General | Feb 03 2006
The Reserve Bank of Australia (RBA) is unlikely to change official interest rates when it meets this week, but according to TD Waterhouse economist Stephen Koukoulas the next move in rates is likely to be an increase.
Koukoulas notes export figures for February were very strong, giving Australia its smallest monthly trade deficit since July 2002 of $595m, down from $2.476bn in January and just less than $1bn in December.
At the same time, he notes job ads have increased by more than 20% from this time last year according to the ANZ job series figures, all of which indicates the economy is continuing to enjoy strong growth.
Koukoulas estimates March quarter growth is likely to be around 1.2% quarter-on-quarter, translating into about 3.3% annual growth. When combined with inflation at the upper end of the RBA’s target range he suggests only one conclusion is possible – interest rates will push higher sooner rather than later.
In his view any hike is likely to come in June or July, with an increase likely to be supportive for the currency, allowing the Australian dollar to return to a level of about $0.75 against the greenback.
