It’s official, the Reserve Bank has opted to raise interest rates by
one quarter of a percent – defying the predictions of the goodly
majority of economists, analysts and columnists. Here’s how some of the pundits have reacted to the news:

Ross GittinsAge/SMH columnist
“The situation is not that inflation is really
taking off, but that… we’ve really
run out of spare capacity. And so the Reserve is understandably a bit
sensitive… (Now) the Reserve Bank will be playing it by ear… it will be waiting
for the reaction. It’s trying to change people’s behaviour. If it makes people
more cautious about their spending, (it) will be pleased.”

Paul Edwards
ANZ’s head of group media
relations
It’s inevitable that there’s going to be a flow-on
to lending rates. But the effect on mortgage holders should be
manageable.

Scott
Haslem
– UBS chief economist
Not entirely unexpected, given the recent run of
stronger global and domestic data and
the RBA’s likely limited tolerance for
above-trend growth. UBS expects rates to be
on hold for the rest of the year.

Tony Pearson – ANZ head of Australian
economics
Occurred sooner than he
expected, but was necessary to contain medium term inflationary pressures.

Simon Tennent – Housing Industry Association executive director
“The housing industry is just recovering from a lengthy downturn in
activity and this rise will serve little purpose other than undermining
confidence within the industry and unnecessarily punishing mortgagees.”

Peter Jones – Master Builders Australia chief economist

“The RBA’s high risk
strategy will not only inflict pain on home owners and the building industry
but also the wider economy.”

Michael Blythe
– Commonwealth Bank of Australia
chief economist
Would have been a
tough call, but “(the RBA) could see a case
there for inflation risks … (and) they have taken out some insurance against that.”

Anthony Thompson – Westpac senior economist
“The next move comes down to the trend in the global economy – if the
global economy continues to remain robust then the bank could press on with
further increases.” However, “we think (this rate rise) will allow them to leave rates on hold
for an extended period.”

Su-Lin Ong
RBC Capital Markets
senior economist
“The upbeat news that we’ve seen globally …has added to the statement
today and they’ve also noted the increases in lending and credit
growth… That appears to have been a key reason as well for them
moving.”

Bill Evans – Westpac chief economist

“I wouldn’t expect a major impact (on banks)… They are saying
‘We are going to shrug it off’.”

Alan Oster – National Australia Bank chief economist
“You want to be careful before saying that paying $10 to $15
more a week is going to knock over the economy …That, to me, is
not very likely.”

Craig James
CommSec chief equities economist
“I don’t think it’s going to tip the economy over the
edge… The Reserve Bank probably thought with all
the speculation of higher interest rates that (there was) little point in
delaying it, get it out of the road now… This is now out of the road.”

Peter Fray

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