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Interest rate hits 11-year high

Posted November 7, 2007 09:32:00
Updated November 7, 2007 10:58:00

Mortgage crunch time: Rates hit an 11-year high this morning (ABC News: Giulio Saggin)

The Reserve Bank has raised the official interest rate by 0.25 per cent to an 11-year high of 6.75 per cent.

The announcement is the sixth interest rate rise since the last election and is the first-ever rate rise this close to a federal election.

The decision is expected to be a defining point in the final two-and-a-half weeks of the election campaign given the backdrop of the Coalition's pledge in 2004 to keep interest rates at record lows.

In a statement accompanying the decision, Reserve Bank governor Glenn Stevens cited a growing threat of inflation as the Board's key reason.

"Inflation in Australia has increased. Underlying inflation was 0.9 per cent in the September quarter and close to 3 per cent over the past year," he said.

"The annual pace of CPI inflation was lower, but this reflected two very low quarterly results nearly a year ago, as well as recent changes to the treatment of child care costs. By the March quarter of next year, both headline and underlying measures of inflation are likely to be above 3 per cent.

Mr Stevens said the board looked carefully at developments in global financial markets before reaching the decision.

"The world economy is still expected to grow at an above-average pace, however, led by strong growth in China and other parts of Asia. High global commodity prices remain an important source of stimulus to Australian spending and activity.

"In Australia, the tightening in credit conditions resulting from the global turmoil has been less pronounced than elsewhere. Wholesale funding costs have risen a little compared with official rates, and some borrowers have experienced an increase in interest costs as a result, but the flow of credit to sound borrowers does not appear to have been impaired."

The Australian dollar has jumped higher in response to the interest rate decision. A short time ago, it was being quoted at 93.08 US cents, which is up almost three-tenths of a cent.

Political fallout

Opposition Leader Kevin Rudd has told Southern Cross Radio the Government has added to the pressure on interest rates by failing to act in key areas.

"A core concern in shaping future interest rates is inflation," he said.

"Then you go on to the question of what determines inflation. And when it comes to the Reserve Bank's 20 warnings in recent years for the Government to do more when it comes to investment in skills in the economy, then that's basically the warning which the Government has ignored."

Coalition frontbencher Andrew Robb says despite the rate rise, voters will recognise it is the Coalition that has the experience to steer Australia through tough economic times.

"What Australia can't survive would be the wages breakout and then the interest rate breakout that would inevitably occur under Labor's industrial relation policy," he said.

"That is a real issue that is emerging as we talk about interest rates today and no doubt through the rest of the campaign."

Earlier, the Housing Industry Association warned that another rate rise will cripple Australian households who are already suffering under mortgage repayment stress.

Association chief economist Harley Dale said it would have undoubtedly been a difficult decision for the RBA to make.

"They're raising interest rates at a time when we have record low levels of housing affordability and a large number of households are financially in a stressful situation, in terms of meeting their mortgage repayments," he said.

Tags: business-economics-and-finance, consumer-finance, economic-trends, government-and-politics, elections, federal-government, federal-election-2007, australia

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Comments (192)

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Jo:

07 Nov 2007 11:23:13am

Is it just coincidence that rates have risen more often since the workchoices were forced upon us than they did before? I think not!

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Jacky B:

07 Nov 2007 11:20:27am

I accept "world" factors and "drought" factors are contributing to higher interest rates. What I want to know is why things were not done to cushion this impact - and I would also like to know what H&C plan to do about it to stop it further spiraling. All I am hearing is "it would be worse under labor". That is not a plan, it's a cop out.

regardless of "official" inflation my weekly groceries have gone up by around 25%, fuel has risen about 40% since last election (remember when we were mad it it reaching $1.00/L). and now due to the IR policies we had to have, I miss out on penalties which has reduced by wage by 15%.

I am being hurt by these great economic managers...so I think I'll give someone else a go. I cant just keep going on like this, even if things don;t improve, at least the other team will give it a go instead of just resting on hurtful laurels.

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Andrew:

07 Nov 2007 11:20:19am

Or if you want a history lesson,

Chart 1: RBA Home Loan Interest Rates
http://www.aph.gov.au/library/pubs/BN/2007-08/Home_Loan_Interest_Rates.htm

Of course you could vote for another recession we have to have.

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Tim:

07 Nov 2007 11:19:40am

Bottom line, Howard promised to keep interest rates at record lows, and he has failed in this promise. As a young new home owner, this will contine to squeze the budget of my family, particularily when combined with rising costs of childcare.

This completely puts both parties on the level concerning economic management in my view, there are many aspects to a good economy and clearly the coaltion has been missing some of them.

I say its time for someone else to give this a go, bring on a change.

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Graeme:

07 Nov 2007 11:16:14am

I work for one of the major banks, have done for over 30 years and we we assess a home loan application we sensitize a borrowers capacity to service the borrowing at a rate 1.5% above the prevailing home loan rate at the time, for business this is 2.25% above the prevailing rate.

This gives an indication of a borrowers capacity to absorb an interest rate rise.

