 Rates may rise if banks say so
Home loan rates may rise if banks decide this is the only option in remaining well-run and profitable. Australian Bankers' Association chief executive David Bell says banks will make unpopular decisions if it's for the good of the economy.
Many independent economists believe that Australia is coping with the current global financial crisis better than any other developed nation.
To remain stable and secure and continue to support the Australian economy, jobs, business activity and investment, our banks need to ensure they remain well-run and profitable. This will mean making commercial decisions which are difficult and, at times, unpopular. Home mortgage variable interest rates for Australian borrowers are currently the lowest they have been in 44 years, but the cost of funding required to make these loans remains high.
The IMF is predicting a 1.4 per cent contraction for the Australian economy which compares very favourably with the US economy, which is expected to slide by 3 per cent, and Britain which is expected to contract by 4.1 per cent.
Forecasters and commentators also agree that the stabilty of our banks has played a major part in keeping us out of recession. In the USA and UK many financial institutions have failed. Our banks are open for business, supporting customers and making loans at low interest rates.
In fact, just before the collapse of US investment bank Lehman Brothers in September 2008 (around a year after the global financial crisis started), there were around 20 AA-rated banks in the world. Today, there are just eight and Australia has four of them - not a bad result when our country is just 2 per cent of the world economy.
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