Swan warned: Home is where the hurt is

THE Government is bracing for a savage backlash from home buyers who believe they have been singled out to fight inflation.

Swan warned: Home is where the hurt is

THE Government is bracing for a savage backlash from home buyers who believe they already have been singled out to fight inflation - and might have to do it again.

The feeling intensified after official figures on Wednesday showed inflation had broken the 4 per cent barrier.

This cast doubt on the Reserve Bank cutting interest rates this year, and raised the prospect of another rate rise, the 13th in a row and the 9th in three years.

Adding to concerns was the ANZ bank's decision yesterday to raise it's interest rate again - by 0.1 per cent - 10 basis points.

The rise, which takes effect on Monday, will lift ANZ's standard variable home loan rate to 9.47 per cent a year.

The bank, which reported a 7 per cent fall in first-half earnings, said the increase followed sustained higher funding costs due to turmoil in global credit markets.

Treasurer Wayne Swan is expected to repeat assurances that the May 13 Budget will have good news for working families as well as containing broad spending cuts which he says are needed to keep inflation down.

But the Federal Government has been forced to revisit a host of sensitive budget decisions as senior Ministers struggle to find the demanded billions of dollars in savings.

The Budget razor gang has considered around 50 additional savings measures in the last week.
This is likely to further cut spending across health, education, welfare and other key portfolios.

Prime Minister Kevin Rudd and Mr Swan are also understood to have considered the introduction of  "means testing'' higher income earners on several welfare programs, while keeping protection for the most vulnerable.

On Thursday Mr Swan was given a taste of the coming backlash during exchanges with voters on his regular blog for The Daily Telegraph.

He was told that families already hit by high food, petrol and power price rises now faced another increase in their mortgage repayments.

"Waxer'' of Sydney wrote: "Homeowners always seem to pick up the blame for the economy, yet only make up a small portion of it. The rich who can afford the higher interest rates just end up with more disposable income and the battlers less.''

Another commenter, PaulH, said: "When will you stop penalising mortgage holders? They make up part of the population not all of it.

"Rising petrol, groceries, electricity, gas, rates, etc are paid by ALL, this is harming everyone, then, by the way, we mortgage holders have to pay the interest rate rise as well.''

And Stephen wrote: "Why is it all us ordinary punters are expected to take a hit in tough times, yet there are big corporations and banks that seem to keep high profits even in tough times?

"Surely this is the major cause of inflation? It is time these executives and shareholders shared the pain.''

The Federal Government wants voters to see that it does recognise the economic hardship they are suffering, and Mr Swan said in a reply: "There's no doubt that interest rate rises do hit mortgage holders really hard.''