Therefore in isolation a 0.25% rate rate rise should not be the end of the world.

Where problems come is what the borrower has done since the time of their original application. I have seen it time and time again where they have gone ahead and taken on additional committments eg pay TV @ $100pm, broadband cost, mobile phone accounts they can't jump over and the GE card to get that wonderful "interest free" plasma TV.

People are committing beyond what they can afford - after they have taken out their home loan and we cannot be blaming the Howard Government for that.

However, if Rudd is given the chance, matters will only get worse, particularly if the unemployment rate rises.

Do not take a risk with him.

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Eric:

07 Nov 2007 11:14:19am

Howards inability to manage the economy is reminiscent of his term as Treasurer, when he failed to modernise the Australian Economy. It took Keating as Treasurer to bring Australia into the todays world. The Howards mantra of being good economic managers is a con; the words are easy what takes real courage is actually doing what needs to be done. What Australia needs is a new management, it is long overdue!

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Andrew:

07 Nov 2007 11:12:11am

http://www.rba.gov.au/Statistics/cashrate_target.html

Enough said

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G:

07 Nov 2007 11:11:37am

I don't own a house, I own investments.
This is great news!

A smirk crosses my face for all the pretentious 20-somethings who, 5 years ago, thought they were massing a property empire and attempted to waggle it in my face as 'the way to go.

Glad I didn't, and now your increased mortgage repayments are funding my holidays.

I guess all you kids with mortgages that you'll have until your mid 60's are gonna think harder about who you vote for this time round...

just a further note: I'm even MORE unclear why I need to buy a house. The majority of families in say, Europe, don't buy houses much at all - they all rent.

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Robert Boyce:

07 Nov 2007 11:10:44am

Funny thing but this is one time ME TOO can't say me too to 6.75%. He remembers the 17%, So do we Kev.

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alister:

07 Nov 2007 11:10:01am

The rise in interest rates is another UNDESERVED PENALTY on pensioners and very low income workers. Consider this:-

we do not travel, we do not buy cars over $3000, we buy only basic food and occassional cheap clothing; we do not go to major sporting or entertainment events. Our biggest 'outing' each fortnight is to a shopping mall mostly using public transport. We cannot replace home appliances, lawn mowers etc, without a huge financial savings effort.

In short, we have not, do not, and will not contribute in the least to monetary inflation. Why therefore must we pay for the whims of the rich who purchase vehicles worth 1000's more dollars than are necessary, indulge in multi dwelling purchases, and expend money unnessarily on luxury imported goods?

Very strange that not a single comment on this monetary factor has been made so far: well perhaps not considering that the politicians most certainly would not have personal knowledge of the problem.

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Hrcules Brabazon:

07 Nov 2007 11:09:13am

Paper Houses Paper Houses. Kindly corrrect me as to why Howard and Costello introduced the famous' First Home Buyers' Scheme? Was it
A. Out of the Kindness of their hearts?
B. To sooth nerves in the building industry in the wake of the intro. of the GST
C. A nice fiddle for Banking sector to flood the market with gazillions in easy credit.
ANS. B & C.
Kids taking up the 'no deposit' house and land package, and simply using the FHBG as deposit, have no understanding of that one post war principle that your mum Mona would have drummed into you as a kid, Mr Howard, that is 'save save save', and in the process of saving learn a a little fiscal restraint. Isn't it a pity that you didn't listen to your dear old mum! Tsk Tsk tsk.

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Mike:

07 Nov 2007 11:08:29am

John Howard the "master puppet " falls on his face again.
His government has no control over interest rates.
All their statements are lies, lies more lies.
In truth the interest rate rise as Andrew Robb this morning had to acknowledge on ABC radio is not controlled by the government at all -its controlled by an independent authority the Reserve Bank.
There are no cotton threads connected to the Reserve back
- IT IS INDEPENDENT

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Stevo:

07 Nov 2007 11:06:27am

A decent size wages breakout would help all those struggling with debt. I'm suprised it hasn't happened given the resources boom and the skills shortage. Oh thats right, WorkChoices. You have the choice to work for less, illegal to strike. you have the Workchoice to remain silent.... bye bye little johnnie

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Tony:

07 Nov 2007 11:06:00am

I've read some of the posts by people on here and am disgusted at the "give no crap" attitude by some. Its just to easy to be so simplistic.

The home affordability problem is caused by a number of factors.

In the 1980s when the worlds economy was exploding and rates went through the roof, banks lent up to 90 percent of the value of a property and we had to scrimp and save for that elusive deposit on a house. Today, banks lend up to 110 percent.. Not a typo... 110% Meaning that those who qualify dont need a deposit or evidence of saving. Granted the criteria is strict, but no loans manager meeting targets is going to knock back too many. So now we have young buyers being told they qualify for a loan that would be totally out of reach.

OK.. One could argue that noone's foricing anyone to take out such a big loan and they should buy within their means... Enter the Builder and Developer!

