The housing industry has questioned the wisdom of the Reserve Bank of Australia's (RBA) decision to leave the cash rate unchanged for a further month given the "considerable pain" some businesses are facing.
The central bank left the cash rate at 4.25 per cent at its monthly board meeting on Tuesday, as generally expected by economists.
Housing Industry Association chief economist Harley Dale said the expectation of further official interest rate cuts entering 2012 has been replaced by businesses and households counting the potential cost from the possibility of further hikes by retail banks.
The big four banks, and many other lenders, raised their rates last month, despite the RBA leaving the cash rate unchanged.
"The fractured state of economic conditions in Australia means there is considerable pain being felt by small and medium-sized businesses, as well as some large businesses, which tends to get lost in a general focus on aggregate economic outcomes," Dr Dale said in a statement.
"Against this backdrop a rate cut today would have been the appropriate action to take."
Financial comparison website RateCity said 45 lenders raised their variable home loan rates by an average of 12 basis points in February.
"The rates that borrowers pay have been creeping away from the Reserve Bank's cash rate movements since the global financial crisis," RateCity CEO Damian Smith said in as statement.
"Last month proves that all variable rate mortgage holders are vulnerable to rate hikes, regardless of what the RBA does," he said.
He warned borrowers, particularly first home buyers, that they need to be prepared for higher costs to their repayments this year, and should expect frequent small changes in rates, perhaps as often as every month.
Announcing the central bank's rate decision, governor Glenn Stevens said while lending rates have generally risen slightly since the board's previous meeting, they remain close to their medium-term average.
"With growth expected to be close to trend and inflation close to target, the board judged that the setting of monetary policy remained appropriate for the moment," Mr Stevens said.
"Should demand conditions weaken materially, the inflation outlook would provide scope for easier monetary policy."
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