While horses were whizzing around the track at Melbourne’s Flemington Race Course, The Reserve Bank of Australia issued a shock announcement that it would straddle mortgage holders with an official interest rate rise of 0.25%, bringing it to 4.75%.
Economists had tipped rates to remain steady. However, RBA governor Glenn Stevens said in a statement that:
a larger than expected slowing in Chinese growth have lessenred recently most commodity prices have firmed, after a fall earlier in the year.
The prices most important to Australia remain at very high levels, with the result that the terms of trade are at their highest since the early 1950s. The turmoil in financial markets earlier in the year has abated, though sentiment remains fragile.
The announcement seemed to catch everybody unaware, sending journos the country wide lunging towards their keyboards. The Herald Sun estimates that the rate rise will cost average mortgage-holders an extra $40 a month and “home buyers with $300,000 25-year loans from the bank will pay $88 extra per month.”
Some commentators instantly linked the rise to Joe Hockey’s recent calls for tighter banking regulation (“Hockeynomics”) while others focused on Treasurer Wayne’s Swan’s stinging rebuke of the RBA’s decision.
Here’s an overview of what the pundits had to say:
The Australian
David Uren: Wayne Swan hits ‘cynical’ bank cash grab
The Commonwealth Bank’s shock decision to almost double the RBA’s 25-basis-point rate rise has exposed the banking sector to a fresh round of regulation.
Condemning the Commonwealth’s move as a “cynical cash grab”, Wayne Swan foreshadowed a reform package to foster competition and stop the big four banks from exploiting their market dominance.
The Courier Mail
Michael Madigan: Time to name and shame banks say retailers after latest interest rate rise
Stunned retailers – who had expected the Reserve to hold fire in the lead-up to Christmas – accused the banking sector of “economic terrorism”.
The United Retail Federation said it was preparing a “name and shame” campaign against the banks. URF national president Scott Driscoll said the rise would “kill Christmas 2010” for retailers, consumers and workers.
The Age
Michelle Grattan: ‘Cash grab’ leaves Joe laughing
Joe Hockey, the butt of attacks from the government and some Liberals, was laughing yesterday. Many home borrowers will be cursing Commonwealth Bank, but, whatever the rights or wrongs of its action, in political terms it has justified Hockey’s criticisms of the banks and his calls for more competition.
Peter Martin: Fury over super-sized rate rise
Australia’s biggest bank has humiliated Treasurer Wayne Swan and thumbed its nose at a parliamentary inquiry by lifting its mortgage rates by nearly double yesterday’s surprise 0.25 percentage point increase in the Reserve Bank’s official cash rate.
Sydney Morning Herald
Lenore Taylor: It’s easy to own up to someone else’s problem
Joe Hockey has clinched his interest rates attack. The grand finale came yesterday when he declared the Gillard government and its ”insipidly weak Treasurer” owned the interest rate rises.
He claimed they owned the Reserve Bank rise because they were still spending too much. And they owned additional rises by the big banks because they hadn’t acted to increase competition in the banking sector.
Jessica Irvine: Saddle up for higher interest – and come home strongly in the long run
Fool me once, shame on you. Fool me twice, shame on me.
There could be no better aphorism to describe the thinking behind the Reserve Bank’s decision to lift interest rates despite last week’s tame inflation report.
Courier Mail
Dennis Atkins: Joe Hockey’s blast at banks seems vindicated
Wayne Swan and Joe Hockey will remember Melbourne Cup day 2010 for quite a while regardless of which horse they fancied in the big race.
The Daily Telegraph
Malcolm Farr: Hitting punters for an interest rate sling
The Commonwealth Bank, which once proudly carried the PR shingle of “The People’s Bank’’, sprinted to be first to show it thinks the public can be milked even more. Taxpayer guarantees during the global recession have allowed the bank to hit its taxpaying customers for a further sling.
I listed so some bwanker spin doctor this morning on ABC’s AM.
