Bank rate rises no concern to economy, RBA

The decision by the big four banks to lift interest rates above the central bank's
cash rate rise does not appear to be a concern for the economy, Reserve Bank of
Australia (RBA) deputy governor Rick Battellino says.
The Commonwealth Bank was slammed by politicians and the public when it nearly
doubled the RBA's 25 basis point increase to the cash rate earlier this month.
"I'm not going to comment on the decisions of individual banks," Mr Battellino told
a business function in Perth on Thursday.
"It's up to them to explain those and justify those.
"The outcomes are basically okay as far as we can tell."
Mr Battellino said interest rates were broadly in line with when the economy was
stable in the 1990s and early 2000.
"As you know in the past three years with the global financial crisis, that is no
longer the case and we've seen very sharp increases in the cost of deposits, for
example, much more than increases in the cash rate," he said.
"And we've seen very big increases in the cost of long term bonds.
"Unfortunately for the banks, the regulators and the rating agencies, (this is)
encouraging the banks to do more of their funding through these high cost sources:
deposits and long term bonds.
"So this is all pushing up the cost of funds for the banks, more than the cash rate."



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