The young couple cant afford an established home close to the city so they look further out. And they keep going... and going until theyre 45-50kms out of the city. They find a lovely estate with a lake that wasnt there last week and oh look, ducks!!

The developer is there with the sausage sizzle and face painting for the kiddies selling blocks the size of postage stamps for 200,000 dollars. But look at that lake isnt it pretty?
And to prevent "riff raff" from building here, theyve thrown in some covenanats to ensure the streets look nice such as minimum house sizes, limited selection of material types and even colors, rules on landscaping and concreting.

So now the young couple are face with building a home no less than 23sqs, with this kind of bricks, steel roof and fencing and a rule that stipulates all frotn gardens must be completed within six months of moving in to an area which eventually promises schools and shops. But it has a lake.

In comes the builder... Yes they can build this house to the developers covenants but if you need carpets and tiles to walk on it will cost you so an extra 5 grand. But you do have an alfresco overlooking that lake or a theatre room, with four bedrooms and a study.

Wow lucky that nice bank person said we can borrow so much. We're going to need it. And thanks to Hr Howard splurging on baby bonuses instaed of child care centres and home owners grants, we can just afford to buy that place.

Gone are the days when young people can build a small house with sheets for temporary curtains and use it as a foot in the door. In order to do that they may have to live in the country but fat lot of good that is if they work in town. The petrol prices will see that cant happen.

We've become a society of wannabes and the banks, builders and developers have seized on it and marketed their products to make it so much easier to get our instant dream (just add lake water). Now its all coming back to bite everyone o

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Cloud:

07 Nov 2007 11:04:43am

Interest rate rises are bad news, but unless actions are taken by both parties, the worst will come soon. The more than $30 billion tax cuts will not help those needed at all.

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common sense:

07 Nov 2007 11:04:31am

under a Labor government your house will take longer to build therefore cost more in every aspect. Under a labor government new housing estates will come under alot of union control which will prevent alot of sub contrators (small business) from these sites unless they have paid up membership. I remember how long it used to take to build houses/buildings (strike after strike) under a labor government alot longer than it takes today as most trades people are contractors, under union control we will go back to hourly rates.
Remember a vote for labor is a vote for union control so if you want it good if not, vote any but .

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Diogenies:

07 Nov 2007 11:01:35am

Repeat after me .... 6 rises in a row = 1.5% increase ...
It rose by 2% at a time under Keating (will never forget applying for loan at 11.5% - approved at 13.5% - first repayment (we were building a house) at 17.5%

We just borrowed again to buy elsewhere (move from Stanthorpe to Tweed Heads) the bank offered us 6 times what we wanted. As we remember living on Wheetbix & milk for 3 meals a day we worked out how much we would get from the dole (in case our jobs went phhhttt) and how much we could afford to repay if rates hit 10% & that is what we asked for & found a place to suit.

As for housing affordability - how many of you here smugly tell your friends "my house is now worth x00,000 when I bought 3 years ago it it was only 1/3rd that" & then in the next breath - "don't know how my kids will be afford to a house" - you are part of the problem.

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Mark:

07 Nov 2007 10:57:48am

Who says the liberals are the best managers in tough times they haven't had any to manage! The same old policy response they have always had budget surpluses and pray for growth delivered by someone else rather than focus on sustainable growth which requires spending on infrastructure , services & training (fertile soil)

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Barrie:

07 Nov 2007 10:56:12am

I suspect that Labor will win the election and roll back the industrial relations laws. This will send interest rates back up to the 17.5% we had during the last Labor government. The unions will demand pay rises and their party will oblige by legislating mandatory pay rises. Businesses will fold and then we will fall into a recession - but the government will borrow money to keep the economy going but leave us with a huge deficit that will be paid off by the next Liberal governement. We are in for a tough three years. I think I will move my investments off shore for that three years.

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Bill Williams:

07 Nov 2007 10:56:04am

I'm reading a lot about how much it is to borrow money, with the new rate rise. My wife and I are pensioners and I would like to tell you all about the lack of''interest' the banks have in us savers. The rates have now moved six times but the savings rates have only moved three. So who's winning...THE BANKS!
Yes. We do need to kick out Howard. If we do, let's demand the incoming government do something about the ruthless financial institutions and hit them with a windfall tax; as they do in the UK. That makes them sit up!

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Andrew:

07 Nov 2007 10:55:16am

The reason the RBA is increasing interest rates is that people are spending beyond their means. If we all constrained our spending patterns just a little, the RBA wouldn't need to keep increasing rates. Perhaps a little bit of Japanese conservatism in Australia wouldn't go astray?

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gazza1:

07 Nov 2007 10:52:47am

Lets be fair dinkum - Howard cant keep refering to the Hawke - Keating interest rates and when they rise under his watch say that he has no control over interest rate changes - Hello yes he does its called inflation.
Hawke - Keating inherited double digit inflation ... by who? treaurer Howard and to bry the inflation rate down interest rates had to rise.
Lets not dwell what happened 10-20 years ago lets look to the future .... the Howard govt has not put in the appropriate checks and balances to ensure that the interest rates dont rise.
Interest rates are not the be all end all its the housing afforabilty, Climate change , skills shotage, hospitals , education , and IR we should all be concentrating on in this election.

