Australia's Treasurer Wayne Swan is not in favor of restricting banks from raising interest rates as this may lead to loan rationing that could peril the growth of local businesses.

Commenting on the move of the Greens Party to put a cap on their interest rates, Mr. Swan said such moves should be studied carefully to avoid unintended consequences to the different sectors in Australia's economy.

"I believe they're genuine in their approach, but they will get the wrong outcome," he told ABC Radio of the Greens plan.

"If you do what they want you'll end up rationing credit and a lot of people will miss out."

Mr Swan said the government would proceed with a next wave of policy reforms aimed at improving competition in the local banking sector.

"There's a whole host of things that need to be put in place for the long term," Mr. Swan added.

Greens proposal

Australia's Greens Party is planning to introduce pieces of legislation that aims to prevent banks from introducing interest rates on loans that are way above that of the Reserve Bank of Australia's.

"The banks need some hauling in," Greens leader Bob Brown told ABC Radio on Monday.

Recent hikes in mortgage rates had cost some borrowers up to $50 a month more than they would have paid had the banks kept rate hikes to the 25 basis points imposed by the RBA recently.

The banks were gouging their mortgage and small business customers, Senator Brown said

"It's gotten out of hand, it seems whatever the banks want they're doing."