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Westpac tips more rises

AUSTRALIA has not experienced the end of the tightening interest rate cycle, according to Westpac.

Its core view had been for two Reserve Bank increases of 0.25 per cent each in October and November.

Although the October rise did not materialise, Westpac expects a November increase of 0.25 per cent and another 0.25 per cent rise in February .

The main reasons for rates not rising were the uncertainty about the domestic economic outlook and concerns about the impact on global growth of a slowing US economy.

November’s increase will be driven by two factors:

l The Aussie dollar failing to break the US 53-55¢ range; and

l Evidence of heightened upstream price pressures from manufacturing prices and import prices and average weekly earnings to be released soon.

The Australian Bureau of Statistics will not release a separate estimate of the GST effect on the September quarter CPI until late November. Until then, the government cannot assess the level of underlying inflation in the September quarter.

The figures will give the government its first complete indication of the impact of the GST and could provide the impetus for the November tightening.

The move of the cash rate in November to the same levels as the US will provide a solid foundation for the Australian dollar

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