Predict+Interest+Rates

One of the key roles of an economist is to predict the future direction of key economic variables. The economist also needs some justification for their predicitions so make sure you give a reason.
 * Predicting the RBA's cash rate for 2011**

At 1 January 2011, the RBA's cash rate was 4.75%. The last increase in the official rate was on 4 November 2010. At the time the the RBA governor had the following to say about the state of the Australian and world economy.

Read the introductory statement here:

[]

In the table below, **predict what you expect the cash rate & unemployment rate will be in the first week of November 2011.** (Remember that the cash rate moves up/down in 25 basis point increments - the cash rate won't be 5.10%).


 * Next to each prediction, **justify your prediction** (breifly).
 * Saying 'the cash rate is low, it can only go up from here' isn't sufficient justification!
 * **Identify at least one demand & supply factors** you believe will cause the cash rate to move towards your predicted levels.

==**__Instructions__**: Click 'Edit this page' above and type your responses in the relevant cells below. DO NOT **try to alter the formatting**. //DON'T WORRY// if the table starts to change shape - the information contained within it is what we care about! Click **'Save'** on the editor toolbar - if you don't your work will be lost.==

For some reason the table will continue to expand so as you reach the end of the page make sure you press **enter.**


 * **Name ** || **Predicted Cash Rate ** || **Reasons: ** ||  ||   ||   ||
 * DMac || 5.25 || The terms of trade continues to increase adding demand side pressures to the Australian economy. At the same time the unemployment rate is falling which pushes Australia closer to capacity constraints which will make it more difficult to expand supply to meet demand. The high oil price may also add to cost inflationary pressures. ||
 * Steve || 5.25 || Natural disasters around the world, and Arab crises - don't suggest a positive outlook. Low sentiment, thus wouldn't have great levels of investment/expenditure - esp. in Australian industries. Proposed carbon tax adds to the uncertainty. Although the ever popular internet shopping will create a demand for personal loans. ||
 * Anthony || 5.00 || With all of the natural disasters which have occurred in major trading partner nations with Australia, this will decrease consumer confidence. Seen as there is low consumer confidence, the reserve bank will be hesitant to increase interest rates because if they did too much, this will decrease economic growth and make it harder for people to service their loans. ||
 * Anthony || 5.00 || With all of the natural disasters which have occurred in major trading partner nations with Australia, this will decrease consumer confidence. Seen as there is low consumer confidence, the reserve bank will be hesitant to increase interest rates because if they did too much, this will decrease economic growth and make it harder for people to service their loans. ||