Believe it or not, interest rate rise is good news

Interest rate rises are never seen as good news, because for the everyday borrower they simply mean another cost to worry about. And while that is understandable, people need to realise that the first interest rate rise since the global financial crisis is actually a very good sign.

I believe the recent rate rise was a bold and wise move by the RBA, and it is also an indication that here in Australia we have managed to come out of the global financial crisis in a far better position than other nations. For us, the outlook is good. We are only the second developed nation to officially increase rates since the emergency lows.

What this really highlights is how strong both our economy and our banking systems are. And I think we need to understand how lucky we are to live in a country where the RBA is willing to make a move ahead of the curve to ensure our economy is not exposed to any further risk. Despite the fact it was never going to be a popular move.

This rise was necessary especially for WA. Why? Because with the Gorgon announcement and growing confidence there is a risk WA may slide back into a boom time mentality.

The increase will assist in protecting housing affordability here in WA by ensuring that the market isn’t fuelled by misplaced confidence. Gorgon may ignite the market somewhat and dropping stock levels are already threatening affordability, there is a significant risk that another housing ‘bubble’ may occur.

What I am asking people to see here is the bigger picture. When the cost of housing increases it causes a wide ripple of problems, rents go up and other living costs are affected. As a consequence, those most vulnerable in society are the hardest hit – this really is a social issue, not just an issue for borrowers.

In the short term rapid price increases favour a few people and businesses, in the medium term, unsustainable price hikes are actually detrimental to the overall strength of the market.

For all you borrowers out there who are facing bigger repayments as a consequence of the rate rise, remember to keep it in perspective. The three per cent interest rates were at emergency levels because there was significant risk to our economy, they were never going to stay there for long. At the moment interest rates are still very manageable.

The outlook for interest rates is that they will now continue to trend upward, so understand this and stay informed so you can make the best decisions when the time is right.