Interest Rates – what is ahead?

words by Finlease

With historically low interest rates and S&P’s predictions of a stable housing market, 2013 is shaping up well. According to ratings agency Standard and Poor’s, Australia’s economic outlook suggests a stable housing market in 2013.  In addition, low interest rates together with high business confidence should help the building industry and increase demand for investment property finance.Yet while rates and ratings agencies are bullish, businesses and households are conservative when it comes to borrowing money which is affecting credit growth.  Debt is being repaid and savings are on the increase.  But saving money is a good thing, right?  In reality, it impacts our economic growth because households are buying less of other people’s products and services, and business aren’t seeking equipment finance to become more efficient.There’s another rate worth considering and that’s the inflation rate of 2% in the September quarter which was driven up by rises in energy costs and a few other increases. As for our unemployment rate, the latest figure of 5.4% is small on a world scale.Yet as the recent Economic Update on job ads reported, “The level of job ads is highlighting not just that labour demand is well below the highs of 2008, but this pace of decline has accelerated since July 2012.” So how do we rate the prospects for 2013?We’re quietly optimistic that the underlying confidence will rise to the top and drive us towards a strong 2013.

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