Interest rate increases prompt criticism of new Australian treasurer

January 13, 2008 Australia's Opposition Party laid blame for recent interest rate increases at the feet of new federal treasurer Wayne Swan. Swan, in turn, criticised the banks, saying they risk being "judged very harshly" if they "try to take advantage of the U.S. sub-prime crisis by lifting interest rates excessively."

Following the National Australia Bank (NAB) lifting its rates 0.12 percent independently of the Reserve Bank of Australia, Swan consulted with Australian Prudential Regulation Authority (APRA), which monitors bank liquidity, and was advised that rises of around 0.1 percent were reasonable.

However, following his moderate response to NAB's rise, ANZ Bank announced a 0.2% rise, prompting Swan's warning. Since then other banks, including Westpac, BankWest and Bendigo Bank, have announced rises between 0.1 and 0.2 percent, while St.George Bank lifted its rates by 0.2 percent.

Former Howard government treasurer Peter Costello criticised Swan as inexperienced, saying, "They've taken the opportunity of a new treasurer who is not on top of the job to increase their margins, and he came out and, on behalf of the Labor Party, he approved it." While opposition treasury spokesman, Malcolm Turnbull claimed the treasurer was "all over the shop."

HSBC chief economist Dr John Edwards said, "It is all a learning experience for him but it is very difficult to say anything that is less than critical about the banks. The ANZ was the real lesson for Swan because they betrayed his belief, which was probably well informed, the banks would be reasonable and keep any rise to about the level imposed by the NAB."