Interest rate cuts are not the only way to encourage growth in the Australian economy, a senior ANZ bank executive says.

ANZ Australia chief executive Phil Chronican says “a lot of uncertainty about the regulatory environment” and concerns over what is happening overseas are acting as a drag on the local economy.

“I think getting some confidence and stability into those things is probably just as important as the level of interest rates, if you want to get some confidence back into the Australian economy,” he told ABC TV on Sunday.

“I don’t think the interest rate is the predominate reason we’re not getting significant growth in consumption or investment, and therefore I’m not sure there’s a lot of merit in having interest rates cut as the only tool.”

The Reserve Bank of Australia lowered the cash rate 25 basis points to 3.25 per cent at its monthly board meeting on October 2.

So far, three of the four big retail banks have dropped their standard variable home loan mortgage rates between 18 basis points (Westpac) and 20 basis points (Commonwealth Bank and National Australia Bank).

The trio said they still faced significant funding pressures because of increased competition for deposits.

ANZ is due to announce its response to the RBA’s decision on Friday, October 12.

Mr Chronican said the pressure on banks from higher costs in the wholesale funding market was not as “steep” currently compared with a year ago.

“What’s happened progressively over the last three years is two things. One is that the increased cost of wholesale funding has just been relentless,” he said.

“It’s gone up and up although it has stabilised this year.”

Mr Chronican said the cost of retail deposits had “gone up materially”.

“So, the overall position is that our interest margins on our domestic Australian business have hardly moved over that period,” he said.