Australia's Stevens Waits for World's Central Banks

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The decision to keep rates unchanged "also gives some of the other central banks a chance to catch up, or at least signal that they're moving towards raising rates."

About 35 percent of earnings at publicly traded Australian companies such as Foster's Group Ltd., the world's second- largest winemaker, and steelmaker BlueScope Steel, are affected by gains against the U.S. dollar, Chris Pidcock, a strategist at Goldman Sachs JBWere Pty., estimated in October.

Increased borrowing costs and the "high" Australian dollar triggered a drop in business confidence in December to the lowest level in six months, a survey by National Australia Bank Ltd. showed yesterday.

Trade Deficit

Australia's trade deficit widened in December as imports of goods including gasoline surged by the most in almost two years, a report showed today. The shortfall swelled to A$2.25 billion from a revised A$1.73 billion in November.

There are also signs Stevens's rate increases in October, November and December are restraining the mortgage market.

Borrowing for home buying fell to a five-year low last month, according to a report this week by Australian Finance Group Ltd., which says it accounts for more than 10 percent of the mortgage market. The group arranged A$1.55 billion of mortgages in January, 19 percent less than a year earlier and the lowest level for any month since 2005.

Most mortgage rates in the economy have increased by about 1 percentage point since October, outpacing the central bank's 75 basis point increase in the benchmark rate, Stevens said yesterday.

Mortgage Costs

Australian & New Zealand Bank Group Ltd. boosted its variable mortgage rate by 35 basis points after Stevens raised the overnight cash rate target by 25 basis points on Dec. 1. Commonwealth Bank of Australia raised its home-loan rate by 37 basis points and Westpac Banking Corp. moved by the largest amount, driving up its mortgage rate by 45 basis points.

Westpac's move means households with a A$300,000 mortgage are being charged an extra A$1,008 a year, instead of the A$576 that would have been imposed had the bank merely passed on the Reserve Bank's increases.

"Interest-rate rises are not good for consumers full stop," Michael Luscombe, chief executive officer of Australia's biggest retailer Woolworths Ltd., said in an interview last week. "I think 2010 is going to be a challenging year."

Households will "welcome this decision and businesses will welcome this decision," Treasurer Wayne Swan told parliament in Canberra yesterday.

To contact the reporter for this story: Jacob Greber in Sydney at jgreber@bloomberg.net

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