Banks’ rate decision stokes political anger
Australia’s major banks have rejected calls from both sides of politics to pass on the RBA rate cut in full.
Following the Reserve Bank’s decision on Tuesday to cut the official cash rate to 1.50%, the four major banks announced they would pass on a portion of the 0.25% cut to consumers. Commonwealth Bank trimmed rates by 13 basis points, while Westpac cut by 14 basis points, ANZ by 12 basis points and NAB by 10.
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The move drew ire from both sides of politics. Prime Minister Malcolm Turnbull called on the banks to pass on the full cut, but said failing to do so the banks’ chief executives must explain the reasoning behind withholding a proportion of the cut.
"They should pass it all on. They should do that, and if they are not prepared to do it, as appears to be the case, then their chief executives should explain very clearly to the Australian people and their customers why they have not done so,” Turnbull said, according to the Australian Financial Review.
"They operate with a very substantial social licence and they owe it to the Australian people and their customers to explain fully and comprehensively why they have not passed on the full rate cut and they must do so.”
Opposition Leader Bill Shorten echoed the calls, but branded Turnbull’s admonishment as “weak and pathetic”. He renewed calls for a royal commission into the sector.
"The decision by the banks to hold back the rate cut from hard-working Australians does nothing to help their credibility," Shorten said, according to the AAP.
Australian Bankers Association CEO Steve Munchenberg dismissed calls for a royal commission, and said banks had made it clear that the RBA cash rate did not determine their cost of funds.
"Two-thirds of bank funding comes from deposits, and the cost of deposits has been going up which is good news for savers, and people with a mortgage are enjoying record low mortgage rates,” he said, according to the AFR.