RBA hikes could be on the way

Adam Smith 29 November 2016

coins percent upAn international economic group has warned Australians to brace themselves for a rate hike.

The Organisation for Economic Co-operation and Development (OECD) has predicted that the Reserve Bank of Australia (RBA) is likely to begin raising the official cash rate before the end of 2017, the Sydney Morning Herald has reported.

In its Global Economic Outlook, the OECD said rate hikes in 2017 will be timely, "given likely monetary-policy developments elsewhere, the cyclical development of the domestic economy and the need to unwind tensions from the low-interest environment, notably in the housing market", the SMH reported.

The OECD also urged the government to take its focus off of bringing the budget back into surplus, and instead provide economic stimulus.

"Returns would be high for accelerated infrastructure development and investing in skills, an area where Australia falls short of top-performing countries. Active measures to increase transfers to households could help address inequality, thereby making the recovery more inclusive," the report said.

The OECD argued that Australia’s government debt was still low, and that the current debt-to-GDP ratio of 45% was projected to fall, the SMH said.

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