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New Zealand’s economy lost some momentum as retail spending and the property market slowed in the first months of 2010, according to the Treasury Department.

Leading indicators suggest January retail sales may decline and the housing market has slipped, the department said in a report posted on its Web site. The monthly update doesn’t contained new forecasts.

Reserve Bank Governor Alan Bollard last month said he is looking for evidence that the economic recovery has become self sustaining before he will start to raise interest rates from record lows. The Treasury said forward-looking indicators such as immigration and business confidence remain upbeat, matching the view of economists who expect Bollard will raise the official cash rate in June.

“The potential for a strong acceleration in gross domestic product is suggesting the Reserve Bank should keep to its stated tightening track” of a rate increase around the middle of 2010, said Craig Ebert, senior economist at Bank of New Zealand Ltd. in Wellington.

Nine of 12 economists surveyed by Bloomberg News expect Bollard will raise the official cash rate from 2.5 percent in June. Two forecast an April increase and one tips July. None expect any change in policy at the next review on March 11.

Indicators of retail spending suggest sales volumes declined in January, the Treasury said. Consumer confidence fell in February, according to an index compiled by ANZ National Bank Ltd. and Roy Morgan Research.

House Sales

The number of house sales plunged 16 percent in January, the department said, citing its analysis of Real Estate Institute figures. The market is likely to remain steady in face of rising home-loan interest rates, it said payday loans.

Extra new listings of properties for sale could depress prices, said Ebert. Listings rose 24 percent in February from a year earlier, Web site realestate.co.nz said today.

Business confidence rose to a 10-year high last month, according to a second ANZ Bank survey published on Feb. 25. The economy could expand 4 percent this year, based on the survey’s responses, the Wellington-based bank said.

“The results were consistent with the economy continuing to expand over 2010,” the Treasury said today.

Buoying the economy, immigration is rising and New Zealand’s currency has fallen 3.8 percent against the U.S. dollar in the past three months. Exports including milk powder, cheese and meat make up 30 percent of the economy.

Commodity Prices

“The lower exchange rate in recent months is providing more confidence for exporters,” the Treasury said.

Commodity export prices have surged 7.9 percent in New Zealand dollars from January, according to an ANZ Bank index published today. Prices for six of nine commodities monitored by the bank rose in February.

Annual immigration growth was the strongest in more than five years, according to a government report today.

The number of permanent migrant arrivals exceeded departures by 22,588 in the 12 months ended Jan. 31, up from 21,253 in the 12 months through December. That’s the highest since May 2004.

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WGY, 810 AM has added conservative talk show host Glenn Beck to its morning lineup.

Beck will make his debut on the Albany, N.Y. news/talk station on March 1, broadcasting live from 9am-Noon. He will replace Al Roney in the WGY lineup.

“Glenn has one of the hottest shows in all of radio right now and we simply could not pass up the opportunity to add him to our on-air team,” said Chuck Custer, director of news and programming for WGY. “With Don Weeks, Glenn Beck, Rush Limbaugh and Sean Hannity, you have arguably the biggest names and best talent in the radio business make quick cash. It’s truly a world class lineup.”

Beck had been airing locally on WROW, 590 AM until Feb. 8, when that station dropped its news/talk format in favor of a nostalgia music format.

WGY did not return a phone seeking comment.

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Miami developer Asi Cymbal is buying property in Miami’s Design District with immediate plans for more restaurants and retail.

Cymbal is managing partner of the Michelle Bernstein restaurant Sra. Martinez and head of his own construction company.

At a steep discount, Cymbal scooped up the former site of a planned town home project – a little more than one acre (49,500 square feet) at the corner of Northeast First Avenue and 41st Street.

Cymbal paid $2 million for the $10.5 million mortgage with Compass Bank on the property on Dec. 30.

The prior owner was Jeremy Green of Nexus Development Group, who once had a slate of residential proposals for the area.

Cymbal, president of Miami-based Cymbal Development, said in an interview the project would involve retail and restaurants, but he declined to be more specific. He also said he might develop retail at some point in the future.

Cymbal owns the 25,000 square foot Midtown Center at North Miami Avenue and 34th Street. He did new construction at Midtown Center and rehabbed an existing warehouse, which is now home to Bardot bar and EQ3 furniture.

