Christmas rate hike is unlikely - RBA

THE Reserve Bank of Australia (RBA) has indicated that the cash rate is likely to stay at its current level of 4.75 per cent for the rest of the year, a parliamentary committee has heard.

Reserve Bank of Australia governor Glenn Stevens said market forecasts of a rate rise in February are realistic / File

THE Reserve Bank of Australia (RBA) has indicated that the cash rate is likely to stay at its current level of 4.75 per cent for the rest of the year, a parliamentary committee has heard.

Reserve Bank of Australia (RBA) governor Glenn Stevens said market forecasts of a rate rise in February next year were realistic.

"For the period in which we are going into in the near term, I think that the monetary policy setting is about the right level," Mr Stevens told the House of Representatives Standing Committee on Economics today.

"At the moment most commentators and market pricing do not anticipate any sort of near term change by us for quite some time and I think that's probably a reasonable position for them to have based on the information we have now."

Pundits predict rates may stay on hold until at least April.

Citi senior economist Joshua Williamson said the RBA was likely to keep rates on hold "for a good four to five months now".

"Since they did go (increased rates) in November we've seen the unemployment rate rise, we've seen the housing finance data remain weak and (the construction and investment) partial data suggests that the GDP will be a little bit weaker than probably what the consensus was expecting," Mr Williamson said.

"Not only will they not go in December but it's unlikely we think they'll actually go in the first quarter of next year."

Futures market betting on the likelihood of a December interest rate rise yesterday fell from 2 per cent to zero.

This year's rate rises have made Australians tighten their belts.

On online survey by mortgage broker Loan Market also found that almost two-thirds of respondents were re-assessing their spending due to higher mortgage repayments.

Loan Market's chief operating officer Dean Rushton says four official rate hikes by the Reserve Bank of Australia (RBA) in 2010 has had a major impact on economic activity, especially in the retail sector which is desperate for improved trade this Christmas.

"Many Australians are struggling with the cost of everyday goods as well as services such as power and water, and they needed some interest stability,'' he said.

Unsurprisingly, 35 per cent of the 452 respondents to the survey said the RBA and banks had "turned Santa into Scrooge''.

Seventeen per cent said they would be cooking up sausages on the barbie rather than prawns or other festive treats.

However, 38 per cent said it would be "Christmas as usual'', despite the increase in mortgage repayments.