As we know the Reserve Bank has lifted the cash rate by .25% which is the first rate rise since March 2005 although it is the sixth consecutive interest rate rise since 2002.

Why another rise? The Governer, Mr Ian MacFarlane released a statement - Monetary Policy which helps explain:

“Following a decision taken by the Board at its meeting yesterday, the Bank will be operating in the money market this morning to increase the cash rate by 25 basis points, to 5.75 per cent.

International developments are continuing to provide stimulus to growth in Australia. The world economy is growing at an above-average pace for the fourth successive year and, significantly, forecasts have recently been revised upwards. Commodity prices have been increasing strongly for some time, and they have risen further in the year to date. This suggests a strengthening in the outlook for Australia’s export earnings, with consequent expansionary effects on incomes and spending.

In Australia, domestic spending has been growing at a solid pace recently and prevailing conditions suggest that this is likely to continue. High profitability and rising share prices are indicative of a favourable business environment in which investment growth is likely to remain strong. There are also signs that the dampening effects of household balance-sheet adjustment on consumer spending are starting to wane.
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