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Frank:

07 Nov 2007 10:50:26am

All those blue collar workers of Australia who forgot who they were for the last 10 yrs and thought they were some sought of business entrepreneurs all of a sudden and were gonna figure in Johnny's great plans............ YOU'RE GETTING WHAT YOU DESERVE!!!!!!!!!!!!!!

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Lowey:

07 Nov 2007 10:50:14am

Inflation is on the rise and what do both parties do? They give out $30+ billion in tax cuts. Kevin Rudd had a gilt edged opportunity to show some guts and not follow the Howard herd but chose to also offer big tax cuts when the nation is crying out for targeted spending on skills and infrastructure. If only he had resisted that temptation he would have had my vote for sure. Why can't both sides be honest enough to admit that tax cuts equal less Government services/spending the ultimate cost of which will have to be picked up by us the voters. Tax cuts are inflationary and will put further upward pressure on interest rates. Today will not be the end of rising interest rates which ever party wins the election.

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Sean:

07 Nov 2007 10:44:12am

The most fascinating thing about this interest rate rise and the general notion that the Coalition remains the best economic manager is that this doesn't appear to be the central issue on the electorates' mind for this election. Howard was shown by Newspoll today to have twice the rate of support for his economic credentials against Rudd. But this is the interesting point as discussed by the Insiders - Howard continues to out do Rudd when the question is who is the best economic manager - yet Rudd/Labour continues to maintain a lead in the polls that also holds in the marginals. Clearly there is something strange going on here. Today's interest rate rise could work one of 2 ways - some people may get so pissed off that they vote for Rudd whilst other's may get frightened by this rise and stick with who they know, Howard. I tend to think that there will be a canceling out effect so there will be no net gain to either side which therefore still placed Rudd as odds-on favorite for the election.

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Graeme Payne:

07 Nov 2007 10:43:48am

Howard has continually blamed the previous ALP Government for interest rate rises. Now he says that such rises are influenced by outside economic factors. John, you cannot have it both ways - it appears the only interest you have is self interest!!!!

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Luke:

07 Nov 2007 10:43:29am

The rate level is a result of were we are on the economic cycle (late boom) the RBA increases rates to slow spending down and reduce asset speculation.

The rate increases at the end the end (of increases) cause the most pain (and the most effect for the RBA). This may well be the last increase before rates begin dropping in 6-12 months. This will depend on how spending changes and the international economy.

Unfortunatley some households will go to the wall (people that a home purchase was a big ask for), others will adjust spending and make it through to the sunshine.

Which government is better to handle the economic situations? Both parties seem intent on passing money back to the electorate in record ammounts fueling spending. The only potential difference between the two is will the abolition of work choices lead to wage increases which will really lift inflation, causing more severe interest rate increases, the jury is out.

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Ricky:

07 Nov 2007 10:42:00am

No No No, come JOhn Howard and Peter Costello, it is time to take responsibilities, I mean how can you explain cleary that Australian Economy is stronger when public scholls and university are less funded, when working class families are srtuggling to make ends meat, they cant afford to buy a house, htey dont have time to spend with their Kids, child care is even worse, Only NorhtSydney is benefiting and sure agreeing that the econmy is stronger,
I mean australians are not that Dumb man, I just cant wait november 24, we need a change

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Les:

07 Nov 2007 10:40:28am

Howard may not have lied when he stated that he would keep interest rates at record lows.
What he did do though was create an expectation that borrowers could take out housing loans with some certainty that rates would be managed.
It is not possible for most people to borrow for a house without the necessity of imposing tight household budgets due to the high price of housing & the ever increasing percentage of disposable income required to service a housing loan.
One interest rate rise stretches the budget, six makes it almost impossible to manage.
Some of these same borrowers have also had wage cuts imposed on them by stealth under the guise of Work Choices legislation.

These are the people Howard & Costello have betrayed.

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Jon:

07 Nov 2007 10:39:04am

Any comments agreeing or disagreeing that the marginal seat polling actually shows that it is likley that the Liberal Party is likley to be returned, but that John Howard is likley to lose his seat.

It is all very well to harp on about the Government's actions over 11 years which I believe are quite disgusting in many respects including economic mismanagement (particularly loose fiscal management), but the reality is that nearly 50% of the people will actyually vote for them. Remember, Beasley lost with over 50% f the vote. I'm afraid we are heading towards a similar situation.

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common sense:

07 Nov 2007 10:37:18am

It just goes to show how many folk budget for the day not the future. the best thing to happen to me was to be knocked back on $3000 car loan in 1991. It thought me 2 vital life skills don't borrow what you can't afford to pay back and if you want something bad enough save for it,but we live in a must have it today world or else we feel inferior to our neightbour.
interest going up is a bit like the millinium bug that never happened however if rates do touch on 11% then maybe that will bug will bite.

