ABC report
By Finance reporter Adrian Thirsk
The governor of the Reserve Bank says he cannot be specific about the timing of future interest rate rises but he says they will not need to be as big as in the past.
Ian Macfarlane, appearing before the new House of Representatives economics committee, says growth in the national economy is slowing but an interest rate increase remains on the cards.
"Despite its growth probably being understated, GDP is also starting to slow a bit under the constraints imposed by capacity limitations," he said.
"I think we will have to get used to seeing GDP growth rates starting with the numbers two or three rather than three or four, which we became accustomed to for such a long time."
Mr Macfarlane says because of the capacity constraints and growing wage pressures, further interest rate increases will be needed at some point.
Buthe says there is no imminent threat of an asset price boom and bust in Australia.
"I do not think this is a serious risk, although it was not that long ago that it posed a threat."
That was in 2003 when both household borrowing and house price growth topped 20 per cent.
But last year, borrowing settled back to 13 per cent growth, although Mr Macfarlane says house prices might have risen in the December quarter.
Chairman Bruce Baird says of particular interest is a comment on interest rates in the bank's latest statement on monetary policy.
"That the likelihood of further monetary tightening being required in the months ahead has increased," he said.
Under subsequent questioning, Mr Macfarlane said he could not be specific about when rates would rise.
"At some point in this phase, where we believe inflation is heading up, where we think there are wage pressures and capacity constraints and demand is still running quickly, then at some point in this phase further interest rate increases will be needed," he said.
Mr Macfarlane says that while inflation pressures will undoubtedly arise, they should not be as powerful or as widespread as previously.
The Australian dollar has fallen on the back of the Reserve Bank governor's testimony.
At 12:00pm (AEDT), it had dropped four tenths of a cent to be trading at 78.4 US cents.
Short term market interest rates have also eased.
By Finance reporter Adrian Thirsk
The governor of the Reserve Bank says he cannot be specific about the timing of future interest rate rises but he says they will not need to be as big as in the past.
Ian Macfarlane, appearing before the new House of Representatives economics committee, says growth in the national economy is slowing but an interest rate increase remains on the cards.
"Despite its growth probably being understated, GDP is also starting to slow a bit under the constraints imposed by capacity limitations," he said.
"I think we will have to get used to seeing GDP growth rates starting with the numbers two or three rather than three or four, which we became accustomed to for such a long time."
Mr Macfarlane says because of the capacity constraints and growing wage pressures, further interest rate increases will be needed at some point.
Buthe says there is no imminent threat of an asset price boom and bust in Australia.
"I do not think this is a serious risk, although it was not that long ago that it posed a threat."
That was in 2003 when both household borrowing and house price growth topped 20 per cent.
But last year, borrowing settled back to 13 per cent growth, although Mr Macfarlane says house prices might have risen in the December quarter.
Chairman Bruce Baird says of particular interest is a comment on interest rates in the bank's latest statement on monetary policy.
"That the likelihood of further monetary tightening being required in the months ahead has increased," he said.
Under subsequent questioning, Mr Macfarlane said he could not be specific about when rates would rise.
"At some point in this phase, where we believe inflation is heading up, where we think there are wage pressures and capacity constraints and demand is still running quickly, then at some point in this phase further interest rate increases will be needed," he said.
Mr Macfarlane says that while inflation pressures will undoubtedly arise, they should not be as powerful or as widespread as previously.
The Australian dollar has fallen on the back of the Reserve Bank governor's testimony.
At 12:00pm (AEDT), it had dropped four tenths of a cent to be trading at 78.4 US cents.
Short term market interest rates have also eased.
