Finance Minister Trevor Manuel has bemoaned the poor transmission between when interest rates are raised to when consumers actually react.

"The response to rate increases is abysmally low," he said.

He noted that South Africans had enjoyed low interest rates and the consumer boom was evident in very rapid credit extension.

"People are tying themselves into knots," he said.

By comparison he noted that when a small 25-basis-point rate increase was announced in Europe, the response was immediate.

"Before they bite"

Instead, South Africans needed increases as high as 700-basis-points as they have in the past “before they bite”.

The current rates tightening cycle in South Africa, which began in June 2006, is at 500-basis-points.

He noted that this problem was beyond government control.

"If people live on debt we find ourselves with a problem," he concluded.

Manuel was speaking at a Mail and Guardian sponsored debate entitled “The great economic policy debate: what does the future hold?”, which was moderated by Judge Dennis Davis.

Davis praised Manuel for stepping forward and taking accountability and talking about some tough issues facing the country in an open forum.

I-Net Bridge