Cymbal also has plans to build a 100,000-square-foot structure at 112-130 NE 41st Street. About half of the building will serve as parking, with retail on the bottom and another use on the top of the building.

One of Cymbal’s partners on the future development projects is Amir Ben-Zion, who is a partner in Miss Yip Chinese Café and the Townhouse Hotel, both on Miami Beach.

Cymbal and Ben-Zion are familiar names in local real estate development circles fast payday loans. In March 2005, the pair were part of a partnership that paid $14 million for the flat-iron parcel one block west of Brickell Avenue.

The site was slated for a mixed-use office building, but the project never got off the ground. In July 2007, it was on the market for $32.5 million.

The pair sold their interest in the project and are no longer associated with it, Cymbal said.

In July of the same year, the pair were part of a partnership that paid $18 million for about an acre of land on Biscayne Boulevard near the Arsht Center for the Performing Arts, where it considered building condominiums. The project never started and the pair also sold their interest in that project, Cymbal said.

At the time, the area around the arts center was inspiring real estate dreams, with Terra Group planning a massive mixed-use development next door.

Cymbal was a vice president and general counsel for the Manhattan projects of Leviev Boymelgreen. He had no connection to the Boymelgreen’s Miami projects, most of which stalled.

As for the Design District, Cymbal said there is great demand for mixed-use projects in the growing Design District, which has become a focal point of activity for the annual Art Basel art event.

“Our intent is to bring the Design District to the next level,” Cymbal said.

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WASHINGTON–The U.S. economy flashed a warning sign of inflation Tuesday, but the recovery is so fragile that experts say a scenario of runaway prices and higher interest rates is a long way off, if it happens at all.

Overall wholesale prices jumped 1.8 per cent in November, the department of labour said, more than double the gain expected. Core inflation, which excludes energy and food, rose 0.5 per cent, the sharpest increase in more than a year.

The U.S. government will release its look at consumer prices on Wednesday instant payday loan. Economists predict a more moderate gain of 0.4 per cent, with core consumer prices expected to rise 0.1 per cent.

U.S. auto sales, meanwhile, will rise 20 per cent in 2010 as the industry starts recovering from its worst year in almost three decades, according to a forecast Tuesday from the Michigan-based Center for Automotive Research.

From the Star’s wire services

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The U.S. economic recovery still faces many hurdles, including a persistently weak labor market and strained household budgets, Janet Yellen, President of the Federal Reserve Bank of San Francisco, said on Tuesday.

Yellen said in a speech to a local organization she was not worried about inflation, arguing instead that the possibility of a problematic drop in consumer prices remains the greater risk.

“The strength and durability of the expansion is in question,” Yellen said. “Some of the rebound is due to temporary government programs and a swing in inventory investment that will not provide an ongoing source of growth.”

Still, she credited the very same government efforts, in conjunction with unprecedented monetary stimulus from central banks worldwide, for reviving growth in the third quarter.

The U.S. economy expanded 3.5 percent during that period, following the worst recession in generations. Whether the private sector can pick up the slack once the government boost is gone remains to be seen, Yellen said.

“The danger is that demand may grow at too anemic a pace to support vigorous expansion,” said Yellen.

Addressing the nation’s battered housing market, Yellen said signs of stabilization were an important positive easy payday loans. But she cautioned that the high unemployment rate, currently at a 26-year high of 10.2 percent, raised the threat of a renewed wave of foreclosures that could again pressure home prices.

The outlook for commercial real estate is “worrisome,” Yellen said.

Given the recession’s toll, U.S. consumers are still strapped for cash, and stagnant incomes are not helping.

“High unemployment, weak job growth, and paltry wage increases are a recipe for sluggish consumer spending growth and a tepid recovery,” said Yellen.

Another possible impediment to a vibrant recovery is the banking sector, which is still facing a mountain of bad loans, Yellen argued.

“It may take quite a while for financial institutions to heal to the point that normal credit flows are restored. The credit crunch hasn’t entirely gone away,” she said.

