Govt furious at 'selfish' CBA rate slug

The government says banks who might be contemplating an interest rate rise should
heed its strong condemnation of the Commonwealth Bank's move to lift rates by 10
basis points last week.

Deputy prime minister Julia Gillard said the Commonwealth was being selfish a time
when all Australians and businesses needed to work together.
"The Commonwealth Bank is acting in a selfish way," Ms Gillard told the Nine Network
on Sunday.
Community services minister Jenny Macklin said mortgage holders had every reason to
be furious with the Commonwealth Bank."
That follows reports that other banks might be preparing to follow the Commonwealth
and jack up mortgage interest rates.
Ms Gillard said the other banks would be taking on board the government's tough talk
about the Commonwealth move.
"At the end of the day, how Australian banks go depends very much on how the
Australian economy goes," she said.
"We've been acting to support jobs and support the economy through economic
stimulus. The Reserve Bank has been acting by decreasing official interest rates.
We're expecting our big banks to play their part in these difficult days of the
global recession."
Ms Macklin said the government and mortgage holders understood that this was not the
way to go.
"We need to do everything we can to support our economy in these very, very
difficult times, not see interest rates go up," she said.
Liberal Senator Julian McGauran said the Commonwealth decision to lift interest
rates, plus moves to sell bonds by other banks, showed that the government's bank
guarantee was no longer necessary.
He said healthy profits were returning to banks which were building comfortable
margins into their operations, including ATM fees and charges.
"The government can no longer justify prolonging the guarantee. The scheme must now
stop, the job is done," he said.
As the global financial crisis started to bite last year, the government moved to
guarantee the $600-$700 billion in deposits in Australian financial institutions in
a move to shore up local confidence.
Senator McGauran said the banks were now in a far more secure position than they
were in October when the guarantee was announced.
"The guarantee has distorted the market to the advantage of the banks and to the
detriment of investment fund providers, threatening their viability," he said.
Senator McGauran said given that the four big banks were now ranked in the top 20 in
the world, it was clear they no longer needed the guarantee.
"It's time the federal government lifted the market-distorting guarantee, allowing
investment fund providers to unfreeze capital," he said.
Opposition frontbencher Tony Abbott said the government's high level of borrowing
meant further interest rate rises were certain.
"It is borrowing over $1 billion a week and if you are going to be seeking that kind
of money, you have got to be giving competitive interest rates," he told Sky News.
"When the government is borrowing on the scale that this government is borrowing,
unprecedented in Australia's history, obviously that puts upward pressure on
interest rates."