RBA 'will act on rates' after stimulus fades

By AAP, 9 September 2009

TREASURER Wayne Swan said interest rates would rise as the Government withdraws its stimulus measures.

While Labor was committed to maintaining its spending for now, aspects of the stimulus were due to end by December, including the small business investment allowance and a more generous first homeowners' grant.

Asked about the prospect of higher interest rates as the economy recovers, Mr Swan said it was inevitable the Reserve Bank of Australia would act as stimulus programs finished.

"As the stimulus is withdrawn, there will be adjustments on interest rates," he said, adding the stimulus was designed to be targeted and temporary.

Interest rates have been at a 49-year low of three per cent since April. Asked if another cycle of global recession was approaching, Mr Swan sounded a little upbeat.

"There's a discussion about all of that globally but while we can't be absolutely certain about the global outlook, there are some encouraging signs," he told Fairfax Radio Network.

From 31 December, the small business investment allowance, which allows firms to claim a 50 per cent rebate for items costing more than $1000, will end.