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Marg:

07 Nov 2007 10:33:26am

Let's see if I've got this right.
When interest rates increase under a Liberal Government it's good economic management, but, if interest rates rise under a Labor Government it's not good economic management.
Does John Howard think we are stupid?
Johnny and his boys have and will continue to mislead, misrepresent and lie to get re elected. I'm not buying it.

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Luke:

07 Nov 2007 10:30:35am

How can everyone say interest rates are high 6.75 RBA or 7.9 bank rate are not high rates. 10+ is high 15+ is very high.

A 7% return is your money back in 10+ years if you invest.

Just to much borrowing going on.

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rb:

07 Nov 2007 10:28:55am

When we purchased an average sized home back in 1971, the cost was about 2-3 times the yearly average wage.

These days an "average house" costs about 6-7 times the "average wage"!

Any rise in the interest rates make the purchase of homes more difficult, however, it is the overall cost that makes home ownership an impossible dream.

The ridiculous cost of land, government taxes, bank insurance fees, etc, etc are the main reasons behind the non-affordability of housing these days.

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Stevo:

07 Nov 2007 10:26:33am

The real impact of inflation is still yet to be felt. Oil prices, not policy, is driving inflation all over the world. Governments are going to need to use a tool other than interest rates to try and check it. Raising interest rates won't dent inflation once oil prices really push it hard. This situation last happened in the 70s. Roaring inflation, HUGE wages breakout, our exporters took a hammering but individuals in debt ie mortgages, saw the value of their debt disappear. So what do you do? It depends on who you are. Some win, some lose and so the beat goes on.

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Barry:

07 Nov 2007 10:25:39am

Two points. I would love to see a proper economist's analysis of interest rate changes between Australia and other leading countries in OECD over the past 30 years and especially since the floating of the Aussie dollar. Australia's interest rate currently is about 4% higher than other countries so we might not be going so well.

I suspect that the year long campaign by Howard ramping up the economy, the Budget tax cuts in July, freebies to oldies etc at end of June would have fanned the inflation rate at a crucial time. Together with the knowledge that the drought would have an impact on inflation, this is incompetence in my mind.

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rmj:

07 Nov 2007 10:25:05am

Record low housing affordability!
Interest rate rise after interest rate rise.
Are we now suffering the highest interest rates in the developed world?
AUSTRALIAN FAMILIES HAVE NEVER HAD IT SO GOOD!
Buy buy johnnie

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Udo:

07 Nov 2007 10:24:49am

if people chose need instead of greed we wouldn't have this problem ...... buy the house you need not the one the Jones's dictate ...... remember that $30,000 car is only $5000 of car with $25,000 of ego try rating that expensive big house like that

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VMc:

07 Nov 2007 10:24:26am

I can't believe a government would want an interest rate rise this close to an election. Therefore who realy runs the economy? In which case does it matter which party governs?

This can and will only hurt people struggling to find the monthly payment for their mortgage. No-one else!! Sorry, of course it hurts the current government too. But not where it counts on a daily basis.

I can't see how this interest rate increase will stem the flow of money exiting Australia with the purchase of foreign goods due to the current strong Aussi $. As those trying to find mortgage repayments don't have money to spare for spending on anything other than essentials.

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tim hoff:

07 Nov 2007 10:23:43am

Well I fixed my rate for 3 years as soon as Labor got ahead in the polls so I don't give a rats.

Personally I think a rate rise is just a contributor to inflation and the RB Gurus are dead wrong.

If the RB is not carefull they will create their own little mortgage crisis to rival the Yanks at this rate.

Consumer spending has been on the march for alot longer than underlying inflation has been on the rise? As long as production keeps up with demand their shouldn't be any major inflation dramas unless outside factors like oil prices, cyclones, Trade Unions and now THE RB conspire to increase business costs.

Hey RB Gurus your consistent rate rises are just being passed on to prices so it's no bloody wonder inflation is on the rise you bone heads.

Good luck to all you "True Belivers" that think that the business bashing social policies of a Labor Govt will bring down inflation.

My advice to you is if you haven't fixed your rate, do it now and for at least 3 years.

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sillyfilly:

07 Nov 2007 10:23:14am

Well, another bonus for the "Howard battlers": another interest rate rise, home afforability out the window, underlying inflation at the top end of the RBA range, workchoices undermining wage relativity for most of the population: Australian families have never been better off: or as Minister Abbott would say "Bull----"!!

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Schadenfreude:

07 Nov 2007 10:22:04am

I'm willing to bet most of you whingers here are at the top of your affordable interest rate level setting...

Now it'll be time for you to sell because you can't afford it... or the bank will take it over...

Then itll be time for me to jump in and buy my first place for a song and have a budgeted interest rate rise of at least 5%.

All you people that thought interest rates would sit at 6% for 25 years really are silly and deserve no sympathy.

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weev:

07 Nov 2007 10:19:54am

It's bedazzling hearing the Liberal spin.

My favourite is 'interest rates will always be lower under a Coalition Govt' - a statement that can never be proven wrong.

