Swan blasts Westpac over extra rate rise

Westpac Bank has provoked the wrath of federal Treasurer Wayne Swan by jacking up
its key mortgage rate by almost double the amount of Tuesday's official rate
increase.
The Reserve Bank of Australia (RBA) raised the cash rate by 25 basis points to 3.75
per cent after Tuesday's board meeting, as expected by most market economists.
It was the first time the central bank has lifted the cash rate three months in a
row since it began announcing its decisions on monetary policy in January 1990.
Federal Treasurer Wayne Swan said the RBA's decision was "unsurprising" given that
the economy was recovering and that rates couldn't stay at emergency, 50-year low
levels forever.
But he admitted it would hit household budgets.
"This is tough for families ... when rates go up it has an impact on the family
budget," Mr Swan told reporters in Canberra.
He also said there was no justification for the retail banks to lift rates by a
greater margin than the official move.
Within minutes, Westpac said it was lifting its standard variable rate by 45 basis
points to 6.76 per cent, blaming continuing cost pressures on its wholesale funding.
Other banks have yet to announce their rate responses.
In a subsequent terse statement, Mr Swan said Westpac was "cynically trying to use
the cover of today's other events".
It was assumed Mr Swan was referring to the Liberal party's decision to elect Tony
Abbott as its leader, ousting Malcolm Turnbull.
Mr Swan said Westpac's cynical move was "a slap in the face" to its customers.
"I think Westpac and any other bank that follows Westpac's lead can expect a very
severe backlash from their customers and from the community generally," he said.
Westpac's increase will add $84 to monthly repayments on an average $300,000
mortgage, instead of the $47 homeowners would have faced if it had stuck to the
official move.
Westpac said its decision was "regrettable".
"Westpac has withheld passing on the full amount of the increased funding costs we
have experienced to ensure we could continue to support our customers through the
economic downturn," it said in a statement.
Business groups were disappointed by the RBA's decision, while retailers labelled
the central bank a "scrooge".
"It risks choking off higher retail spending during the most important trading
period in the year," Australian National Retailers Association chief executive Margy
Osmond said in a statement.
RBA Governor Glenn Stevens said as the risk of a serious economic contraction had
passed, the board had moved to gradually lessen the degree of monetary stimulus that
was put in place when the outlook appeared to be much weaker.
"These material adjustments ... (will) work to increase the sustainability of growth
in economic activity and keep inflation consistent with the target over the years
ahead," he said in a statement.
Opposition housing spokesman Scott Morrison blamed the RBA's decision on the
government's failure to control its spending.
"You can't have it both ways, you can't keep spending money and at the same time
expect to keep the pressure off interest rates," Mr Morrison told reporters.
Money markets are pricing for a 50:50 chance of another 25-basis-point increase when
the central bank next meets in February.
"At some stage the bank will pause, but we don't think we are at that point yet
given that the cash rate is still below the previous low of 4.25 per cent," RBS
Australia chief economist Kieran Davies said.