Banks a bit too quick to raise rates: PM

The major banks were a bit too quick off the mark raising their lending rates for
the prime minister's liking.
The ANZ Bank raised its variable mortgage rate within minutes of the Reserve Bank of
Australia's (RBA) decision to raise the cash rate by a further 25 basis points on
Tuesday.
The other major banks soon followed suit.
"I do note a contrast between, shall I say, the speed which interest rates are
brought down on the part of the commercial banks and the speed with which they are
put up," Kevin Rudd told Fairfax Radio Network on Wednesday.
And with further rate rises likely over the next year, Mr Rudd again warned the
banks not to lift rates further than official rate moves, saying he would be "very,
very concerned" if they did.
Westpac chief executive Gail Kelly, like her counterparts at ANZ and National
Australia Bank last week, couldn't guarantee that her bank would always be able to
toe the line of official moves.
"There are a range of factors to take into consideration," Mrs Kelly told reporters
in Sydney on releasing the bank's latest profit results on Wednesday.
"The costs of funds are linked to a lot of things, not much linked to the Reserve
Bank rate."
Still, for borrowers stuck in the middle of this ongoing stoush, there is some
relief in the idea that another official rate rise in December looks less likely
after an unexpected fall in retail spending.
Despite rising consumer confidence, retail sales declined by a seasonally adjusted
0.2 per cent in September, when economists had expected a 0.5 per cent increase.
Treasurer Wayne Swan said the data were a sign that the economic recovery remained
"fragile" and as such it was appropriate to keep the government's stimulus spending
going as planned.
"Those who advocate ripping out stimulus risk stalling the recovery and sending
unemployment and business failure through the roof," Mr Swan said in a brief
statement.
The Australian Bureau of Statistics data also showed sales fell 0.4 per cent in the
three months to September, which will be a drag on growth figures for the September
quarter due next month.
Department stores took the biggest hit in September, when sales dropped by 2.9 per
cent compared with the previous month.
Only Victoria posted sales growth in the month.
"These data support the view that the RBA will likely keep rates on hold in
December," Macquarie Research associate economist Ben Dinte said.
Money markets are pricing in a 50-50 chance of a December rate rise.
However, the fall in retail activity is unlikely to be too much of a shock to the
central bank.
"Some spending has probably been brought forward by the various policy initiatives,"
RBA governor Glenn Stevens said in his statement that accompanied Tuesday's rate
rise.
"With those effects now diminishing, these areas of demand may soften somewhat."
Other data showed building approvals rose 2.7 per cent in September to 12,476 units,
ahead of economists' forecasts that were looking for a 2.0 per cent increase.
Private home approvals rose 0.3 per cent, while the volatile other dwellings
component - such as townhouses, apartments and flats - jumped 14.6 per cent.
"Low interest rates and the then-looming deadline for the full building-related
component of the first-home owners boost likely provided support to dwelling
approvals over September," Commonwealth Bank of Australia senior economist Michael
Workman said.
The grant for new properties was wound back to $14,000 from $21,000 on October 1.
It returns to its original $7,000 on January 1, 2010.