So far in the election campaign they have changed tack almost weekly looking to find something that will stick. But their lawyers tongues are starting to let them down.

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Jimmy:

07 Nov 2007 10:19:07am

The baseball bats are out johnny!

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brian:

07 Nov 2007 10:18:24am

Unfortunately for John Howard his policies have not changed since he was treasurer in the Frazer govt in the early 80,s when there were record interest rates and a wages explosion that we have not seen since.So as we enter the bad times again what guarantee is there that these events wont re occur.
He has allowed a skills shortage and depleted national infrastructure to be the hallmarks of his government. The claim that they could manage Australia during hard times is hollow.

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buttercup:

07 Nov 2007 10:18:23am

Peter Costello has consistently harped that Labor are bad managers, however, this latest interest rate coupled with John Howards "gift" of $3 million dollars to Bennelong just smacks of "we know better than you".
If Costello and Howard had got it right, then they would have taken decisive action (and they were warned about interest rates rising from the Reserve Bank time and time again) to keep things under control. Its obvious that they ignored the Reserve Banks advice and now people struggling to pay their mortage and live will stuggle even more.
No comments about people living beyond their means thanks, when they started paying their mortgages 11 years ago the interest rate was not what it was announced today and their was sufficient extra in their income for them to live properly.
No thanks to Howard either for Work Place Agreements which saw lots of people lose overtime and pay making life a bit harder too.
Now we should brace ourselves for the backlash of Liberal Party Members adding comments telling us how wrong we are to feel like this..........after all "we have never been better off".

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rake:

07 Nov 2007 10:17:48am

So what happens to all those people who over-extended themselves for a loan that they can not budget for because John Howard - the pied-piper of spin - said that loans would be kept down ....and these people believed him.? S it's ok for these people to be discarded on the scrap-heap of broken electoral promises - fodder for a 'must win at all costs' attitude.

If we vote in in unethical politicians ... we have to live with the consequences.

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Charles:

07 Nov 2007 10:16:34am

This puts paid to the myth that Howard's Heroes are any sort of decent economic managers.
Having claimed they would keep rates low and still banging on about "who do you trust?" during this election, exposes the rampant hypocrisy underlying Howard's Liberal government.

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Kev:

07 Nov 2007 10:15:35am

When are people going to STOP worrying about an economy that is basically controlled offshore?
There are much more important issues to decide, SOCIAL issues, WATER, energy, equity. We should be deciding this election on these issues.
WAKEUP or we will all be living with nuclear reactors powering Australia instead of solar panels, and trying to avoid leukaemia clusters when buying properties instead of bad schools. There is more to life than MONEY much, much more.

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Matty B:

07 Nov 2007 10:11:40am

Everyone knows that the RBA rises rates to curb inflation. There's only one real reason why we have inflation though..... Because the centrally controlled banks (eg. US Fed, Bank of England, RBA) are legally allowed to practice "fractional reserve lending". This allows them to lend approximately 10 times more than what they actually hold in reserve. Therefore the money supply is easily able to outgrow GDP (or real wealth) making every dollar we own worth less.
Don't believe me? ........ Google it!

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Frank Crawford:

07 Nov 2007 10:10:06am

I hope the comments about the Libs being home and hosed are just wishful thinking on your part, why would anyone reward this Prime Minister with anything other than "The Grand Order of The Boot"? He has taken political lying to another level throughout his tenure, refuses to take responsibility for anything that happens on his watch, I ask the question if he did not know about all the disasters that have visited his government, then why not? Who has their finger on the pulse? Goodbye Mr Howard.

Agree (2) Alert moderator
will:

07 Nov 2007 10:09:59am

Johnny,

stop treating ur fellow citizens as an eco idiot!
stop making those unreasonable promises ,

i don't see how has our eco improved when we all have to pay more and more for our living, while wage stays the same. however, the wage and inflation are also killing a lot of small business.

John Howard, stop telling lies!

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pc:

07 Nov 2007 10:09:19am

Are these the rate rises we had to have. After years of economic neglect, the chickens are coming home to rest for the economic managers! You can't just ride the wave generated by Hawk and Keating and ignore the real economic reforms started back then which needed to be built on. Howard and Costello may be good at creating surpluses, by fiddling the books, introducing new taxes and returning IR back 100years, but hogging cash out of the economy for their own political future is their greatest neglect. Investment in our future and neglecting all of us and our needs is a disgrace. except at election time of course. As always those that suffer are those that can't defend themselves. This and the other rate rises show us how close the economy is poised and does the coalition really understand the economy and how to create it rather than manage it.

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Christos:

07 Nov 2007 10:08:03am

Hopefully, gullible voters will recognise their folly in accepting Honest John's claim prior to the 2004 election that only he could control interest rates. Australia is a follower of world trends and our politicians do little to influence our macro economics. Ross Gittins has a good article in today's SMH on this topic as it refers to wild claims made by treasurers. The right wing American style politics of Howard's government makes us a candidate for statehood in George Bush's USA. I don't agree with trying to retain Australian ockerism but I'd prefer that we evolve a character of our own rather than an adopted one from abroad.

