Australia housing boom lifts waning mining sector

Economists predict 2014 will see interest rate rise

Published Mon, Jan 13, 2014 · 10:00 PM
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[SYDNEY] Sydney led 10 per cent gains in Australian property prices last year, prompting more economists to bet this year will bring an interest rate rise than a further cut.

Thirteen of 30 economists surveyed by Bloomberg News predict the Reserve Bank of Australia's (RBA) benchmark will be higher by Dec 31, with 11 forecasting no change. Policymakers will add eight basis points to the record-low 2.5 per cent cash rate over 12 months, swaps data compiled by Credit Suisse Group show. The nation's two-year bond yield climbed 34 basis points over six months, the most among 21 developed markets.

Traders are shifting focus from the impact of waning mining investment to the RBA's tolerance of surging home prices in a nation where debt levels are among the developed world's highest. Policymakers haven't cut rates since August after slashing the benchmark by 2.25 percentage points from late 2011, preferring to talk down the local currency to support exports.

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