Identifier
Created
Classification
Origin
09CANBERRA913
2009-10-06 06:56:00
UNCLASSIFIED//FOR OFFICIAL USE ONLY
Embassy Canberra
how-toVZCZCXRO2672 RR RUEHPT DE RUEHBY #0913 2790656 ZNR UUUUU ZZH R 060656Z OCT 09 FM AMEMBASSY CANBERRA TO RUEHC/SECSTATE WASHDC 2115 INFO RHEHAAA/WHITE HOUSE WASHDC RHMFISS/DEPT OF ENERGY WASHINGTON DC RUCPDOC/DEPT OF COMMERCE WASHINGTON DC RUEATRS/DEPT OF TREASURY WASHINGTON DC RUEHLO/AMEMBASSY LONDON 2136 RUEHKO/AMEMBASSY TOKYO 3711 RUEHWL/AMEMBASSY WELLINGTON 0142 RUEHBJ/AMEMBASSY BEIJING 9619 RUEHUL/AMEMBASSY SEOUL 9931 RUEHDN/AMCONSUL SYDNEY 4962 RUEHBN/AMCONSUL MELBOURNE 6701 RUEHPT/AMCONSUL PERTH 4966
UNCLAS CANBERRA 000913
SENSITIVE
SIPDIS
STATE FOR EEB AND EAP/ANZ
TAGS: EFIN ECON AS
SUBJECT: AUSTRALIA LIFTS INTEREST RATES
UNCLAS CANBERRA 000913
SENSITIVE
SIPDIS
STATE FOR EEB AND EAP/ANZ
TAGS: EFIN ECON AS
SUBJECT: AUSTRALIA LIFTS INTEREST RATES
1. (U) SUMMARY: The Reserve Bank of Australia (RBA) today raised
the cash rate 25 basis points to 3.25%, becoming the first central
bank in the G20 to tighten monetary policy since the GFC began. The
RBA cited strong growth in China; rising house prices; a better than
expected private investment outlook; inflation not falling as much
as expected; and follows three months of better-than-expected
economic results. The RBA seems confident growth will continue over
the next year and is signaling further but gradual rate rises. END
SUMMARY.
RBA MOVES EARLY
--------------
2. (U) The RBA today lifted the cash rate by 25 basis points to
3.25%, becoming the first G20 central bank to tighten monetary
policy since the GFC. It is the first rise since March 2008 and
defies conventional wisdom among analysts, since a majority of
economists believed the RBA would wait until November to lift rates.
The RBA cited strong growth in China; rising house prices; a better
than expected private investment outlook; and inflation not falling
as much as expected. It believes growth will be close to trend over
the next year and therefore it is "prudent to begin gradually
lessening the stimulus provided by monetary policy."
REACTION
--------------
3. (U) Treasurer Wayne Swan said the decision reflected the strength
of the economy. He remarked that "Australians are smart enough to
know" that interest rates could not remain at emergency lows
forever. He reinforced the need for fiscal stimulus, citing weak
private investment data and falling national income. Some
economists argued the rise was unjustified due to per capita GDP
falling in four of the last five quarters. The Opposition linked
the interest rate rise to the government's "reckless" spending. The
Australian Chamber of Commerce and Industry contended the RBA pulled
the trigger too early and that business conditions remained weak.
4. (SBU) COMMENT: The RBA has set a precedent among advanced
economies by lifting the cash rate, showing it is confident the
economy is entering a long-term growth cycle and signaling further
but gradual rate rises. GOA monetary policy has begun a tightening
cycle that could last several years (the last one was between May
2002 and March 2008).
CLUNE
SENSITIVE
SIPDIS
STATE FOR EEB AND EAP/ANZ
TAGS: EFIN ECON AS
SUBJECT: AUSTRALIA LIFTS INTEREST RATES
1. (U) SUMMARY: The Reserve Bank of Australia (RBA) today raised
the cash rate 25 basis points to 3.25%, becoming the first central
bank in the G20 to tighten monetary policy since the GFC began. The
RBA cited strong growth in China; rising house prices; a better than
expected private investment outlook; inflation not falling as much
as expected; and follows three months of better-than-expected
economic results. The RBA seems confident growth will continue over
the next year and is signaling further but gradual rate rises. END
SUMMARY.
RBA MOVES EARLY
--------------
2. (U) The RBA today lifted the cash rate by 25 basis points to
3.25%, becoming the first G20 central bank to tighten monetary
policy since the GFC. It is the first rise since March 2008 and
defies conventional wisdom among analysts, since a majority of
economists believed the RBA would wait until November to lift rates.
The RBA cited strong growth in China; rising house prices; a better
than expected private investment outlook; and inflation not falling
as much as expected. It believes growth will be close to trend over
the next year and therefore it is "prudent to begin gradually
lessening the stimulus provided by monetary policy."
REACTION
--------------
3. (U) Treasurer Wayne Swan said the decision reflected the strength
of the economy. He remarked that "Australians are smart enough to
know" that interest rates could not remain at emergency lows
forever. He reinforced the need for fiscal stimulus, citing weak
private investment data and falling national income. Some
economists argued the rise was unjustified due to per capita GDP
falling in four of the last five quarters. The Opposition linked
the interest rate rise to the government's "reckless" spending. The
Australian Chamber of Commerce and Industry contended the RBA pulled
the trigger too early and that business conditions remained weak.
4. (SBU) COMMENT: The RBA has set a precedent among advanced
economies by lifting the cash rate, showing it is confident the
economy is entering a long-term growth cycle and signaling further
but gradual rate rises. GOA monetary policy has begun a tightening
cycle that could last several years (the last one was between May
2002 and March 2008).
CLUNE