He tore strips off the the bank after a meeting in Brisbane with the deputy governor of the Reserve Bank, Ric Battellino, Treasury secretary Ken Henry and the chairman of the Australian Prudential Regulation Authority, Dr John Laker. "On the basis of evidence presented to me by the key economic officials, the increase in the average cost of funds to the major banks is much more in line with the increase announced by the NAB than the increase announced by the ANZ," Mr Swan said.
But the ANZ sharply disputed his line, saying its funding costs had risen by more than 0.30 percentage points and that those increased costs were likely to persist in the medium term. "We understand the Treasurer's concerns. However, this is a commercial decision in a competitive market. We are committed to passing on reductions in wholesale interest rates when market conditions ease and more normal conditions return," a spokesman for ANZ, Paul Edwards, said. The controversy over rates came as Mr Swan received some good news on the economy yesterday, with new figures from the Bureau of Statistics showing Australia's home building sector finally in recovery.
Building approvals jumped in November to their highest level in more than three years, as developers responded to evidence of a national housing shortage. On a seasonally adjusted basis, total building approvals went up 8.9% in November and were up 14.6% over the year, with houses, apartments and public sector housing all on an upsurge.
In Victoria, the trend level of building approvals in November was up 22% from a year earlier. Queensland had a similar story, while in South Australia, trend approvals hit their highest levels since 1985. In the first five months of this financial year, municipal councils across Melbourne approved 20% more new houses and units than in the same months last year, and 37% more than in the same period of 2005. Mr Swan also received a buoyant view of Australia's economic prospects during his meeting with the economic officials, who assured him that whatever happened in the US, Australia was in strong shape.
"The Australian economy is perhaps the best placed of all economies in the Western world to deal with the fallout from the US subprime mortgage crisis," Mr Swan said. "Our economy is in a healthy state." However, he warned that inflation was likely to be at or above 3% for the next 18 months. "That is, if you like, the parting gift of Peter Costello and the Liberal Party to the incoming government," Mr Swan said.
But Federal Opposition Leader Brendan Nelson said the former government could not be blamed. "Having seen Australia through the economic meltdown in South-East Asia and then the US recession in 2001, we built a very strong economy, a finely tuned car," he said. In the US, President George Bush rejected a claim by Democratic aspirant Hillary Clinton that the US economy was "slipping toward recession". But in a marked shift from his usual upbeat economic assessments, Mr Bush conceded that the US faced "economic challenges" due to rising oil prices, the home mortgage crisis and a weakening job market.
"We cannot take growth for granted," Mr Bush said in a speech to a group of business leaders in which he acknowledged that "recent economic indicators have become increasingly mixed". But even after a government report on Friday that showed unemployment jumped to 5% last month from 4.7% in November, Mr Bush stopped short of warning that the nation may be about to enter a recession.
With NEW YORK TIMES
Treasurer of Australia Wayne Swan. 
Australia's Opposition Party laid blame for recent interest rate increases at the feet of new federal treasurer Wayne Swan. Swan, in turn, criticised the banks, saying they risk being "judged very harshly" if they "try to take advantage of the U.S. sub-prime crisis by lifting interest rates excessively."

Following the National Australia Bank (NAB) lifting its rates 0.12 percent independently of the Reserve Bank of Australia, Swan consulted with Australian Prudential Regulation Authority (APRA), which monitors bank liquidity, and was advised that rises of around 0.1 percent were reasonable.

However, following his moderate response to NAB's rise, ANZ Bank announced a 0.2% rise, prompting Swan's warning. Since then other banks, including Westpac, BankWest and Bendigo Bank, have announced rises between 0.1 and 0.2 percent, while St.George Bank lifted its rates by 0.2 percent.

Former Howard government treasurer Peter Costello criticised Swan as inexperienced, saying, "They've taken the opportunity of a new treasurer who is not on top of the job to increase their margins, and he came out and, on behalf of the Labor Party, he approved it." While opposition treasury spokesman, Malcolm Turnbull claimed the treasurer was "all over the shop."

HSBC chief economist Dr John Edwards said, "It is all a learning experience for him but it is very difficult to say anything that is less than critical about the banks. The ANZ was the real lesson for Swan because they betrayed his belief, which was probably well informed, the banks would be reasonable and keep any rise to about the level imposed by the NAB."