SYDNEY, March 29 (Reuters) - The Governor of the Reserve Bank of Australia (RBA) Glenn Stevens said on Monday interest rates had been too low and could not remain at previous levels, supporting market expectations that more rate rises were due.
Reiterating the RBA's recent hawkish tone, Stevens also zeroed in on Australia's booming property market and warned people against speculating on rising house prices.
'We can't assume rates will remain low. The relationship between the cash rate and what they pay for mortgages or small business loans is what we think is useful,' said Stevens, when asked to define normal rates in an interview with Australia's Channel 7.
'If you look back when the economy was stable and we had low inflation, the cash rate, that is the rate we decide on, the rate has been in the average of 5 percent,' he said, referring to a period since the 1990s.
'It's a mistake to assume a riskless, easy, and guaranteed way to prosperity is just to leverage to property,' he said.
Australia's resilient economy and a rising house market have led the RBA to raise rates four times in its last five meetings. It has said repeatedly that rates need to return to a 'normal' level as the economy recovers.
Australian rates stand at 4.0 percent now, and Stevens had said in February they could rise by another 50-100 basis points.
The RBA holds its next policy on April 6 and the market is split on whether it would lift rates by 25 basis points to 4.25 percent.
That said, interbank futures show the market expects rates to rise to around 4.30 percent by June, and to 5.0 percent by December.
(Reporting by Anirban Nag, writing by Koh Gui Qing)
((Guiqing.Koh@ThomsonReuters.com; Reuters Messaging; guiqing.koh.reuters.com@reuters.net; +61 2 9373 1821))
Keywords: AUSTRALIA ECONOMY/ (If you have a query or comment on this story, send an email to news.feedback.asia@thomsonreuters.com) COPYRIGHT Copyright Thomson Reuters 2010. All rights reserved. The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.
Reiterating the RBA's recent hawkish tone, Stevens also zeroed in on Australia's booming property market and warned people against speculating on rising house prices.
'We can't assume rates will remain low. The relationship between the cash rate and what they pay for mortgages or small business loans is what we think is useful,' said Stevens, when asked to define normal rates in an interview with Australia's Channel 7.
'If you look back when the economy was stable and we had low inflation, the cash rate, that is the rate we decide on, the rate has been in the average of 5 percent,' he said, referring to a period since the 1990s.
'It's a mistake to assume a riskless, easy, and guaranteed way to prosperity is just to leverage to property,' he said.
Australia's resilient economy and a rising house market have led the RBA to raise rates four times in its last five meetings. It has said repeatedly that rates need to return to a 'normal' level as the economy recovers.
Australian rates stand at 4.0 percent now, and Stevens had said in February they could rise by another 50-100 basis points.
The RBA holds its next policy on April 6 and the market is split on whether it would lift rates by 25 basis points to 4.25 percent.
That said, interbank futures show the market expects rates to rise to around 4.30 percent by June, and to 5.0 percent by December.
(Reporting by Anirban Nag, writing by Koh Gui Qing)
((Guiqing.Koh@ThomsonReuters.com; Reuters Messaging; guiqing.koh.reuters.com@reuters.net; +61 2 9373 1821))
Keywords: AUSTRALIA ECONOMY/ (If you have a query or comment on this story, send an email to news.feedback.asia@thomsonreuters.com) COPYRIGHT Copyright Thomson Reuters 2010. All rights reserved. The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.