Wayne Swan Says Lifting The Funding Guarantee Would Be An Act Of Madness

Post by NeilMc on June 16, 2009 · Under Australian Economy, banking, home loans, interest rates, mortgages · Comment

Federal Treasure Wayne Swan has suggested that the lifting of the Federal Government guarantee on bank funding simply to teach lenders a lesson for raising interest rates would be an “act of madness”

Last week Australian banking major Commonwealth Bank of Australia (CBA) became the first Big Four lender to raise its interest rates since the Australian central bank the Reserve Bank of Australia began an interest rate easing cycle in September.

During an interview on ABC’s Lateline, Mr. Swan called the move “selfish” branding the rate increase as being unjustified.

“Certainly the action from the Commonwealth Bank, from my point of view, is not justified, and it does counter the economic stimulus or the fiscal stimulus the Commonwealth government is putting in place and the stimulus that comes from the easing of monetary policy by the reserve bank,” Mr. Swan said.

Mr. Swan said that the lifting of the sovereign guarantee which has been in effect since October last year would be an irresponsible response.

“What the bank guarantee does is allow all Australian financial institutions, including the four major banks, to borrow on overseas markets so we can have credit flowing through this economy,” he said.

“To take it away would be an act of madness.”

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