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Westpac says rates may have to go up

28/10/2009

Westpac chief Gail Kelly says the cost to the bank of funding its lending is still very high and could result in credit rationing. Kelly said Australians need to save more to provide banks with the funds to lend back to them.

"We need to become more self-sufficient in regard to raising our own savings to meet our borrowing needs. As our requirements for borrowing grow relative to how our life savings grow, we may not be able to meet demand."

Kelly, who has not ruled out raising interest rates by more than the Reserve Bank’s moves to the official cash rate, said the cost of wholesale funding is still very high for banks because they are refinancing old wholesale debt with new, higher rate debts.

"So while marginal funding costs are coming down at the moment, the average is still actually going up," she said.

Source: Herald Sun

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