With 2012 tipped as the year when the cash rate in Australia is more likely to fall than rise, consumers carrying debt would ordinarily be thinking about the savings they would make. However, as the banks have and may continue to independently raise rates on lending and move further away from the current RBA policy of easing, consumers and particularly borrowers are annoyed and confused as to why they are being asked to pay higher mortgage rates, and rightly so. Depending on how far the banks decide to go, not only will this have the effect of hurting Australian families and businesses during a climate of soft consumer sentiment, it also has the effect of taking some of the power to pull levers in the economy from the RBA.
Are Australian Banks looking for pass the buck?
Australian banks are said to be amongst the healthiest in the world and yet they have recently taken a policy of raising lending rates. Only this week it was reported that the reason behind the move is pressure on banks by some of their big shareholders. I question whether this announcement is a way for the banks to distance themselves from the blame game that usually erupts in the media when the public takes a dim view of big banks with multi-billion dollar profits raising rates outside of any adjustments by the RBA. Alternatively, to be fair, we need to consider whether their decision to lift rates simply demonstrates the reality of the current economic climate where listed companies are constantly under pressure from major shareholders to perform. Either way, if the banks move rates too far in opposition to the RBA they will be in the firing line of the public and the politicians.
Janine Cox is the Senior Analyst at Wealth Within, a private investment company specialising in managing direct share portfolios through their Individual Managed Account Service. The company is also a government accredited specialist share market educator, where Janine is one of only two lead trainers educating people how to invest and trade the share market. Janine can be contacted at email@example.com or you can visit the website www.wealthwithin.com.au.