Mark Bouris: We don't need a rate rise

Interest rates are on the radar again. July 28 is going to be an interesting political date as I reckon that the government needs to see where growth is at and where inflation is at and that's the date when the Australian Bureau of Statistics (ABS) puts out its latest quarterly report, we also get a peek at the 12 months past performance of those two very important economic indicators.

The government would ideally like to see some benign numbers and would hope to see the consumer price index in the 2 - 3 per cent range preferably at the lower end. They want to talk up how their economic policy is working efficiently especially compared to the rest of the world where economic performance is untidy and uncertain. Off the back of some good economic news then government can get an election campaign wound up and keep the positive tunes running.

That is if the number for inflation is low range then, fingers crossed. I noticed this week that NAB is saying that the economy is starting to turn a bit "blue " and I guess that means not as rosy as it was a few months ago.

There was a slight up kick in residential mortgages settled in May but so slight it's not worth getting excited about and certainly not something that can be relied upon to deliver a positive trend. Whatever the head line inflation number on the 28th I hope to think that the Reserve Bank Board strips out those inputs that are short term irregularities like house price increases, power increases, excise on cigarettes which distort the price trends and give a lot of weight to the impact that is starting to bite from the six rate rises that were imposed on mortgage belt in Australia since late last year.

Those rate rises will start to cumulatively effect confidence and consumer spending from here on and any rate rise in August may well become "the rate rise we didn't need to have".

Add into the mix the increased cost of funds to the banks and you might find that there could be mortgage rate rises even if the RBA doesn't move. An out of cycle retail rate rise is on the cards, very much so. The only stopper on that event occurring now is probably the election and that timing would not be all that welcome from both parties.

We don't need rate rises either from the RBA or the retail lenders. What we need is steady management of the interest rate environment and a common goal from our banker friends and try to get housing demand and supply back into an even and stable environment with the help of whoever wins the next election.

Let's hope someone stands for what we need and not what they tell us we need.

For more from Mark go to www.ybr.com.au