Splurge to put a lid on rates

THERE is likely mortgage relief ahead with rates tipped to stay on hold for at least four months.

There may be mortgage relief in store with the RBA forecast to keep rates on hold for at least four months / File

PUNDITS have ruled out any chance of a pre-Christmas interest rate rise despite a surprise surge in business investment fuelled by Australia's red-hot resources sector.

The Australian Bureau of Statistics yesterday revealed a 6.2 per cent jump in September quarter investment to $28.7 billion - the biggest rise in spending in three years and twice market expectations.

But economists warned that weakness in equipment, plant and machinery spending - combined with Wednesday's bleak housing construction numbers - could hurt Australia's third-quarter GDP, to be unveiled next week.

Citi senior economist Joshua Williamson said the recent economic data suggested this month's official interest rate rise was "very pre-emptive" and the RBA was likely to keep rates on hold "for a good four to five months now".

"Since they did go 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.

ANZ senior economist Katie Dean agreed the 1.1 per cent fall in equipment, plant and machinery investment was troubling, despite a 13.4 per cent surge in spending on buildings and structures.

"If we don't see some good gains in profits and stocks in Monday's business indicators survey, we'll become concerned about the possibility of a negative GDP print next Wednesday," she said.

"We continue to expect the RBA will sit on the sidelines until Q2 next year."

Business investment is expected to reach $123.94 billion this financial year with mining tipped to contribute $55.355 billion, the ABS says.

Ms Dean said these projections suggested spending growth of about 23 per cent.