THE Reserve Bank’s decision to sit on its hands for another month does not change the prospect that interest rates will soon head higher.
Melbourne Cup day on November 2 may well be the first increase, followed by several more increases next year.
In his statement after Tuesday’s monthly board meeting, Glenn Stevens stuck to his central scenario.
The Chinese growth story remains on track even amid deepening pessimism in the US and as Europe’s sovereign debt and banking crisis spreads to Ireland.
That means the already “very high” prices for our iron ore and coal exports will boost national income “very substantially” as they flow into mining company profits, dividends, taxes and wages.
This also will underpin the huge wave of mining and energy project construction.
In a nutshell this will mean higher interest rates for those of us with mortgages and the probability of a stronger dollar.