Banks To Ignore Calls For Freeze On Rates

Illawarra Mercury

Thursday March 6, 2008

FEDERAL Treasurer Wayne Swan wants banks to consider the pressures home owners face as they cope with their 12th consecutive interest rate rise.

But there are signs his plea may fall on deaf ears, with Adelaide Bank yesterday raising the cost of its wholesale funds - the product it offers mortgage brokers - by 40 basis points.

The Reserve Bank of Australia earlier lifted its official cash rate by a quarter of a percentage point to 7.25 per cent, taking it to its highest level in 12 years.

The major banks are yet to announce their response, but there are fears they may put their mortgage rates up by an even bigger margin.

"They've had eight interest rate rises in the last three years," Mr Swan said.

"That's a very big burden for a lot of people struggling out there. So, I'd ask them to be mindful of those financial burdens that their customers are under."

Interest rates have risen 12 times since May 2002 and eight times in three years.

While some believe the RBA may now pause before pulling the interest rate trigger again, new figures out yesterday will do little to dissuade the bank from another rate hike altogether.

December quarter national accounts figures showed some economic slowing but continuing signs of strong domestic demand.

Gross domestic product climbed by a seasonally adjusted 0.6 per cent in the three months to the end of December, taking growth for calendar 2007 to 3.9 per cent.

While the 2007 figure was in line with market expectations, it was well above Australia's average growth rate of 2.8 per cent in the three years preceding 2007.

The data showed domestic demand continued to surge, particularly in resource rich Western Australia.

Household consumption grew by a strong annual rate of 5 per cent.

Westpac Bank senior economist Anthony Thompson said the slower growth would not discourage RBA.

"Overall these numbers confirm what the RBA has been saying, in that the economy was still growing pretty strongly at the end of last year," he said.

"(But) we still think they won't have enough signs (over the next few months) that growth is slowing fast enough, as they would like."

Mr Swan blamed the Howard government for what he said was its failure to build productive capacity to match domestic demand.

"These figures show our economy in the rear view mirror ... (and) paint a picture of the economic landscape that we inherited."

But Opposition treasury spokesman Malcolm Turnbull said the data was further evidence of the "strong, resilient, dynamic and flexible economy" Labor had inherited.

EDITORIAL A super idea on spending - P22

© 2008 Illawarra Mercury

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