(Reporting by Pedro Nicolaci da Costa, Editing by Chizu Nomiyama and James Dalgleish)

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A push from U.S. President Barack Obama and Chinese leader Hu Jintao to shrink trade and investment imbalances is probably years away from being fulfilled, according to comments from their own officials.

Group of 20 leaders met in Pittsburgh yesterday aiming to reduce global capital imbalances blamed for contributing to the financial crisis, including a U.S. reliance on borrowing from abroad to finance spending, and Chinese dependence on exports.

“That’s not a simple thing to achieve, you don’t get that by writing a communique,” David Nelson, acting U.S. assistant secretary of State for Economic, Energy and Business Affairs, said in an interview. Ma Xin, an official at China’s government planning agency, warned that his nation’s “low” consumer spending is a problem that has “accumulated over many years and it is a structural problem.”

Failure to accelerate a shift toward domestic demand in Asia, and to diminished U.S. borrowing, risks laying the ground for future crises. Federal Reserve Chairman Ben S. Bernanke has said the influx of savings from Asian nations contributed to depressing U.S. interest rates in the middle of the decade, when the credit boom that preceded the current crisis began.

G-20 Statement

The G-20 yesterday released a joint statement saying that “ensuring a strong recovery will necessitate adjustments across different parts of the global economy, while requiring macroeconomic policies that promote adequate and balanced global demand.”

“Whatever the communique says, it’s up against a very, very difficult change for China to make, and they’re not convinced they have to make it,” said Derek Scissors, Asia economic policy fellow at the Heritage Foundation in Washington, said in a telephone interview. On the U.S. side, its record budget deficit means “we don’t have any credibility,” he said.

The G-20, which groups the largest developed and emerging nations and was established after the 1997-98 Asian financial crisis, concluded its third summit yesterday. The meetings were elevated to the leaders’ level in November.

“There is value in having leaders meet and agree conceptually, but that’s not the end of the road,” said Nelson of the State Department. “It takes a lot of work, a lot of initiatives.”

Budget Deficit

The U.S. will post a federal budget deficit this year of $1.59 trillion, up from $459 billion last year, according to Congressional Budget Office projections.

While American households increased their savings rate to 4.2 percent by July from a low of 0.8 percent in April 2008, it remains less than half the 8.9 percent average of the 1960s and 1970s.

Similarly, even as China has this year seen its economy accelerate without relying on export gains, it has done little to reduce savings as a share of the economy. Household and corporate savings amount to almost 51 percent of gross domestic product, compared with about 48 percent in 2005, International Monetary Fund figures show faxless cash advances.

“The saving rate in the U.S. is growing and we believe that it is a correction of the old model” of economic growth reliant on debt-financed spending, Ma, director-general of international cooperation at the National Development and Reform Commission, China’s top planning agency, said in Pittsburgh.

China’s Understanding

Ma, speaking to reporters, added that “China also understands that its economic-growth model has some flaws. One of them is low consumption capability.”

Before arriving in Pittsburgh, Obama said redressing global imbalances would be a priority.

“We can’t go back to the era where the Chinese or the Germans or other countries just are selling everything to us,” the president said in an interview with CNN broadcast Sept. 20. G-20 leaders need to make “sure that there’s a more balanced economy.”

Treasury Secretary Timothy Geithner said this week that the higher savings rate is an “encouraging sign.” He added in a press briefing that “one of the great strengths of this country is that we adjust quickly, we move quickly.”

After “a long period of time living beyond our means, you see people already changing behavior,” the Treasury chief said in Pittsburgh. “That’s one reason why we can stand here today and express some measured optimism about our capacity to put in place a more sustainable recovery.”

‘Root Cause’

China’s President Hu told the G-20 yesterday that “the issue of global economic imbalances has drawn close attention from the international community.” The “root cause is the yawning development gap between North and South,” he said, according to an English translation of his text, referring to developed and poorer nations.

Hu’s government is overseeing a 4 trillion yuan ($586 billion) stimulus plan — coupled with record lending, tax cuts and subsidies — to spur the nation’s economy. While exports dropped for a 10th month in August, retail sales climbed 15 percent from the same month a year ago as consumers snapped up everything from televisions to automobiles.

Even so, it will take years for China to build a social safety net, with health care and retirement protections, that would reduce incentives for “precautionary” savings, said Nicholas Lardy, a China economy specialist at the Peterson Institute for International Economics in Washington.

To reduce further its export reliance, China should eliminate manufacturing subsidies that make its exports cheaper, and allow the yuan to appreciate against the dollar, Lardy said.

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President Barack Obama’s $787 billion fiscal stimulus program has created or saved as many as 1.1 million jobs since its implementation in February, the White House said today.

The stimulus added 2.3 percentage points to gross domestic product in the second quarter, the Obama administration said today in its first quarterly report to lawmakers in Washington on the economic impact of the program. The White House said it expects the stimulus to add up to 3 percentage points to growth in July through September.

Unemployment is forecast to rise even as the economy starts to recover from its deepest recession since the 1930s. The stimulus package aims to stabilize the economy through tax cuts and infrastructure spending and creating or saving about 3.5 million jobs.

“We think we are on track” to achieve that goal, Christina Romer, chairman of the White House Council of Economic Advisers, said today in a conference call with reporters.

The administration’s figures were met with skepticism from Republicans in Congress, who noted that 2.4 million jobs have been lost since March.

“How can anyone tell the American people with a straight face that the more than 2 million jobs that have been lost since the stimulus was enacted is actually 1 million jobs ‘saved or created?’” Senate Republican Leader Mitch McConnell of Kentucky said in a statement.

Payroll Cuts Peak

Since the slump began in December 2007, the U.S. has lost 6.9 million jobs. Payroll cuts peaked at 741,000 in January and have since subsided, with 216,000 job losses in August, according to the Labor Department. The jobless rate rose to 9.7 percent in August, a 26-year high, from 9.4 percent.

John Makin, a visiting scholar at the American Enterprise Institute in Washington, questioned the assumptions used to measure the impact of the stimulus.

“They can say whatever they want, and they have,” Makin said.

Separately, Treasury Secretary Timothy Geithner said the government is moving to withdraw some of its support for financial markets, while cautioning that the recovery will have “more than the usual ups and downs.”

The jobless rate will increase next year to 10.2 percent before falling to 9.1 percent in 2011, the Congressional Budget Office forecast last month.

“The fiscal stimulus is still ramping up,” Romer said when asked about the need for a second stimulus package. She added that the administration will re-evaluate “the trajectory” of the program as early as December to determine if further measures are needed.

New Phase

“As we enter this new phase we must begin winding down some of the extraordinary support we put in place,” Geithner told the Congressional Oversight Panel that monitors the $700 billion Troubled Asset Relief Program.

The world’s largest economy contracted 1 percent from April through June, according to the Commerce Department. The drop was the fourth in a row, making it the longest contraction since quarterly records began in 1947.

“The economy is obviously still far from healthy,” the CEA said in today’s report. Economists surveyed by Bloomberg News forecast growth of 2.2 percent for the current quarter.

The Federal Reserve yesterday said 11 of its 12 regional banks reported signs of a stable or improving economy in July and August.

The labor market “remained weak across all districts,” while some regions reported an “uptick in temporary hiring and a decline in the pace of layoffs,” the Fed said in its Beige Book business survey, published two weeks before officials meet to set monetary policy.

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European Union finance ministers agreed to push for tighter rules on bank bonuses as they prepared a common stance on overhauling the financial system before a summit of the Group of 20 nations.

Authorities need “stronger muscles and sharper teeth,” Swedish Finance Minister Anders Borg, whose nation currently holds the rotating EU presidency, told a press conference yesterday in Brussels after leading a meeting of European finance chiefs. “The bonus culture must come to an end.”

German Chancellor Angela Merkel and French President Nicolas Sarkozy said on Aug. 31 that they would press fellow G- 20 leaders to regulate bank bonuses as well as require lenders to set aside more capital to avoid a repeat of the financial crisis that has caused global writedowns and losses of $1.6 trillion. G-20 finance ministers meet in London on Sept. 4-5 before a Sept. 24-25 summit of leaders in Pittsburgh.

French Finance Minister Christine Lagarde said she is optimistic that all 27 EU governments will support proposals she brought to yesterday’s meeting to curb bonus pay at banks. She said the options included an outright cap on bonuses, limiting them as a percentage of total pay, and taxing them.

“In the hours and days to come, all the finance ministers will understand the suitability of the French position and will rally to it, and in a very formal way that may surprise you,” Lagarde said.

Geithner’s View

In a briefing in Washington yesterday, U.S. Treasury Secretary Timothy Geithner said reining in executive compensation is “a critical part of our broader reform agenda.” He said the U.S. has proposed “pretty comprehensive reforms” to give shareholders more control over pay policies and also give managers better incentives to act in the best long-term interest of their banks.

“If you look at what’s happening across Europe, like in many of these areas, there’s a lot in common in terms of basic strategy,” Geithner said. He declined to comment on specific changes sought by his counterparts, saying he had not yet had detailed discussions on the policy proposals.

U.K. Prime Minister Gordon Brown sees a cap on bonuses as difficult to enforce, the Financial Times reported earlier this week, citing an interview. Chancellor of the Exchequer Alistair Darling, who did not attend the meeting in Brussels, later this week will put forward a plan to the G-20 nations through the Financial Stability Board that the U.K. already plans to adopt.

Bonus Limits

Darling will call on countries to force banks to discourage excessive risk-taking by holding back bonuses for as many as five years and make risky lenders hold more capital. He also wants top bankers’ bonuses to be made public. The U.K. was represented at yesterday’s meeting by Economic Secretary Ian Pearson.

“The British were more positive than could be deducted from news reports in the past week,” Dutch Finance Minister Wouter Bos said. Earlier, in response to a question about the U.K.’s efforts to curb bonuses, Bos said he sees “some major countries moving in the right direction but not every country is moving yet as quickly as they possibly could.”

A U.K. official said the government in London “is committed to ending the short-term bonus culture and pay practices that could threaten the stability of the financial system. We need to see measures that are global in scope,” said the official, who spoke on condition of anonymity.

German Deputy Finance Minister Joerg Asmussen said the U.K. endorsed the French proposals “in principle.” The EU wants “a clear relationship between bonus and performance.” Bonuses will be more transparent and compensation may be deferred, he said.

G-20 Consensus

“Now we have to find a common G-20 position in London,” Asmussen said. “It won’t be enough for Europe to take a position.”

“This will be a very difficult thing to get agreement on and implemented across a wide range of countries,” said Jonathan Loynes, chief European economist at Capital Economics Ltd. in London. “Experience shows it needs to be sorted out on a country-by-country basis.”

Sarkozy said on Aug. 25 that France won’t hire banks that refuse to accept government limits on compensation, and executives from French institutions including BNP Paribas SA and Societe Generale SA promised to defer two-thirds of bonus payments for three years and to pay out one-third in shares.

“I don’t think the rest of the world will agree to those plans and efforts,” Otto Waser, chief investment officer at R&A Research & Asset Management AG said in a Bloomberg Television interview on Aug. 27. “Talents are just going to leave the industry and do their business elsewhere, so I don’t think it’s a workable avenue,” he said of the French proposals.

European Banks

Amid concern over policy makers’ demands that banks also set aside more capital to prevent future crises, the cost of protecting bank bonds from default rose in Europe yesterday by the most since May. The Dow Jones Stoxx 600 Banks Index dropped 1.7 percent yesterday in London, a third straight day of declines.

Merkel, who has said the bonus system “quite rightly drives a lot of people up the wall,” joined forces with Sarkozy ahead of the last G-20 summit in London in April to demand steps to control executive pay, plus rules governing hedge funds and a new “architecture” for financial markets. Merkel, who faces elections on Sept. 27, has since voiced concern that governments may backslide on past G-20 commitments as the recession eases.

The euro-area economy barely contracted in the second quarter, with Germany and France returning to growth after the European Central Bank injected billions of euros into markets and governments offered consumers incentives to spend. World Bank President Robert Zoellick said yesterday the chances of a “truly global recovery” have increased because of China’s expansion and signs that other economies are stabilizing.

Europe’s Recovery

As evidence mounts that the worst of Europe’s recession has passed, Bos said yesterday that policy makers should start thinking about how to unwind government stimulus measures. Other policy makers joined calls from the International Monetary Fund’s No. 2 official, John Lipsky, for the exit to be coordinated.

