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Economic slump will not save us from a rate rise

June 6, 2011

Homeowners hoping that interest rates remain steady as Australia's export earnings continue to drop look set to be disappointed.

When economic data for the first quarter of 2011 was released earlier this week, initial speculation predicted that the 9 percent plunge in export volumes would stave off an interest rate rise.

However, the Reserve Bank of Australia (RBA) has warned this will not be case as a huge surge in business activity is on the horizon.

For months, finance and mortgage industry pundits have been promising the current interest rate status quo of 4.75 percent, in place since November 2011, would come to an end by August. And while a date has not been set, rates look certain to rise by the end of the year.

The export slump is in no small part due a drop in mining and energy exports by 14 percent and coal by 27 percent.

Treasurer Wayne Swan said January’s natural disasters had had a bigger impact on the economy than the Treasury had anticipated.

In April, building approvals slumped for the fifth time in six months, dropping 1.3 percent, with the exception of Queensland where the rebuild is under way.

In capital cities home prices fell more than 1 percent in the first quarter: