News From Down Under

The Reserve Bank of Australia raises interest rates for a third time, taking Australian short-term rates to 3.75%. That is significantly above the level in other advanced economies, but still relatively low on a historical basis. Reading the RBA statement here, they appears to be of the opinion that their official targets will be met, which is why they no longer believe that interest rates need to be low (They are clearly uncomfortable with the significant increase in house prices). That indicates that further rate hikes will be implemented, though not necessarily (but possibly) at the next meeting.

Meanwhile, the Labour government's plan to implement a "cap and tax" (AKA "emissions trading") for Australia suffered a setback when the main centre-right opposition party, the Liberal Party , deposed its pro-"cap and tax" leader Malcolm Turnbull in favor of Tony Abbott, who opposes the "cap and tax" scheme. This reduces the likelihood that the scheme will be passed in the Australian Senate, though it is still possible that the Labour government will be able to convince the necessary 7 Liberal senators to vote against the new party line, enabling passage.