Bank funding costs may have risen but maybe not as much as the big four banks think, Reserve Bank Governor Glenn Stevens says.

At a Q and A session in Sydney on Tuesday, Mr Stevens said the problem with the debate on funding costs “is that people talk a different language”.

“A lot of bankers talk spreads,” Mr Stevens told an audience at the Australian Business Economists annual dinner in Sydney.

“And they talk about the cost of funds having trebled.

“The spreads have trebled but the absolute total number of points they are paying haven’t trebled, they have increased by a lesser number.”

Last Tuesday, the central bank took the cash rate to 3.75 per cent from 3.5 per cent.

It was the RBA’s third rate rise in three months. The same day Westpac lifted its variable mortgage rate by 0.45 per cent.

Commonwealth Bank and ANZ quickly followed suit.

Mr Stevens said, however, that looking back to the beginning of the year he would not have expected to raise interest rates by the end of 2009.

“I think at the beginning of the year, was I expecting to have the economy looking as good as it does?

“I said we were in recession so I felt that things were going to turn out rather worse than they have, but who’s complaining? Not me.”

AAP