Did the RBA move interest rates higher too soon? I think so.
A house building slump in the September quarter should have been a warning to the Reserve Bank not to raise rates till February 2011. The November interest rate rise, like the May interest rates increase was in my opinion, not needed. House prices were already falling, and the CBA had said that they were going to raise rates by themselves.
In May, Greece's economy looked shaky, and now the Irish have had their financial dramas and denial, both demonstrating that a potential second wave of the GFC is not yet out of the picture.Both happened days after the RBA decision.
The Australian Bureau of Statistics recorded the unexpected 6.1 per cent fall-off in housing construction in the September quarter and this also seems to have been missed by the RBA.
This was the biggest quarterly dip in a decade. So this month's Reserve Bank of Australia interest rate rise might was too hasty and the the movement would not be till after February 2011 in my view.
House building activity fell when pundits said it should have risen
The constant interest rate hikes by the RBA to get the interest rates "back to normal levels" as quickly as possible may have been one rise too many in May, as I had said then, and a second rise too many early this Month, in light of the housing construction figures, and the retail figures.
So the latest RBA increase, supplemented by extra rises many Australia's big four banks, means that builders may be in for a bleak 2011.
Author: Mr Mortgage
