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<td><font size=5>Borrowers warned: rate rise ahead </font>

By NICK GENTLE and AAP

The prospect of imminent interest rate rises could spell trouble for the Australian economy after official figures showed yesterday household borrowing galloping away to record levels.

Fuelled by the lowest mortgage rates in 28 years, borrowing by households jumped by a record $23.7 billion in the last three months of 2001 to $558.6 billion, a new all-time high, the Australian Bureau of Statistics said.

Household loans taken out during the December quarter reached $548.2 billion, a $22.5 billion surge compared with $14.8 billion the previous quarter.

The bureau said home purchasing was the biggest single component of the December-quarter rise.

Many households were lured into borrowing for new homes by the doubled first home owners' grant, which dropped to $10,000 from $14,000 on January 1, 2002, and last year's six interest rate cuts by the Reserve Bank.

But economists expect the Reserve to start lifting its cash rate from 4.25 per cent next week, and keep raising it until it hits 6 per cent some time next year.

This would push mortgage rates from just over 6 per cent currently to about 7.75 per cent, adding about $170 to the monthly repayment on an average 25-year, $154,400 loan. Labor's treasury spokesman Bob McMullan said debt climbed to $77,734 for every household, compared with $41,450 when the Coalition came to office."Under [Treasurer] Peter Costello's management, Australians now owe more than they earn each year," he said.

The Reserve's monthly measure of private sector credit grew by 1.1 per cent in February and 8 per cent over the year.

Meanwhile, a bureau estimate yesterday of job vacancies posted its first rise in more than a year, another sign that prospects for job-seekers were improving. Allowing for seasonal influences, job vacancies climbed 3.6 per cent in the three months to February to 87,500.

The chief economist at BT Funds Management, Chris Caton, said the lift showed the economy was no longer weak enough to justify the current low level of interest rates.

The bureau has issued the latest in its Business Indicators series for the ACT.

Highlights included:

Possibly led by a drop in the participation rate, trend unemployment remained steady on 4.3 per cent in February against a drop in the national figure to 6.7 per cent.

The established house price index for the December 2001 quarter rose by 6 per cent over the September quarter, giving a year on year increase of 17 per cent, marginally ahead of the national figure.

The chain volume measure of the ACT's trend state final demand increased by 4 per cent, to almost $5.2 billion, over the year to the December quarter 2001. This was in line with the national result.

January 2002 saw retail trade figures rise by 1 per cent over December figures, and 10 per cent over the corresponding period in 2001.


http://canberra.yourguide.com.au/de...ory_id=137952&y=2002&m=3
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