German Finance Minister Peer Steinbrueck, absent from yesterday’s meeting in Brussels, told his counterparts in a letter last month that failure to align exit strategies risked “distortions of competition,” after governments extended more than $2 trillion in fiscal packages and help for banks such as Citigroup Inc. and Royal Bank of Scotland Group Plc.

“I think the exit strategy from this crisis should be coordinated at the European level and of course also at a global level. We will discuss this at the next G-20 in London,” EU Monetary Affairs Commissioner Joaquin Almunia said yesterday.

The G-20 members are Argentina, Australia, Brazil, Canada, China, France, Germany, India, Indonesia, Italy, Japan, South Korea, Mexico, Russia, Saudi Arabia, South Africa, Turkey, the U.S., the U.K. and the EU.

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The man who may become Germany’s finance minister after next month’s elections, Hermann Otto Solms, says tax and spending cuts are needed to lift the nation out of its worst economic crisis since World War II.

“We believe that tax reductions are good for growth and employment and if you have more employees you have more taxpayers,” Solms said in an interview on Aug. 25 in his Berlin office overlooking the 19th century Reichstag building that houses parliament. A “big tax reform” is a non-negotiable demand for potential coalition talks after the Sept. 27 vote.

Solms, 68, a vice-president of Germany’s parliament who rides a BMW motorcycle, wants to guide his Free Democratic Party back to power after 11 years in opposition. Chancellor Angela Merkel says she wants to dump her current Social Democratic coalition partner and govern with the FDP. Polls since December have given the two allies a combined 50 percent or more, enough to form a government.

If replicated on election day, Solms, the FDP’s finance policy spokesman, is a leading candidate to replace Social Democratic Finance Minister Peer Steinbrueck, a persistent critic of what he terms the “Anglo-American” financial model.

“Solms will be the next finance minister,” said Friedrich Thelen, former parliamentary editor of the business magazine Wirtschaftswoche and founder of Thelen-Consult, a Berlin-based business advisory group. “There’s nobody else.”

Record Borrowing

If he gains office, Solms will inherit falling tax revenue and borrowing forecast to surge to a postwar record. The budget posted a 17.3 billion-euro ($24.7 billion) deficit in the first half of this year as the government boosted subsidies for companies to keep workers on the payroll during the crisis, the Federal Statistics Office said Aug. 25. The budget was close to balanced in 2008.

Solms’s party leader, Guido Westerwelle, criticized the government’s first stimulus package, worth 50 billion euros, as the “most expensive election campaign in German history.”

While Solms said he didn’t want to talk about Cabinet posts before the vote, he said he has no illusions about how difficult it will be for Germany’s next finance minister to reassert budget discipline.

“In the finance ministry you are responsible for everything,” Solms said. “Finance ministers are never loved. Yet just like an executive who takes over a company in a crisis one has a chance to really improve things.”

Kohl, Brandt

The FDP last served in government under Christian Democrat Chancellor Helmut Kohl from 1982 to 1998. From 1969 to 1982, the party was junior partner in the governments of Social Democratic Chancellors Willy Brandt and Helmut Schmidt.

If the FDP doesn’t win enough votes in four weeks to rule with Merkel, Solms said he’ll recommend the party stay in opposition rather than seek an alliance with the Social Democrats.

The FDP’s platform calls for simplified, lower income tax rates between 10 percent and 35 percent. Germany’s top income tax bracket is currently 45 percent and the lowest is 14 percent. The CDU wants to drop the lowest bracket to 12 percent and raise the threshold for the 45 percent rate to 60,000 euros from 52,000 euros.

The FDP also wants to revamp inheritance tax on family businesses, which Solms said “is driving lots of business people abroad.”

While praising what he called Merkel’s swift reaction to the global financial crisis last year, Solms said Merkel’s bad- bank law was problematic because “no bank will take advantage of it unless they’re on the brink of insolvency.”

He also condemned Merkel’s moves on bank supervision, saying “here, nothing has happened.”

Aristocratic Title

An aristocrat from Hesse in central Germany, Solms’s full name is Hermann Otto Prince zu Solms-Hohensolms-Lich. He said he decided to drop the title “because I am a convinced democrat and people should be measured by their achievements and not by their origins.”

