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Date Published : Monday, February 11, 2008
The recent decision by the Reserve Bank of Australia (RBA) to increase interest rates is not having the desired dampening effect on the economy and is helping the wealthy to continue spending, an industry expert has argued.
Last week, consumers with home loans and savings accounts were affected when the RBA increased the base rate of interest by 0.25 per cent to seven per cent - the third such rise in six months taking rates to their highest levels for 12 years.
In making its decision, the RBA stated increasing inflation and the "tightening of lending standards" were to blame, but this has been rebuffed by the Sydney Chamber of Commerce (SCC).
According the SCC's executive director Patricia Forsythe, the measures are not having the desire effect on the growth of inflation and are, in fact, allowing the wealthier inhabitants of the New South Wales capital to carry on spending.
Ms Forsythe told the Australian: "Sydney has become a two-lane economy. The battlers have been stung by falling house prices and rate rises, but the wealthier regions are still experiencing solid house price growth.
"Only about a third of households have mortgages, so there are many households which aren't directly impacted by rate hikes."
Ms Forsythe's comments were echoed by Retailers Association of Australia chief executive Richard Evans, who suggested the rate rises are affecting those who can least afford it.
"The RBA's interest rate hikes have been a kneejerk reaction ... Once consumers stop spending, you lurch into a recession; small business starts struggling, unemployment starts increasing."
Australian savings accounts compared and reviewed.
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