Swan issues a warning to banks

9 Feb 2010

Scheme withdrawal is no sign for a rate rise

With the announcement coming over the weekend that the federal government’s billion dollar bank guarantee scheme would be phased out until the end of March, the treasurer Wayne Swan has put banks on notice against using the timing to excuse a possible rate rise.

The bank guarantee scheme was put in place during the peak of the global financial crisis to ensure banks security against taking foreign loans to ensure lending. It’s widely accepted that the scheme helped to encourage the economy to rebuild at the rapid rate it did following the economic collapse in 2008.

Mr. Swan has warned banks not to use the lack of a financial safety net as an excuse to raise interest rates beyond the Reserve Bank’s rate, saying that any bank that did so “would incur the wrath not just of the Australian people but of the Australian government”.

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