As a final note in his steaming pile of spin he said that Australian banks were already regulated and that this regulation had been the reason that Australia an its banks did not suffer so much during the GFC.
I interpreted that as meaning that regulating the banks is good for the banks and good for the nation.
Bring on a bit more regulation then I say.
And finally I totally agree with this sentiment
because I certainly am.
I listened to some bwanker … that should read
Does anyone seriously think sledging the banks will have the slightest effect? LittleSwan has been doing this for years and is now widely seen as Wayne the wimp.
A concerted action program is needed including a vigorous investigation of banks’ collusion, more competition like a new government owned bank based in the post office and a super profits tax. If its good enough for the mining industry its good enough for the customer head kicking banks.
The good ol’ commentariat. These pack of knobs would be lucky to pick the winner in a two horse race where one of them is going the wrong way on the wrong day. Let’s face it, economic commentary is guess work disguised as insight and since it is mixed with the usual holier than thou journalistic ego and you get a bunch of arrogant, self righteous dimwits that makes Germaine Greer look sane. These are the same pack of twats that, at the start of the GFC were ridiculing Treasury for their supposed “optimistic forecasts.” There was much arm flapping and frothing at the mouth by certain sections of the commentariat (you know who you are News Ltd) who were predicting much larger deficits and debt and unemployment around 10%. Some of the attacks were quite personal on Ken Henry, questioning his fitness for the job and his competency. Interesting though that with the benefit of hindsight, has any of them actually had the fortitude or humility to apologise to Treasury or Ken personally? Has anyone questioned their competency? At least when the Greens pass judgement on economic matters they are held accountable every 3 years at an election. Most of the commentariat think accountability is spelt with a silent Q or something. Quite frankly I wouldn’t let them forecast the jam donut requirements of the school tuckshop. I can hear them now, “the two speed playground economy has created a fatty shortage in certain parts of the school. That combined with the over supply of poppers has meant that inflationary factors are causing sausage roll prices to rise.” It’s such a shame that they are taking the oxygen that we may need one day.
Sledging the banks certainly has an effect. It enables the rate rises to go ahead and Labor to maintain the perception of the “party for the people.”
The conversation goes something like this.
TREASURER: Just remember to act shocked when I insult you.
CEO: As long as you don’t join this Hugo Chavez-like call for more regulation, you can call us Satan worshippers for all I care.
TREASURER: The public servants are making noises about competition, you know.
CEO: Well you’d know all about that. After all if competition between Labor and Coalition ceases to be meaningful, say over financial policy, then our chief economist, when asked about the economic indicators on TV between the sport and the weather, might forget what the unemployment rate is and reach for some other figure that comes to mind, like the underemployment rate.
TREASURER: Yes, yes, we’ve been through this …
CEO: … It might slip his mind what the government debt level is, just after a meeting in which he’s been discussing the net national debt, 40 per cent of GDP I think, then speaking of GDP growth there’s the total factor productivity which has been falling since 2005, and you know how hard it is to remember which figure the public is more intereste in …
TREASURER: You’ve made your point. But you have to admit we’ve taken care of you. I mean, the retail deposit guarantee in 2008, we gave you a whole month to empty out the non-bank deposits before we extended it to them. We had so many meetings to calibrate the exact level of wholesale borrowing guarantee fees that would price out the riff-raff. The home price boost that enabled you to keep paying dividends – it was touch and go there, what if someone had asked in question time how many jobs it created?
CEO: And we kept our part, we’ve been very flattering throughout the crisis. I hope you’re not suggesting we owe you any favours.
TREASURER: Look, don’t be like that, Ralph. Just remember to act shocked when I call it a “cynical cash grab.”
CEO: (Laughing) That’s fine, I’m OK with “cynical”. Anything beyond that, and you clear it with my PR department first, understood?
TREASURER: Well that’s sorted. Got anything on the races today? …