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07 December 2007

The Reserve Bank of Australia has decided to issue statements regarding its deliberations after all monthly board meetings

The reserve Bank keeps an eye on the world economy and a hand on the rudder of the Australian economy. It will be an interesting balancing act for the Aussie Reserve Bank as it looks to the world stage and manages locally. For the first time we learnt of how world economic turbulence saved Australians from another lift in official interest rates this month.

The continuing global uncertainty puts further rates rises in Australia in doubt for now however some pundits are tipping a possible three rates rises in 2008. What do you think?

Craig James at Commsec echoes this theory. "The Reserve Bank is much less confident about the Australian economy continuing to remain strong, about inflationary pressures remaining,"

He want onto say ... "They're concerned about the credit jitters which are across the globe, the strength of the US economy. "Clearly, if the US economy goes into recession, all bets are off. Interest rates are going to remain stable here in Australia rather than go up."

Worsening economic conditions

Others such as Economist Scott Haslem from UBS says the Reserve Bank has also stopped implying that Asia, and by implication Australia, could be largely immune.

"The RBA does appear to be less convinced that the Asian region is going to be impervious to the slowdown that now clearly looks to be under way in the major economies," he said.

"I think the other thing the bank is acknowledging is that the appreciably higher borrowing rates that we're seeing may well be doing some of the job that the RBA thought it would have to do."

Australia's big retail banks are talking about lifting rates for home borrowers because the global credit crunch has put up their cost of funding. If they do so, today's statement suggests the Reserve Bank may take the view that they are doing its job for it.

What do other people think of the large banks recouping losses from other markets from their Australian customers who have remained restrained and not to prone to high risk finance strategies. should we pay for the sins of others or live and die on our our swords?

Yours in property

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