Australia raised interest rates for an unprecedented third month running yesterday, announcing a 25 basis-point rise to 3.75 percent as it makes a “gradual recovery” from the financial crisis.
Reserve Bank of Australia Governor Glenn Stevens said the risk of serious contraction in Australia had passed and the worst had failed to materialize, but remained cautious on economic conditions.
“In Australia, the downturn was relatively mild, and measures of confidence and business conditions suggest that the economy is in a gradual recovery,” Stevens said.
It was the third successive rise since Australia in October became the first advanced economy to raise rates after the global financial meltdown. Australia was also the only major Western nation to avoid a recession in the slump.
Stevens said the effects of government stimulus worth more than US$70 billion were beginning to fade, but public infrastructure spending was stoking demand and prospects were strengthening for business investment.
“The rate of unemployment is now likely to peak at a considerably lower level than earlier expected,” he said, adding there had been a “noticeable recovery” in household wealth.
Treasurer Wayne Swan said it was “unsurprising” that the bank had again lifted rates, which “could not stay at 50 year emergency lows forever”.
“The Australian economy is performing better than just about every other advanced economy, with lower debt, lower deficit and lower unemployment,” Swan said. “The consequence of that is rates will rise gradually over time.”
Canberra last month sharply lifted its economic forecasts for this financial year, flagging growth of 1.5 percent instead of a 0.5 percent contraction and indicating that unemployment will peak at a relatively modest 6.75 percent
Most analysts had expected yesterday’s rate hike, with CommSec’s Craig James saying aggressive cuts from 7.25 percent in September had left the cash rate “way too low.”
“Now it’s getting back to more normal levels,” James told Sky News. “This will incur a degree of pain for households ... [but] this is actually great news for savers in the economy. We’re seeing interest rates going up and that’s going to provide income for them in the coming months.”
The bank next meets to consider rates in February, and most analysts believe the cash rate will approach between 4.5 and 5 percent in the medium term.
Investors took heart from Stevens’ remarks, with the stock market closing up 0.38 percent at 4,719 in the wake of the announcement, after an otherwise flat day.
The Australian dollar took a battering from the hike, closing at US$0.9133, down from US$0.9171 before the decision and US$0.9153 on Monday afternoon.
ROLLER-COASTER RIDE: More than five earthquakes ranging from magnitude 4.4 to 5.5 on the Richter scale shook eastern Taiwan in rapid succession yesterday afternoon Back-to-back weather fronts are forecast to hit Taiwan this week, resulting in rain across the nation in the coming days, the Central Weather Administration said yesterday, as it also warned residents in mountainous regions to be wary of landslides and rockfalls. As the first front approached, sporadic rainfall began in central and northern parts of Taiwan yesterday, the agency said, adding that rain is forecast to intensify in those regions today, while brief showers would also affect other parts of the nation. A second weather system is forecast to arrive on Thursday, bringing additional rain to the whole nation until Sunday, it
CONDITIONAL: The PRC imposes secret requirements that the funding it provides cannot be spent in states with diplomatic relations with Taiwan, Emma Reilly said China has been bribing UN officials to obtain “special benefits” and to block funding from countries that have diplomatic ties with Taiwan, a former UN employee told the British House of Commons on Tuesday. At a House of Commons Foreign Affairs Committee hearing into “international relations within the multilateral system,” former Office of the UN High Commissioner for Human Rights (OHCHR) employee Emma Reilly said in a written statement that “Beijing paid bribes to the two successive Presidents of the [UN] General Assembly” during the two-year negotiation of the Sustainable Development Goals. Another way China exercises influence within the UN Secretariat is
CHINA REACTS: The patrol and reconnaissance plane ‘transited the Taiwan Strait in international airspace,’ the 7th Fleet said, while Taipei said it saw nothing unusual The US 7th Fleet yesterday said that a US Navy P-8A Poseidon flew through the Taiwan Strait, a day after US and Chinese defense heads held their first talks since November 2022 in an effort to reduce regional tensions. The patrol and reconnaissance plane “transited the Taiwan Strait in international airspace,” the 7th Fleet said in a news release. “By operating within the Taiwan Strait in accordance with international law, the United States upholds the navigational rights and freedoms of all nations.” In a separate statement, the Ministry of National Defense said that it monitored nearby waters and airspace as the aircraft
Taiwan’s first drag queen to compete on the internationally acclaimed RuPaul’s Drag Race, Nymphia Wind (妮妃雅), was on Friday crowned the “Next Drag Superstar.” Dressed in a sparkling banana dress, Nymphia Wind swept onto the stage for the final, and stole the show. “Taiwan this is for you,” she said right after show host RuPaul announced her as the winner. “To those who feel like they don’t belong, just remember to live fearlessly and to live their truth,” she said on stage. One of the frontrunners for the past 15 episodes, the 28-year-old breezed through to the final after weeks of showcasing her unique