Rate rise ‘a stitch in time’
The Reserve Bank of Australia is a near certainty to raise interest rates next month after annual inflation came in at 3.9 per cent this week.
While not advocating an increase, Mr Howard said a smaller rise now may help to prevent a bigger rate hike in the future.
“It’s a question of the old saying `a stitch in time saves nine’, that could well be the philosophy of the Reserve Bank and if it does, it would be hard to criticise it.”
He said “What you have to consider is that if you don’t have an interest rate rise then it is possible there will be a further boost in inflation because of the strength of the economy and a bigger rise might be needed further down the track to contain the inflation.”
“That is not in anybody’s interest.”
While he did not like rate rises, Mr Howard said that outside the farm sector, Australia had a “very strong, even exuberant economy” and all that activity had produced some inflationary pressure.
“The Reserve Bank may well say that the best thing it can do for Australia is dampen that inflationary exuberance a little now, rather than to let it run and if it does it may have to lift interest rates by a much bigger amount in order to dampen inflation.”
Opposition hits out
Opposition leader, Kim Beazley said the Prime Minister promised Australians this would not happen.
“He made the promises and he is to blame,” he said.
Mr Beazley accused the Government of being out of touch with mortgage holders.
“You whack another rate rise on, on top of the ones that are already there, and what you are talking about for many Australians will be breaking the camel’s back, ” he said.