cash rate 25 bps to 3.25%, page-23

While many of you are thinking that Australia will suffer as a result of the rise in rates, it must be said that a country that has rapidly rising house prices is doing okay. The fact that the rates were good enough to get the housing market rise above all expectations just shows that the rates were, and still are too low!

I would say that one of the factors that got the RBA looking deep is the much improved retail sector, with HVN and JBH outperforming the economy. And if the public were really struggling with day to day bills then they would have used that stimulus money to help get by. But no, we saw record sales for plasma and LCD TVs across the nation instead. Hardly a sign of a struggling economy.

Anyway, our bank lenders are supposed to be smart. They would have ensured that the loans given out were modelled on high interest rates down the track. So providing this is the case then we should avert any hardship in the housing sector in the future. Somehow, I just don't see the proof that the mortgage officers were trying too hard to envisage the worst case scenario.

But enough of the sarcasm. The major mistake was to have emergency rates solely on cash rates and home loans, and not business loans. The fact that the economy grew where it can least afford to is a worrying sign. The fact that business expansion did not take place, the fact that debt expansion did take place does not bode well for the future in my book.

Let's hope I'm wrong!