Westpac defends rate rise decision

Westpac's chief executive broke her silence on the bank's dramatic rate rise yesterday, defending Westpac's decision to almost double the Reserve Bank of Australia's .25% increase to the official cash rate.

Gail Kelly told an investor and media update that the decision reflects the higher costs of funds which are about 10 times higher than pre-crisis levels.

Treasurer Wayne Swan angrily denounced the bank's rate increase last week warning the bank that there would be a consumer backlash.

However, Kelly maintained yesterday that politicians "really do understand this new environment" and can "see the evidence before them that funding costs have materially gone up".

Kelly also vowed not to subsidise home loans at the expense of business customers.