Get set for the Fed's rate hike: Harley Dale's ACI Construction Brief

The US Federal Reserve should just get on with it and raise interest rates, says economist Harley Dale, in the latest issue of the Construction Brief by Australian Construction Insights.

There has been an expectation for some time that the US FOMC – Federal Open Market Committee would this year raise interest rates for the first time in over a decade, he noted.

The hike could have happened in September itself, but a slowing China rattled the Fed. 

"We will almost certainly see the Fed raise interest rates this week are markets are primed and priced for a rate hike, it says, although nobody knows how the reaction will pan out. 

"In Australia, there has been an element of 'I used to be indecisive, but now I'm not so sure' to pricing of another interest rate change." 

The Official Cash Rate (OCR) will stay on hold at 2 per cent throughout 2016, but financial institutions will increase variable mortgage rates (and probably business rates) early in the new year, his report says. Against this backdrop there is still a far greater risk that the RBA lowers the OCR further before it raises it. 

The latest ACI Construction Monitor also said that NSW was now the strongest non-residential construction market in Australia, followed by Victoria. 

The Construction Brief paints an optimistic picture of 2016, helped by NSW and Victoria. 

These are Australia’s largest states and both also look the goods in terms of the CommSec State of the States Report.

The ACI Construction Monitor for Summer 2015 not only ranked NSW the number one non residential market – but also assessed non-residential construction conditions in NSW as having a strengthening outlook. 

The outlook is also positive for ‘strengthening’ of non-residential construction conditions in Victoria. The remaining six states and territories are all assessed to be ‘neutral’ or ‘weakening’.