 Reserve Bank Chief, Glenn Stevens, has attracted heavy criticism after he declared it was unrealistic to expect bank home loan rates to only move with the official cash rate. While the RBA has lifted the official cash rate three times in the last 5 months, borrowers have been hit with a series of unofficial rate rises by banks, and lending rates now sit well above 9 per cent.
The Reserve Bank board meets on Tuesday but it was widely expected the official cash rate will remain on hold at 7.25 per cent.
Mr Stevens, who said the financial sector was likely to withstand the global credit turmoil, admitted there was now a growing gap between the official cash rate and the cost of lending on the international money market.
Treasurer Wayne Swan did not respond directly to the comments but said he understood how rising interest rates were hurting families. He said the Government had made it easier for people to swap banks. "We believe the community will reward those banks who best shield families from the increased costs of borrowing flowing from the US subprime crisis," Mr Swan said.
Consumer and real estate groups are fearful comments made by the RBA boss will give banks the green light to make further interest rate increases, a move that would hurt many Australian families.
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