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Burnie82:

07 Nov 2007 10:07:32am

Prior to the RBA announcement, Peter Costello repeatedly mentioned the ongoing drought as a contributing factor to rate rises.

And yet the current Government continues to believe that the issue of the environment does not hold the Australian economy in the palm of its hand. When on earth is this Government going to act on the looming threat of global warming on Australia?

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Jason Griffiths:

07 Nov 2007 10:07:18am

All though the interest rate has increased yet again, I would suggest that homebuyers take into consideration further possible interest rate increases prior to committing themselves to a home loan. that way, should further increases occur, homebuyers would better positioned to absorb the rate rises into their current budget.
Their is nothing worse than losing your precious home through poor financial mangement and planning. Plan and research your financial position carefully, if neccessary contact an accountant. The small investment in advice is well worth the saving in the long run.

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rmj:

07 Nov 2007 10:05:58am

Who do you trust?
This governments fraudulent claims on economic management ability need to be exposed.
They signed a RESTRICTED trade deal with America that currently looses 15 BILLION dollars per annum.
They sold the goose that laid the golden egg when they sold Telstra. Now BILLIONS of dollars of profit that used to go into the Australian economy go overseas (to respectable investors like the Suharto family).
They bought air craft costing BILLIONS that see us loose air superiority in our region.
Yet they are considered good economic managers.
What a sick Joke the media plays upon Australians.
Another 2 interest rate rises are tipped.
Honest john I for one do not trust you and I believe that if Australians really knew what was going on very few others would either!

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Bill:

07 Nov 2007 10:03:44am

It is funny, but looking at the figures (not listening to political rhetoric), every time the libs are in, interest rates start to rise, every time labor gets in, they start coming down. I don't argue that rates weren't high under labor but just like now, it was the libs that sent them in that direction.

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ahill:

07 Nov 2007 10:00:35am

Housing affordability hits record LOWS and the Liberals say they should be voted back in. Anyone remember the story of the Emperor's new clothes - I just cannot believe that voters would fall for Howard's incredible spin on this.

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Sammy:

07 Nov 2007 10:00:14am

Does the man Howard and the Liberal party have NO SHAME.
If you listen to their retoric it is everyone elses fault that the independent RBA had to lift rates. Then you have the die hard supporters decrying that if the plebs did't put themselves in such debt it would be a problem.
To use a previous Liberal party ad. SHAME, SHAME, SHAME: the guilty party.
For the Family first partywhich supports the Liberal party in most economic princilpes: Sow and ye shall reap.
Look at the direction of interest rates since 2000. Those terrible labor ministers they still control the economy 5 years after they were booted out of power.
THEY ARE ONLY HEADING IN ONE DIRECTION and Costello has no clue how to stop them.... if he couldn't do it in an election year when will he.
Who will handle this crisis better? The one that will offer the greatest number of bribes or the party who scare the punters the most.
Great choice.
I say... why not let Downer take over as treasurer!!!!!!! Ha
Be scared Australia, be very scared.

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Matty T:

07 Nov 2007 9:59:59am

Is it a deliberate policy of the Howard government to reduce housing affordability to the lowest post-war levels (and are therefore strong, but evil, economic managers), or have they been asleep at the wheel (and have absolutely no idea or control of the economy)?

Seems to me they don't know what they are doing.

It can't be a deliberate policy to turn us all into wage-slaves, can it?

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Mark:

07 Nov 2007 9:56:36am

Until someone does something to reduce the spending within the retail sector that involves "interest free" and "buy now, pay later" then interest rate rises will have little impact. The issue is that interest rate rises have no effect if you can buy a product without paying for it there and then. The big problem will come in 18 to 48 months when payment for these electrical and home furnishing products becomes due.
The government should outlaw these type of retail deals to slow down spending.

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Richard:

07 Nov 2007 9:55:51am

This government is well and truly on the nose. How can John Howard, on one hand, rail against Keating's high inflation and on the other blithely dismiss six interest rates as being out of his control.

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Rex:

07 Nov 2007 9:55:45am

Another interest rate rise under the Howard stewardship. If the coalition government cannot keep interest rates down in good times, how the hell can they claim to be the only party capable of keeping them down in bad times? Yet this is the utterly ludicrous argument they will be trying to flog to the Australian electorate in the coming weeks!

Sorry John, it's time to give someone else a hand at the tiller.

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rake:

07 Nov 2007 9:55:38am

I thought I heard Peter Costello admit that one of the factors that's pushing up interst rates is the drought - via it's impact on food prices and lower farm exports.

Given that's accepted, and given that most climatologists now-days say that global warming is exacerbating the exceptional drought, surely it's therefore logical to say that global warming is actually impacting this aspect of the economy as well? Especially since Costello also says the drought is a factor in the interest rate rise.

It looks like a highly probable scenario.

Drought and interest rates are not just a coincidence in this climate changing scenario. Just as insurance rates are rising as climate gets more extreme, there are other flow-on impacts on the economy.

