The Reserve Bank of Australia increased interest rates for the third consecutive month. This recent hike brings the rate to 3.75 per cent. The hike still pushed through despite the fears of the Dubai debt having a potential toll on the global economy. This rate hike is the largest since 1994 when the cash rate went up by three per cent in five months.
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From October to December, the official cash rate went up by 75 basis points after it stayed at a 49-year-low 3 per cent from April to October. This recent hike also means that an average $300,000 mortgage will incur an additional $46.
RBA Governor Glenn Stevens stated that the hike was implemented because the global economy is out of trouble. He also added that since the worst has passed, RBA is gradually decreasing the financial stimulus that was put into effect during the meltdown. Stevens also mentioned that this development will boost economic growth and check inflation movement.
In contrast, Treasurer Wayne Swan claimed that the new interest rate hike will have a great effect to the family budget and that rates will continually rise for it will not remain at emergency low levels in the long run.
Also, Business SA chief executive Peter Vaughan said that the increase was done prematurely. He also added that a rate increased is the last thing businesses and consumers need for the Christmas season. Vaughan also claims that the RBA should have waited for more stability before taking the spending money of the consumers.
In the long run, Vaughan also predicted that this hike will have a huge effect on customer sentiment and it can negate the measures that have helped businesses and families during the economic crisis.
Meanwhile, Westpac already initiated a 0.45 per cent increase to their variable home rate to bring their rate to 6.76 per cent. As a result, other major banks are considering whether they will follow Westpac’s lead. As of the moment, ANZ has a 6.31 per cent rate while CBA at NAB has their rates at 6.24 per cent.
