The new boy Treasurer Wayne Swan will surely have mixed feelings about the decision of the Reserve Bank to keep interest rates steady. If there is to be any increase in the next six months or so then far better for Labor that it was sooner rather than later.

A rise this morning could have been sold as the last of Peter Costello’s rather than the first of Wayne Swan’s. Come the next meeting of the Reserve Bank Board in February and the responsibility will be seen as Labor’s.

The minutes of the Bank meeting in November certainly put the responsibility for the last 0.25% increase squarely on the shoulders of the outgoing government.

“Members noted,” the minutes record, “the recent changes to fiscal policy projections. At the time of the Australian Government’s May budget, the surplus had been forecast to be around 1 per cent of GDP in 2007/08 and to rise gradually in subsequent years.”

“Since May, parameter variations had suggested an increase in the surplus to around 2½ per cent of GDP over the period covered by the forward estimates. New expenditure and revenue measures announced since the budget and in the early part of the election campaign had since reduced the projected surplus to around 1 per cent of GDP.

“This meant that fiscal policy was roughly neutral in its overall effect on growth as conventionally measured, the recent initiatives having offset the ‘automatic fiscal stabilisers’.”

Offsetting those “automatic fiscal stabilisers” will not be changing under the economic management plans so far announced by Treasurer Swan. For all Labor’s talk of savage spending cuts there will be little if any increase in the budget surplus from the 1% figure so the brunt of any policies to limit inflation will continue to fall on monetary policy. Whether another rise will be needed will depend on what happens to growth in the broader world economy.

While he waits to see what happens there, Treasurer Swan will be dealing with the likelihood that banks and other home lending institutions will push rates up independently of the Reserve Bank cash rate in any case. The Bank of Adelaide has already done so and others will surely follow. The Reserve Bank Governor Glenn Stevens as good as predicted that in the cautious statement he released to accompany the decision not to change the rate:

Nonetheless borrowing costs have risen appreciably since mid year, particularly for business borrowers, as a result both of changes in monetary policy and market-driven increases in funding costs for intermediaries. Depending on conditions in wholesale markets in the near term, some further rise in rates charged to borrowers may yet occur. These developments will help to contain private demand over the period ahead.

It was a nice way of saying that we at the Bank did not have to do anything to make things more expensive for consumers because the banks will probably do the job for us. And if a little jaw-boning by Mr Swan and Prime Minister Kevin Rudd succeeds in persuading banks to lower their profit margins instead then we can always act in February.