Rates could be on hold for a while

Economists believe official interest rates may well be on hold until next year - a
relief for borrowers, and for federal Labor as it tries to turn the election
campaign's focus on the economy.
As widely expected by financial markets, the Reserve Bank of Australia (RBA) left
the cash rate at 4.5 per cent for a third straight month after Tuesday's board
meeting.
Prime Minister Julia Gillard welcomed the rate decision for families and businesses
who were "doing it tough".
"On a day like this it brings into sharp relief the fact that economic management is
at the centre of this election campaign," she told reporters in Newcastle.
But Ms Gillard said she wasn't about to make "deceptive and misleading" claims about
the government's ability to keep rates down because the RBA was independent,
although it would do things to take pressure off rates.
"In the past we saw the Liberal Party go out and claim to Australians that they
would keep interest rates at record lows and then we saw 10 increases," she said.
Opposition finance spokesman Andrew Robb said households were still suffering from
the six interest rate rises since between October.
"We dodged the bullet today, but because of the reckless spending and the $100
million of borrowing every day for the next two years by the government, the
pressure on interest rates will continue," he told ABC Radio.
"It's the reason why we have the highest interest rates in the western world."
RBA Governor Glenn Stevens said current borrowing rates were around the average
level of the past decade.
"With (economic) growth likely to be close to trend, inflation close to target and
the global outlook remaining somewhat uncertain, the board judged this setting of
monetary policy to be appropriate," he said in a statement.
The decision followed an unexpectedly benign underlying inflation outcome last week
and coincided with new data on Tuesday showing only slim growth in retail spending.
RBC Capital Markets senior economist Su-Lin Ong said the RBA looked to be in a
"comfortable wait-and-watch position".
"Indeed, the risk remains that this pause extends into 2011," she said.
Earlier, the prime minister told workers at a Woolworths distribution centre on the
NSW central coast that tens of thousands of jobs had been saved during the global
recession because of Labor's economic management.
"We made the better economic decisions when the going was tough, and for the future
we are going to keep making the better economic decisions," Ms Gillard said.
But Opposition Leader Tony Abbott said he had every confidence that his economic
team would do a better job than a government that had taken the budget from a $20
billion surplus to a $57 billion deficit in just two years.
"When the Australian people compare my team with Julia Gillard's team, they will
share my confidence," Mr Abbott told reporters near Brisbane.
He was "happy" to guarantee that Joe Hockey would be treasurer and Mr Robb would be
finance minister should the coalition win power.
Mr Abbott also attacked the Labor's draw-down of a "special one-off dividend" of
$300 million from government-owned Medicare Private to help fund its election
promises, describing as a "sneak attack" on families".
He said the dividend was equivalent to an eight per cent rise in private health
insurance premiums.
Treasurer Wayne Swan said Medibank Private had "very strong" reserves to adequately
pay the dividend and dismissed Mr Abbott's claim.
"What will push up prices is the Liberal Party's proposal to privatise it," he told
reporters in Tuggerah, on the NSW central coast.
"It will remove from the system a competitor that puts downward pressure on prices."



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