The Reserve Bank of Australia's decision to lift the official cash rate has caused surprise and dismay from various lobby groups, with one from WA saying the central bank has acted too hastily.
The Reserve Bank of Australia's decision to lift the official cash rate has caused surprise and dismay from various lobby groups, with one from WA saying the central bank has acted too hastily.
Earlier today, the RBA lifted the official rate by 25 basis points to 3.25 per cent, making Australia the first western economy in the world to lift interest rates.
It is the first rate rise since March last year.
Most economists were expecting the cash rate to stay on hold before an increase later in the year, however some were warning the RBA could move as early as today.
The Chamber of Commerce and Industry WA said it was surprised at RBA's decision.
"CCI is concerned that today's one quarter of one per cent rate rise may damage consumer and business confidence, which has been steadily improving over recent months," it said in a statement.
"While CCI is encouraged that today's decision by the RBA is another vote of confidence in the strength and resilience of the local economy, the WA business community urges it to proceed with caution until further signs of a full and sustainable economic recovery are apparent.
"While there are positive signs emerging that the worst of the global economic slowdown may be behind us, more time is needed before we can declare victory."
Groups from the housing sector say the rate rise will hurt.
"The RBA has put a healthy housing market in jeopardy by lifting official rates," mortgage broker Loan Market Group chief operating officer Dean Rushton said.
He said the economy would have been better prepared if the RBA had begun to raise rates in early 2010.
"It will hurt consumer and business confidence and possibly have an adverse impact on a national housing market, which has so far weathered the global economic downturn," he said.
The Housing Industry Association said the rate increase would do nothing to alleviate the chronic undersupply of new housing in Australia.
"There is a big risk that the increase in official rates will blunt consumer and business confidence that is crucial to the prospects for an economic recovery," HIA chief economist Dr Harley Dale said.
Mortgage Choice said homeowners should prepare for further rate hikes in the next few months.
"Borrowers should prepare themselves for a festive season featuring higher mortgage repayments and know where to look for signs of upcoming interest rate movements," Mortgage Choice corporate affairs manager Kristy Sheppard said.
Financial comparison website ratecity.com.au said the best strategy for borrowers was to start planning for interest rate rises and, if possible, accelerate repayments.
