Australia’s big four banks are facing mounting pressure to slash their interest rates after the central bank delivered its fifth cash rate cut in 12 months.
The Reserve Bank of Australia (RBA) on Tuesday cut the cash rate by 25 basis points to 3.25 per cent.
While the RBA has made 125 basis points worth of cuts since last November, the banks have not passed on all reductions in full, blaming rising funding costs in offshore markets.
Tuesday’s cut sparked calls from industry groups, politicians and retailers for the big banks to pass on the savings to mortgage holders.
Australian Chamber of Commerce and Industry (ACCI) director of economics and industry policy Greg Evans said as the funding pressure for banks had significantly eased they no longer had a reason to hold back on rate cuts.
“The intention of the Reserve Bank is to provide benefit to real businesses and consumers,” Mr Evans said.
“It is not to assist banks and their profitability.”
Opposition treasury spokesman Joe Hockey said there was no reason for the banks not to pass on the cut in full and quickly.
“And in doing so hopefully stimulate some domestic consumer and business confidence,” he told reporters.
If retail banks pass on the rate cut in full, mortgage-holders with a $300,000 home loan will save about $48 a month in repayments.
The Bank of Queensland was the first lender to respond to the RBA’s cut but only reduced its standard variable home loan rate by 20 basis points to 6.71 per cent.
“Given the continuing pressure on the cost of funding a 20 basis point reduction is the best balance between our customers and shareholders,” chief executive Stuart Grimshaw said.
The Commonwealth Bank and Westpac both told AAP they were reviewing their rates.
A National Australia Bank spokeswoman said it stood by its commitment to have the lowest standard variable rate of the four major banks in 2012.
This would mean if any of the other three majors lowered its variable rate, then NAB would ensure its was lower.
ANZ will hold its regular monthly meeting to discuss interest rates on November 12.
Retailers believe that if the banks pass on the RBA cut in full, it will help stimulate spending in the lead up to Christmas.
“While rate cut decisions are no silver bullet for retail sales, the sector will at least be hopeful some of the financial pressure on shoppers eases, and this will make way for growth and employment at a crucial time of the year,” Australian Retailers Association executive director Russell Zimmerman said.
The housing industry’s peak body, the Housing Industry Association, and Master Builders Australia both said banks needed to pass on the cut to ensure non mining sectors of the economy could grow.
While the Australian dollar dipped slightly after the RBA’s rate cut announcement, retail and bank stocks rose.
ANZ gained 20 cents to $24.99, Commonwealth Bank lifted 19 cents to $56.04, NAB rose 27 cents to $25.81 and Westpac added 22 cents to $25.16.
David Jones gained two cents to $2.52, Woolworths rose 15 cents to $29.00, Myer added six cents to $1.78 and Harvey Norman lifted two cents to $1.94.
