Strong Christmas sales may provoke another rate rise

Unexpectedly high Christmas retail figures may encourage the Reserve Bank to raise interest rates further as consumer confidence returns.

Retail trade figures from the end of 2009 showed a seven per cent rise over the year, with big discounting by the major retailers also drawing customers to embark upon an early Christmas shopping spree, the Courier-Mail reported.

Gary Black, chief executive of the National Retailers Association, told the newspaper that the figures were a surprise and did not reflect rising interest rates throughout the year.

As a result there was speculation that the RBA will be encouraged to raise rates further. Commonwealth Bank consultant Michael Blythe said he expected the RBA to lift the cash rate to 4.25 per cent early this year and to five per cent by the end of the year.

Rising interest rates may encourage bank customers to compare home loans this year in search of the best deals. Last week, Christopher Chadd, head of research at Property Frontiers, said that the large rise in Australian house prices could mean that property remains unaffordable for many foreign investors and locals in the coming year.

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