The Reserve Bank Board increased official interest rates to 3.5 per cent yesterday.
The rate rise was not unexpected as the economy continues on its road to recovery. This 25 basis point increase means an additional $46 a month on a $300,000 home loan.
ANZ announced yesterday that their variable home loan rate will rise to 6.31 per cent as of Monday 9th November, from 6.06 per cent. ANZ also announced that they were raising interest rates on a range of deposit products by 35 basis points.
Federal Treasurer Wayne Swan admitted that the interest rate rise was tough on Australian families and businesses but that it was a warning that rates could not remain at emergency lows.
Mr. Swan also added that no bank should have any justification to increase interest rates over and above the increase in the cash rate delivered by the Reserve Bank.
Glenn Stevens Reserve Bank governor stated that economic growth was likely to be close to trend over the next year and inflation close to the central bank's two to three per cent target.
Last month's interest rate rise together with the Reserve Bank's decision to tighten monetary policy will help ensure sustainable economic growth and keep inflation close to its target.
Yesterday's decision is expected to be part of a series of rate rises as the Reserve Bank goes about "normalizing" its official rate. Economists feel that due to the 25 basis point hike in October and November there is a possibility that we might not have a rise in December before hiking again in February.
The RBA is keener on a higher cash rate than it is on a slower economy. The RBA's main objective is to edge up its policy rate to more normal levels, for starters from an emergency 3 per cent towards a still very low 4 per cent, while doing as little damage to the economy as possible.