The new rate will be 8.57 per cent for borrowers not enjoying a discount, or even more if the banks decide to pass on more than the increase in order to widen their margins.
Betting on the futures market points to a follow-up rise within months - perhaps as soon as Wednesday December 5, the morning after the next Reserve Bank board meeting.
As the board was debating the merits of the increase yesterday a government backbencher Cameron Thompson welcomed the move saying it would centre the election campaign more firmly on economic management...
“People recognise the good economic management of the Howard government and that really is all that is likely to happen tomorrow if there is a rise, that point will be made once again that we are fortunate to have a good strong economic management team,” he told ABC radio.
His comments were downplayed by the Prime Minister John Howard who said he had phoned the member and had told been told that all he had said was that when there was a focus on economic management people saw the capacity of the Government as greater than that of the Opposition.
The Opposition leader Kevin Rudd seized on the comments describing the “absolute political cynicism” of the Liberal Party as “breathtaking”.
“The Government is seeking to make political advantage out of something which obviously hurts working families, and I think that stinks,” he said.
Today’s increase will add an extra $50 to the monthly cost of servicing a $300,000 loan; an extra $67 to the cost of servicing a $400,000 loan.
If as is widely accepted it is followed by another rise - the third in a matter of months – this and the next will combined add $135 to the monthly cost of servicing a $400,000 loan.
The combined effect of all the increases since the last election will be to have been to have pushed up the cost by $460.
At the time of the last hike in August Mr Howard denied that he had ever personally promised during the last campaign to keep rates at record lows, saying it was merely a claim in Liberal Party advertising.
He invited the Leader of the Opposition Mr Rudd to “scour every transcript, and I will make them available, of every interview that I gave during that election campaign and he will find no such commitment.”
Since then the journalist Laurie Oakes has found that Mr Howard did in fact make such a commitment, promising on ABC radio interview two days before the poll to continue “keeping interest rates low, keeping them at 30-year lows.”
The Treasurer yesterday attempted to turn Australia’s first ever pre-election rate rise to his advantage, claiming that rates would climb even higher if Labor won office.
“Its industrial relations policy would heighten inflationary pressure. The Organisation for Economic Cooperation and Development believes it, the International Monetary Fund believes it, all reputable economists believe it,” Mr Costello said.
The Access Economics Investment Monitor released this morning points to further inflationary pressure assessing the value of investment projects in planning as “a staggering” $357 billion”. It says demand for Australian resources from China and India shows no sign of slowing.
Today’s 9.30am announcement will be keenly watched for clues as to how the Reserve Bank sees the months ahead.
