Australia needs to start lifting interest rates by the end of 2017: OECD

Australian borrowers should expect interest rates to start going up by the end of next year according to the Organisation for Economic Cooperation and Development (OECD).

The ongoing period of record-low interest rates in Australia has led to hot real estate markets in Melbourne and Sydney and the OECD says the RBA will need to tighten its monetary policy heading into the back half of 2017.

The OECD made the call in its Global Economic Outlook which it released this week.

“Monetary policy tightening is expected to commence towards the end of 2017 and this is appropriate given likely monetary policy developments elsewhere,” the report states.

The report comes amid movements from big banks on standard variable rates, who have started to increase them for new borrowers.

RBA governor Philip Lowe has indicated in previous statements that their rate cutting cycle might be at an end but some market analysts are still predicted another possible cut next year.

The OECD raised concerns in the report about the overheated housing market in Australia and suggested the nation look at increasing interest rates.

“Significant housing market concerns remain and there is growing discord between financial market developments and the rest of the economy due to the low interest rate environment,” the OECD report says.

The OECD report also recommended reform to Australia’s GST and land tax systems, and predicts economic growth in the country will slow to below 3 per cent by the end of the year.


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