending, borrowing levels, business confidence can increase many months before the economy feels the effect. The mere mention of an interest rate increase can effect these factors. The effect of an interest rate increase takes months of time to effect the economy to slow down borrowing and slow down the economy. This is why the RBA announcements are after several months as to if interest rates will increase. The last decreases in interest rates was caused by a slow down in the global economy and thus the Australian economy.
The RBA decreases the interest rate to increase the growth to avoid what is know as a recession and if negative growth continues it evenually becomes a depression.
http://www.rba.gov.au/PublicationsAndResearch/RDP/RDP2001-09.html
indicators can be found at
http://www.abs.gov.au/websitedbs/d3310114.nsf/Home/key+national+indicatorsComments are of a general nature and may not be relevant to your individual circumstances. If you intend making any investment, financial or taxation decision you should consult a professional adviser.
Thanks duckster, that has explained alot and without confusing me!
Again, cheers.[biggrin]Corey Corby
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