Saturday, May 7, 2011

Double whammy in the next Federal Budget

  • Aussies set for financial pain in wake of tight Budget
  • Economists believe Reserve Bank will life interest rate
  • "Inflation figures are bad news for mortgage holders"

A FINANCIAL double-hit is destined to drain the pockets of struggling homeowners - a June interest rate rise just weeks after a penny-pinching Federal Budget.

And it all comes as living costs soar to new heights.

Economists now believe the Reserve Bank will be forced to lift its official interest rates when its board meets next month, stirred into action earlier than expected because of runaway inflation.

Having kept rates on hold since November, the RBA released a surprisingly hawkish report on the state of the economy yesterday, highlighting the need to lift its inflation forecasts for the next two years. It now expects underlying inflation - the best measure of the cost of living - to punch through the dangerous 3 per cent level by Christmas, one year earlier than it had predicted only two months ago.

The dire situation puts the Reserve Bank in a difficult and quite ironic position.

In a bid to rein in the surging cost of living, the bank has to raise interest rates and thus inflict more pain on household budgets.

Senior Westpac economist Bill Evans said the bullish inflation figures could only be viewed as bad news for mortgage holders.

It spelled one certainty - it's "go time" for the Reserve Bank with a 0.25 per cent hike in June an increasingly likely and untimely proposition, Mr Evans said,

"The change in the forecasts and the choice of words in the key paragraphs indicate to us that the [Reserve] Bank is likely to raise rates at its next meeting in June," he said.

"We have consistently argued the next move will be in the September quarter but a move in June has now become the more likely result."

Such a pre-emptive strike would put unprecedented financial pressure on homeowners, given that Westpac admitted this week that the number of customers defaulting on its mortgages were now higher than at the height of the global financial crisis.

In its quarterly report released yesterday, the Reserve Bank preached almost the same message to the rhetoric used in previous reports that preceded interest rate hikes, namely, the "need to ensure inflation remains consistent with the medium-term target".

That is RBA speak for impending rate hike, Mr Evans said. 7 May 2011

Here is another DIRECT assault on the middle class Australians.

This is deliberately designed to put this class into the POVERTY CLASS.

The article has stated that there is an increase in the cost of living i.e. the cost of goods has gone up.

The government produces fraudulent information regarding the official CPI rate. Most goods and services have gone up anything between 10 - 50%.

The claimed current inflation rate is at 3.33%

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