Rudd pressures banks

Australia’s new leader, Kevin Rudd, is urging Australia’s banks to not to raise their home loan interest rates.

He was speaking on ABC radio this morning, just hours before he – and other new Labor ministers – drive to Yarralumla  to be sworn into their new posts.

The National Australia Bank, in particular, has warned that its home loan interest rates may have to be raised, to cover the higher costs of funds, incurred as a result of the sub-prime mortgage crisis in the United States.

Mr Rudd acknowledged that Australia’s banks do have a right to raise rates, for commercial reasons.

“That’s a decision for them,” he said.

However he also urged the banks to remember that Australian families are already “under pressure” financially.

“They should be very, very mindful of their customer base,” Mr Rudd said.

This process is known, in financial circles, as “jawboning.”

The main culprits are usually central bank chiefs.

Mr Rudd, though, has set something of a precedent by indulging in a little jawboning even before he officially takes up his new post, as Australia’s 26th Prime Minister.

He was speaking on the eve of the next board meeting, at which Australia’s central bank, the Reserve, will review the nation’s interest rates.

Although the bank’s Governor, Glenn Stevens, is making no secret of the fact that he is worried about Australia’s rising inflation, another rate rise this week is considered unlikely.  That is because the US sub-prime mortgage crisis is already slowing US economic growth.