Interest rates 'likely to rise this year'

The Reserve Bank of Australia may be forced to increase interest rates this year in light of the increasing wages and prices in the country, an expert has asserted.

Chris Richardson, Deloitte Access Economics partner, said in a paper released this week that this will be necessary to curb inflation, reports the Herald Sun.

He asserted that consumers are "cautious" at the moment and that savings accounts are being used more and more by Aussies.

This tallies with comments made by Saul Eslake, economist at the Grattan Institute, who told the Sydney Morning Herald that a growing number of people are becoming more careful with their cash.

Mr Richardson stated: "Consumers are cautious, 'savings' is the new black as Generation Y realises they haven't saved nearly enough for their burgeoning family responsibilities, while all generations are feeling the sting of higher interest rates."

He asserted that there is a risk that growth in Australia could be "disappointing" during 2011 and the following year.

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