What perhaps has helped Australia is that it is riding on Asia's fairly decent growth due to strong growth from China despite of the global economic downturn . All in all, this is good news as its another affirmation that the outlook for the global economy is looking better.
Wednesday, April 7, 2010
Reserve Bank of Australia Raises Main Interest Rate Target Again
RBA has increased its main target interest rate for a fifth time in the last 6 months by a quater point to 4.25%. I think Australian Central Bank is an interesting one to watch as they were one of the first few central banks in the world to start increasing its interest rate.
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Having studied in Australia last semester, raising interest rates is not surprising. The Australian economy is booming as I also noticed in the exchange rate between the US dollar and the Australian dollar.
By raising the interest rate, this would cause people to borrow now before it keeps increasing, so the Australian economy must be benefiting from this. Also as the interest rate goes up and is expected to continue to go up, people will start investing more and more because they expect higher return which will also help the economy. Increasing interest rates would also cause more consumer confidence which might cause people to spend more.
Canada may soon follow Australia's example and become the first among the G7 countries to spike their interest rates. Talks about the rise in expected interest rate may cause businesses to borrow money now for projects instead of waiting to start these projects later on.
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