Official Interest Rate=20 Bulletin AUGUST 2006

RBA = Increases Official=20 Cash Rate by 0.25%

3Dmoney=20 The Reserve Bank ("RBA") has today announced it is = increasing=20 the cash rate by 25 basis points, to 6.0%, citing strong economic = activity=20 and the need to contain inflation which is at 4%.

The increase takes official interest rates to their highest = since early=20 2001.

The RBA stated that in reaching this decision it took into = account the=20 following considerations:

Growth of the Australian economy is taking place against the=20 background of strong international conditions. The world economy = is in=20 its fourth successive year of above-average growth, and official = and=20 private-sector forecasts are that this will continue next year, = despite=20 some moderation in the United States. The general strength of = the global=20 economy has been reflected in further increases in commodity = prices=20 since the start of the year. These increases have been broadly = based and=20 are adding to the growth in Australia's national income and = spending.=20
Despite regional differences, most indicators suggest that = demand and=20 output in Australia have strengthened over recent months. A = favourable=20 business climate, strong profitability and high levels of = capacity usage=20 are contributing to rapid growth in investment spending. Even = with=20 moderate growth in household spending, this has underpinned a = solid rate=20 of expansion in domestic demand and a pick-up in employment over = recent=20 months.
Strong demand for finance over the past few months indicates = that=20 households and businesses have continued to find it attractive = to borrow=20 at recently prevailing interest rates. Compression of lending = margins=20 over recent years has contributed to a lowering of borrowing = costs=20 relative to the cash rate. This has meant that although the cash = rate=20 has recently been slightly above its average for the = low-inflation=20 period since 1993, interest rates paid by borrowers have = remained below=20 average.
The growth of demand, against the background of an economy = operating=20 with limited spare capacity, has contributed to increased = inflationary=20 pressures this year, and businesses report that labour market = conditions=20 are tight. Raw materials costs have picked up as a result of = broad-based=20 increases in global commodity prices, and there has been a more = general=20 pick-up in output prices at all stages of production.
These pressures have also been evident in underlying = consumer price=20 inflation. In the June quarter, underlying inflation is = estimated to=20 have picked up to a rate of just under 3 per cent, confirming = the upward=20 drift that had started to become apparent in the previous = quarter.=20 Although the increase in the headline CPI was much larger, = reflecting=20 fuel price increases and a sharp rise in the price of bananas in = the=20 wake of Cyclone Larry, the Board recognises that it is necessary = to=20 abstract from temporary influences in forming its policy = assessments.=20 Overall the Board's assessment, based on the gradual increase in = underlying inflation this year, and the wider background of=20 above-average global growth and strong domestic demand, was that = underlying inflation in the period ahead was likely to exceed = previous=20 forecasts.

Given these circumstances, the Board judged that an increase in = the=20 cash rate was warranted in order to contain inflation in the = medium=20 term.

If you have any questions on this, or would like to review your = home=20 loan situation and options, please contact our = office.

Tel:	1300 667 694
Fax:	1300 667 594

Send email = Visit = website

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Level 4, 1 Queens Rd
Melbourne VIC = 3004

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