Despite views to the contrary from a number of commentators, CBA, NAB and ANZ have indeed followed suit and raised their rates. In reality this was a relatively easy call to make given the historic behaviour of the ‘Big 4’ and the commercial reality attached to increasing bank capital. What’s of more interest now is ‘where to from here’? In part, the answer lies with our politicians. Our base case now is that the Reserve Bank has the imprimatur to push ahead with a rate cut sooner rather than later. Further we are of the view that it is increasingly likely that the larger banks will not pass on all of one or more of these future rate reductions. In effect this is a very good outcome for Australia : ie the RBA is able to play its part in stimulating the economy through cheaper money and a depreciating currency, whilst not over-stimulating the emerging property bubble. In all this would appear to be the ‘least worst’ scenario!