Treasurer Wayne Swan said today that the rising interest rates are the sign of stronger Australian economy. The Treasurer was backing the recent rise in interest rates by the Reserve Bank of Australia. Swan also appealed the retail banks not to raise their rates beyond the recent increase by RBA.

The Reserve Bank of Australia increased its cash rate by 25 basis points to 4.25% at its monthly board meeting today. This is the second monthly increase in a row and the fifth increase in past 7 months.

RBA tried to justify the recent increase in interest rates by saying that the expected economic growth is likely to be close to the target in the coming year. RBA further said that it is appropriate for interest rates to be closer to average.

This move of the central bank encouraged other major banks to lift their rates. The Commonwealth Bank of Australia has already lifted its standard variable mortgage rate in line with the RBA guidelines, while other major banks said that they are reviewing their rates.

Treasurer Wayne Swan said today that there was no justification for the retail banks to raise their rates beyond the RBA's increase.

“If any bank did that, that would be arrogant in the extreme,” said Mr. Swan.