Pressure on for rates cut
(20 August 2008 – Australia) Pressure, particularly from the Australian Government, has been placed on banks to cut interest rates if the RBA cuts the official rate in September.
While concerns about rising inflation appear to have prevented a rates cut, an impending cut in the official interest rate was discussed at the most recent RBA meeting on August 5.
Much of the recent focus has been on whether or not the Australian banks intend to pass on the cut.
Earlier this week Reserve Bank assistant governor Philip Lowe said a big fall in funding costs meant banks have no excuse not to ease the squeeze.
Federal Treasurer Wayne Swan has once again called on Australia's major banks to pass on any drop in interest rates handed down by the RBA. Swan justified the stance by saying that a substantial portion of the banks’ borrowing costs comes down when the RBA takes a decision to move rates down.
Prime Minister Kevin Rudd said that the banks will be judged harshly if any future cuts by the RBA are not passed on.
Rudd said that if the banks produce profit lines like CBA’s, as seen most recently, and then in the same breath say if official rates comes down that we may not pass on all of the cut then the banks collectively could suffer real damage to their reputation.
AMP Capital chief economist Shane Oliver said banks were running out of excuses for not cutting interest rates.
However, Commonwealth Bank chief executive Ralph Norris said that he didn’t think that we lived in a communist country and that the bank will do what is commercially appropriate, what is prudent.
Much of the recent focus has been on whether or not the Australian banks intend to pass on the cut.
Earlier this week Reserve Bank assistant governor Philip Lowe said a big fall in funding costs meant banks have no excuse not to ease the squeeze.
Federal Treasurer Wayne Swan has once again called on Australia's major banks to pass on any drop in interest rates handed down by the RBA. Swan justified the stance by saying that a substantial portion of the banks’ borrowing costs comes down when the RBA takes a decision to move rates down.
Prime Minister Kevin Rudd said that the banks will be judged harshly if any future cuts by the RBA are not passed on.
Rudd said that if the banks produce profit lines like CBA’s, as seen most recently, and then in the same breath say if official rates comes down that we may not pass on all of the cut then the banks collectively could suffer real damage to their reputation.
AMP Capital chief economist Shane Oliver said banks were running out of excuses for not cutting interest rates.
However, Commonwealth Bank chief executive Ralph Norris said that he didn’t think that we lived in a communist country and that the bank will do what is commercially appropriate, what is prudent.
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