Interest rate hikes 'were necessary'

The decisions of the Reserve Bank (RBA) and Commonwealth Bank (CBA) to raise interest rates yesterday (November 2nd) were necessary for promoting economic stability and growth, one commentator has claimed.

Terry McCrann of the Herald Sun argued that while neither rate move would have been widely welcome among politicians, the public and the media, Australians should be grateful that the decisions were taken by central and commercial bankers respectively.

Turning to the RBA's decision to raise the official cash rate by 25 basis points to 4.75 per cent, he suggested this was prudent in light of the country's current, unprecedented commodity boom.

"This is pouring a tsunami of money into the country, and along with it sparking the mother of all investment booms," said Mr McCrann.

"Mr Stevens [RBA governor] has embarked on raising rates into this income and spending wave so as to avoid a runaway inflationary boom and inevitable bust; crucially to build sustainable strong growth."

Meanwhile, the writer claimed that CBA's decision to raise its standard mortgage rate by 45 basis points would serve to relieve the pressure on the RBA to hike again in December while also allowing CBA to continue lending at a rate it feels comfortable with.

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