Solms never knew his father, a Luftwaffe fighter pilot, who was killed during World War II shortly before his birth. He said among his earliest memories as a 4-year-old boy was the arrival of American troops in March 1945.

“I have this image of the Americans rolling into our village with their tanks,” he said. “It was a feeling of relief.”

Solms studied agricultural economics in the U.S. from 1969- 1970 at Kansas State University in Manhattan, Kansas.

“Naturally, one gets to know the American soul better in the Midwest rather than in New York,” Solms said. “That’s why I still think I can understand Americans better.”

Thelen said Solms’s almost 30 years in parliament means he knows how to navigate the pressures faced by the man responsible for the nation’s finances.

“They’ll need someone as a power-broker and Solms will do it,” Thelen said.

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The Reserve Bank of Australia will have to raise the benchmark interest rate from its “emergency” level at some stage as the economy rebounds from the global recession, bank Governor Glenn Stevens said.

“There will come a time when the exceptional monetary stimulus in place at present will no longer be needed,” Stevens said in his half-yearly testimony to parliament’s economics committee in Sydney today. “It will then be appropriate for the board to do what it has done on past such occasions, namely to start adjusting interest rates back towards normal levels.”

The Australian dollar and bond yields jumped on mounting speculation the central bank may increase borrowing costs before the end of the year. A more normal level for the overnight cash rate target is “a good deal north” of the current 49-year low of 3 percent, Stevens said today.

“The bank is clearly going to hike rates soon — year end is the most likely time,” said Adam Carr, an economist at ICAP Australia Ltd. in Sydney. Stevens points out that “the economy is more resilient than most thought it would be, global growth is leveling out and financial markets have stabilized,” he said.

The economy grew 0.4 percent in the first quarter, rebounding from its first contraction in eight years in the previous three months, as lower borrowing costs and government spending stoked domestic demand. Stevens said today it appears that gross domestic product also expanded in the second quarter.

Currency Climbs

Australia’s currency advanced to 84.65 U.S. cents at 11:20 a.m. in Sydney from 84.17 cents before the governor’s testimony began. The two-year government bond yield rose 8 basis points to 4.53 percent.

Traders have a more than 90 percent expectation that the central bank will raise the benchmark rate by half a percentage point before the end of 2009, according to interbank futures on the Sydney Futures Exchange as of 11:36 a.m. local time. A month ago, the futures implied the rate would remain unchanged.

“What we’ve got is an emergency setting” for the benchmark rate that was “put in place in anticipation that the economy would be seriously weak,” Stevens said no fax payday loans. “As the set of risks that we think you face start to shift, at some point you have to move away from the emergency setting.”

Last week, the central bank scrapped its forecast for the economy to contract this year, instead predicting GDP will expand 0.5 percent. The bank expects growth to accelerate to 2.25 percent in 2010 and 3.75 percent in 2011.

Shallow Slowdown

“On the basis of the information to hand at present, this may well turn out to be one of the shallower recessions Australia has experienced,” Stevens said. Low interest rates risked stoking economic imbalances, he added.

The Reserve Bank board slashed the overnight cash rate target by 4.25 percentage points between September and April. As well, the government distributed A$12 billion ($10.2 billion) to households and pledged to spend A$22 billion on roads, ports, railways, schools and hospitals.

Stevens didn’t provide a timeframe for when the central bank may begin raising rates.

“It’ll be the right thing to start removing it before it’s excessive,” Stevens said in response to questions. Policy makers will remove monetary policy stimulus “in a timely fashion and when the time is right,” he added.

“The emphasis on removing the ‘emergency’ setting of the cash rate was emphasized and re-emphasized” by Stevens, said Annette Beacher, an economist at TD Securities Ltd. in Singapore.

“While coy about timing, there is no doubt that at this point the governor is looking to withdraw the extraordinary stimulus in the economy.”

Stevens declined to identify what policy makers regard as a so-called normal or neutral policy setting, though he said the benchmark rate has averaged in the 5 percent range for the last 20 years, which he characterized as the “low inflation world.”

He added that a more normal level for the key rate is “a good deal north of what the cash rate is now” and borrowing costs could go “noticeably” higher.

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