Aust Treasurer has message for banks

CANBERRA - Treasurer Wayne Swan says the latest interest rate rise is cold comfort for families and business but is the reality of a strengthening economy.

Swan said the 25 basis points rise was taking interest rates to more normal levels.

"I know that is cold comfort for a lot of families and a lot of people in businesses," he said. "But that is the reality of a strengthening economy."

However, he warned the banks not to jack up their interest rates beyond the amount decided on by the Reserve Bank.

Swan said rates were still lower than they were before the global recession.

Someone with a A$300,000 mortgage was still paying A$500 less a month or A$6000 less a year, he said.

Swan pointed out that the 4.25 per cent cash rate - following the RBA's latest rate move - was identical to early 2002, before rates were increased 10 consecutive times during the Howard government era.

"Rates are now at the level that they were when the Liberal Party imposed on Australia 10 rate rises in a row, so rates are still at historically low levels," he said. "The Government understands how tough it can be for someone who is a first-home owner."

Swan sent out a warning to the banks. "There would be no justification whatsoever for any bank to move up and above this cash rate increase decided by the independent Reserve Bank," he said. "If any bank did that, that would be arrogant in the extreme and it would not be justified."

- AAP