The Reserve Bank shows its independence with the interest rate rise announcement today in the middle of a Federal Election. It is a fair indication that no matter which party wins the Federal Election on 24 November the rise or fall of interest rates will remain strongly in the hands of the Reserve Bank. The important issues will be the policies of the various parties and how those policies impact on the economy particularly in terms of inflation.

The promised tax cuts by the major parties which would not be expected to come into force until 1 July 2008 will now mean very little to those who are effected by the rise in interest rates. The repayments on a home loan of $250,000 over a thirty-year term will rise by $10 a week with a .25% increase in interest rates. The interest rate rise will be of concern to many including new and existing homebuyers, small business and the farming community especially given the continued upward trend of interest rates over the last five years.

For first homebuyers the case for an increase in the First Home Buyers Grant is strengthened with this interest rate rise and is one way that the Government can assist first homebuyers. Many of us have been calling for an increase in the First Home Buyers Grant for some time. The current First Home Owners Grant of $7,000 was established 1 July 2000 in conjunction with and to offset the introduction of the GST.

Increasing the first owners grant is one way to assist first home buyers however existing home owners with home loans will be worried about how they will meet the increased loan repayments. A relative increase in rents may also follow making it harder for those without their own home to save. The rate rise will also add to the cost of business and in particular the farming community already hard hit by the drought. These sectors have no alternative but to pass the interest rate rise on to consumers already hard hit by high and rising petrol prices.

The challenge now for the Government and the Opposition in the current election campaign is to come up with measures and policies to assist all those affected by rising interest rates.