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Australian Treasurer warns banks against raising rates

10-04-2010 11:36 BJT

CANBERRA, Oct. 4 (Xinhua) -- Australian Federal Treasurer Wayne Swan on Monday warned banks that there will not be justification for them to lift rates above the official cash rate, even if the Reserve Bank of Australia (RBA) increases its rates when it meets on Tuesday.

Australian Federal Treasurer Wayne Swan (2nd L) sings Australian national anthem
with ministers during the official swearing-in ceremony at Government House in
Canberra, Australia, Sept. 14, 2010. (Xinhua File Photo)

On Sept. 21, the RBA kept its benchmark cash rate on hold at 4.5 percent since the most recent increase in May.

But economists are predicting a 25 basis point rise when the central bank meets on Tuesday.

According to The Australian newspaper, banks may try to protect their profit margins from wholesale funding costs by announcing additional rises on variable mortgage rates of up to 15 basis points.

Swan said there were issues on the long-term funding profile of banks, but it still did not justify hitting customers with higher interest rates than those of the RBA.

"I don't think there is any justification whatsoever for any bank to move above the official cash rate decision of the Reserve Bank," Swan told ABC Radio on Monday.

"Banks are making healthy profits at the moment, their net interest margins are back above what they were before the global financial crisis."

The RBA has been raising rates for six times since October last year, when cash was at a multi-decade low of 3.0 percent, to May this year.

HSBC's chief economist Paul Bloxham expected that if the central bank does not raise official interest rates at its meeting on Tuesday, it is likely to do so before the end of the year.

Editor:Zhang Jingya |Source: Xinhua

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