Mortgage rate rise makes Australian Government defensive

The Reserve Bank of Australia this week put the cash rate up 0.25 per cent to 6.5 per cent.
As mortgage interest rates jump to 6.5pc the Federal Government has tried to cover its political difficulty over today's interest rate rise by accusing Kevin Rudd of being a Liberal.
As soon as the Reserve Bank of Australia (RBA) announced the fifth interest rate rise since the last election the Opposition started making political capital.
In Question Time Kevin Rudd reminded the Prime Minister of the 2004 Liberal Party advertisement promising to keep interest rates at record lows.
"What does the Prime Minister regret most, making the promise or breaking it?" Mr Rudd said.
Mr Howard distanced himself from the advertisement, saying he did not personally make that claim.
"The most definitive thing I said in the election campaign of 2004 was in answer to a question from Neil Mitchell - 'so you wouldn't be embarrassed to win the election and then to have an interest rate rise?', answer: well I don't seek to give guarantees/judgements about individual movements - my argument is that they will always be lower under our policies," Mr Howard said.
Treasurer Peter Costello hit back at Mr Rudd by mocking his claim to be a fiscal conservative.
"We have a leader of the Opposition whose dearest wish is to be a Liberal," Mr Costello said.
The Government says despite today's rise, rates are lower than the average under Labor.
Another rise tipped
It was the unexpectedly high June quarter Consumer Price Index (CPI) that sealed the case for higher interest rates, amid buoyant economic activity.
In raising the cash rate to 6.5 per cent, the RBA also played down the impact on the global economy of credit market problems in the US.
Pricing on local credit markets indicates a belief the central bank could move again by the end of the year.
The chief economist of nabCapital, Rob Henderson, agrees it is a risk.
"Possibly they need a more restrictive monetary policy setting than they have now," he said.
"But I don't think they'll know that until into 2008, or possibly very very late in this year."
Industry, union response
The Australian Chamber of Commerce and Industry (ACCI) says it hopes the increase will forestall the need for any more adjustments for the next year at least.
ACCI chief executive Peter Hendy doubts the rate rise will affect business confidence levels.
"We only yesterday put out our business expectation survey for the last quarter," he said.
"It had the highest business confidence levels for eight years and in fact, plant and equipment investment prospects were the highest for 14 years.
"Ironically, they're increasing interest rates because the economy is going so strongly.
But Australian Council of Trade Unions (ACTU) president Sharan Burrow says the rate rise makes today a frightening day for families.
"Working families know that the IR (industrial relations) laws already take away their job security, their income security," she said.
"This increased debt on top of everything else is just going to make people very frightened."
Housing affordability
Meanwhile, the National Affordable Housing Summit chairman says house prices across Australia are increasing at an unacceptable rate.
Professor Julian Disney says the figures are not surprising.
"They're just illustrating how low the manic boom of a few years ago has slowed down," he said.
"Prices are still going up much faster than is acceptable and a lot of people are going to be overcommitting themselves."
Source: ABC