The chickens are coming home to roost, whether some choose to bury their head in the sand or face reality.

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Steve:

07 Nov 2007 9:55:25am

I wonder how much higher interest rates would have been under a Labour Government? History says - much higher!!!

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Alan Deakin:

07 Nov 2007 9:53:11am

I am so sick of the spin the the media and self centred lobby groups keep putting on interest rates. Though I fortunately never experienced the extreme rates of long ago, when I borrowed money for my home I only borrowed what I could afford to pay allowing for up to an additional 5% increase in rates.

Anyone who is stupidly borrowing on the extreme limits of their repayment capabilities without the foresight to factor a couple of percent interest rate rises deserves everything they are now getting.

This is not a problem generated by the Government.

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Heythere:

07 Nov 2007 9:52:50am

Howard says he promised to be better than labour on interest rates. After six rate rises this term - how could labour be worse?

It shows there's more to economic management than just surpluses and tax cuts.

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craig:

07 Nov 2007 9:51:42am

i live within my means...i havent overborrowed unlike twits out there....stop blaming the government for your own mis management of your personal finances !!

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Heythere:

07 Nov 2007 9:50:43am

For everyone remarking at how close it is to an election - if Howard hadn't delayed the election so long so he could keep having the taxpayer funding advertising for the libs, this wouldn't be an issue.

Howard takes credit for the good times but no responsibility for the bad times. He should be more like Peter Beattie and apologise occaisionally.

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Rosalind:

07 Nov 2007 9:50:08am

Well it happened and the timing couldn't be worse for the Govt. Interest rates highest in 11.5 years, couldn't happen to a nicer bunch of imposters. If Howard & Costello try to put a positive spin on how 'we've never been better off' after this latest rise (house prices must be 10 times higher since 1996) then they had better be prepared to eat their words at the ballot box and catfood should be on the menu.

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Competence:

07 Nov 2007 9:49:55am

The government is talking up it experience as its credential. However, we do not need experience; we need competence.

Do they have it? I believe not as evident from Haneef, AWB, WMD, Tampa, Children-overboard, global warming, inability to control inflation, and now when benefits of Keating era have waned continuing rise in the interest rates.

To blame the world economic environment for this rise would be in bad-faith as government had claimed the lower interests in the past on itself.

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Matty T:

07 Nov 2007 9:49:32am

Slightly off topic, but where did the myth of the current government being better economic managers come from?

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Retired:

07 Nov 2007 9:49:19am

About time and don't stop. Increased interest rates are good for self funded retirees who need the low volatility of cash investments.

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banisters_mind:

07 Nov 2007 9:47:57am

So after 11 years of the Howard Administration, interest rates are back to where we started, great...

Agree (1) Alert moderator
Greg:

07 Nov 2007 9:47:20am

A new election slogan for John "Going For Broke".

Thanks,
John

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Chad:

07 Nov 2007 9:46:17am

I cannot believe the Howard government, i.e. Costello and Howard, will still deny all responsibility for this rate rise today. We can barely cover our bills and mortgage now, I am very worried about this latest rise.

And yes, we did allow for a rate rise or two in our budgeting when we borrowed, but we didn't allow for SIX rate rises in a row, with no signs from the Government they will slow their spending to get re-elected.Six rate rises is poor management, clearly they should have been a bit more careful with their tax cuts to the higher income earners, for they are the only ones who can afford to spend it! Thanks, Liberals.

I will be totally FURIOUS when those two clowns come out and deny, deny, deny!

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Peter:

07 Nov 2007 9:46:14am

I am getting older and have more cash in the bank. This is good news for those with cash investments. I can remember when I was getting 14% for my cash investments. Looking forward to those days coming back.

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RAS:

07 Nov 2007 9:46:14am

Since 2004, the interest rate is going up and up - six continuous rate rise with not a single one down. The economists are anticipating more rate rises in the coming months. That clearly demonstrates that Howard's economic policy is not working whatever he claims to fool us.

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C:

07 Nov 2007 9:45:40am

Rising interest rates are a sign of an expanding economy. As they were when interest rates were increasing under Paul Keating's management of the economy.

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Graham:

07 Nov 2007 9:45:29am

I think John Howard now needs to make up his mind - does he run the economy or is it essentially on auto-pilot?

He can not deny responsibility for interest rate rises, and then turn aroundf and say it is essential that his government remain in control of the economy to minimise any adverse impacts.

That is basically what he has begun to say now, and the Opposition and media should not let him get away with it.

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JP:

07 Nov 2007 9:44:15am

I think this will only help the Coalition. As audacious and transparent as it is, I bet that a lot of people will fall for the "You need experience to manage the economy in these challenging times" line.

Agree (1) Alert moderator
happy:

07 Nov 2007 9:41:21am

This is GREAT news for first home buyers!!! So happy!! The more rates go up the more house prices come down. Keep em coming...... One or two more raises and we will start seeing serious discounts on prices. Thanks Jonnie and keep that economy on the boil, WE WANT MORE RISES.

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