Rba: Monetary Policy To Be Changed If Economic Conditions Strengthen

Monetary policy will change if "economic conditions gradually strengthen as expected"

, according to the Reserve Bank of Australia.

The Reserve Bank of Australia (RBA) has admitted that it will change monetary policy if "economic conditions gradually strengthen as expected".

It insisted that inflation must remain consistent, which could alert to credit card holders, and said that interest rates were no longer at "exceptionally low levels".

However, the RBA's predictions for the economy were that it would "grow by around 3.25 to 3.5 per cent in both 2010 and 2011".

The Bank forecasts early year growth for the country, supported by public demand, which could intrigue people with Aussie credit into spending on their plastic.

But an increase in the commodity prices is also predicted because of an overall improvement in the global economy.

It said that due to a worldwide increase in prices of rural commodities, Australia's terms of trade should have a more positive outlook, by rising for the first time since its fall in 2008-09.

And the Bank called itself "prudent" for its decision to raise the cash rate by 25 basis points in meetings in October, November and December last year to end up at the current 3.75 per cent figure.

However, the RBA did point out that the banks had increased their rates by more than one percentage point above its cash rate, which has "materially reduced the amount of monetary stimulus to the economy".

In a recent Bank meeting, Glenn Stevens, governor for the RBA, said the levels would be maintained for the time being.

He added: "Public infrastructure spending is now boosting demand, as is an upturn in housing construction. Investment in the resources sector is strong."

But this all comes among recent predictions that believe the RBA will increase the cash rate twice this year, according to Clifford Bennett, chief economist at Herston Economics.

He told the Australian Associated Press that interest rates are at a "new normal" rate of around 3.5 per cent, in contrast to last year.

by: Sam Gooch

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