Rates must rise says government

Interest rates can not stay low forever said a senior government minister yesterday. Financial Services minister Chris Bowen said he understood Westpac’s decision to push up its fixed-term rates by 0.10 points because those rates were ‘‘largely set by expectations’’ and there were ‘‘signs of increased interest rates and cost of capital around the world’’.

‘Bowen said borrowers must “build into their calculations the possibility of interest rate rises over the medium term, and particularly over the longer term because interest rates are at historically record lows, and they can’t stay that way forever’’.

The Reserve bank of Australia is expected to push rates up by one to 1.5 per cent over the next 18 months. ‘‘As the world … slowly edges towards a recovery then you are going to see a rising cost of capital, rising interest rates,’’ Mr Bowen said in a television interview. ‘‘Fixed term rates tend to reflect that.’’

Source: Sydney Morning Herald