THREE major banks today snubbed Treasurer Wayne Swan by lifting their variable loan rates by up to 0.20 percentage points.
Signalling more pain for homeowner, Westpac, St George and Bendigo Bank all announced today they would be raising their variable lending rates as a direct result of the sub-prime lending crisis.
Westpac, the country’s fourth-largest bank, said it would rate its standard variable home loan by 15 basis points to 8.72 per cent, effective from Monday.
The nation’s fifth-largest lender, St George, said it would increase its standard variable home loan rate by 20 basis points to 8.77 per cent, effective from Tuesday. The regional Bendigo Bank said it its variable home loan would rise by rate by 15 basis points to 8.75 per cent from next Thursday.
Mr Swan said that while expected, St George and Westpac's rate rises were very bad news for families. He added that the Government would “harshly” judge banks that did not cut their lending rates when the US sub-prime credit crisis subsided.
“My views are well known - I consider rate rises as large as those announced by the ANZ at the beginning of the week and St George today to be excessive,” Mr Swan said in a statement.
Last week Mr Swan said any increase in lending rates above 12 basis points as a result of the US sub-prime crisis was "excessive".
Earlier in the week, Commonwealth Bank increased its standard variable rate on home loans by 0.10 percentage points to 8.67 per cent, effective today, January 11. That came in the wake of ANZ and National Australia Bank last week, both of which increased their variable rates independent of action by the Reserve Bank of Australia.
ANZ's increase of 0.20 percentage points is double that of CBA. NAB increased its rate by 0.12 percentage points to 8.69 per cent.
The Australian revealed this week that the big four banks collectively have close to a $1 billion direct exposure to the US sub-prime market, despite months of assurances they were immune from the crisis that was the catalyst for the global credit crunch.
The credit crunch, which has resulted in a significant rise in the cost to banks of obtaining funds which they in turn lend out, has now seen the big four Australian banks raise their standard variable mortgage rates independent of any action by the Reserve Bank. Also today, ING Direct and Wizard Home Loans lifted their variable rates.
“Families and businesses who have endured 10 straight official rate rises certainly won't welcome today's rate rises - particularly St George's rise, and neither do I," Mr Swan said. “I say to all banks, you will be judged very harshly if you try to take advantage of the US sub-prime crisis by lifting rates excessively.”
St George’s increase was greater than expected by the markets and is understood to have infuriated the Treasurer.
Michael Cameron, St George’s chief financial officer, said the bank had faced the same funding pressures as its larger rivals.
“Over the past 5 months we have been absorbing increased funding costs of more than 0.3 per cent and have hoped that conditions would have retuned to normal and we would not have to pass these costs on to our customers,” he said.
The current situation is the first time since 1992 that banks have raised rates independently of the Reserve Bank.
A senior Westpac executive, Jeremy Dean, said: “Westpac has been absorbing increased funding costs on behalf of customers for several months, but it is now clear that the liquidity issues affecting the global financial markets are likely to persist for some time.”
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."