Rate rise blow to festive cash | Ipswich News | Local News in Ipswich

THE Reserve Bank has added more to the considerable cost of Christmas spending by raising interest rates to 3.75 per cent – the third increase in the past three months.

Government and business commentators described the move as “heavy-handed” and disagreed with the rosy picture of Australia’s economy painted by Reserve Bank Governor Glenn Stevens.

Mr Stevens said, with the risk of serious economic contraction behind us, the board had moved to gradually lessen monetary stimulus that was put in place when the outlook appeared to be much weaker.

“These material adjustments to the stance of monetary policy will, in the board’s view, work to increase the sustainability of growth in economic activity and keep inflation consistent with the target over the years ahead,” he said.

While one Ipswich businessman described the 25-point rate rise as a “killer for Christmas”, other business operators in the city were less critical.

Owner of Country House, Ruth Booij, said the rate rise was “unnecessary”.

Mrs Booij said she doubted her Christmas spending would be cut as a result of it.

The previous two rises had not affected her gift and homewares business.

“Rate rises haven’t affected consumer confidence,” she said.

Big White furniture store’s Louie Mirallez said yesterday’s rise would probably cause her to review Christmas spending.

“It just makes everything a bit dearer,” she said.

“Business is hard enough as it is, although we haven’t found it too bad in the run-up to Christmas.”

Queensland Treasurer Andrew Fraser said the interest rate rise so close to Christmas would not make life any easier for families.

It is expected to add about $47 a month to repayments on an average $300,000 mortgage, assuming retail banks match the move.

Real Estate Institute of Queensland (REIQ) managing director Dan Molloy said the increase seemed to go against the Reserve’s most recent comments on monetary policy which indicated that only if economic conditions evolved would a gradual adjustment of the cash rate be required over time.

“As there has been no substantial change to the economic forecast since the Reserve’s November meeting, another rate rise just a month later seems a little heavy-handed.

“While it is fair to say economic conditions in Australia haven’t been as dire as previously predicted, unemployment is still at its highest level in nearly eight years.”