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Westpac looks to big rate rises: report

Westpac is under financial pressure to raise its interest rates but fears a political backlash, chief executive Gail Kelly has reportedly told a private shareholder briefing.

Mrs Kelly told the briefing political pressure from Canberra could make it tough for the bank to increase home and business loan interest rates ahead of the federal election, due later this year, Fairfax newspapers reported on Tuesday.

In December last year, Westpac raised rates by 45 basis points when the Reserve Bank announced a 25-point rise in interest rates.

The bank blamed higher funding costs but two months later announced a 33 per cent increase in its latest quarterly earnings, most of it from trading before the interest rate rise in December.

Mrs Kelly told the briefing, held in Sydney last Friday, that Westpac's reliance on expensive offshore sources for its lending funds would lead to a 30 to 40 basis point rise in lending costs.

A Westpac spokeswoman on Monday declined to comment, saying the remarks were made during a private meeting.

"We take a range of stakeholder interests into account whenever we make a decision on setting variable mortgage rates," she told the papers.

The comments may lead to further speculation the big banks will all increase their interest rates above the Reserve Bank's increases.

Reserve Bank chiefs have predicted several rate rises before the end of the year as the economy gathers strength.

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