Several business groups have spoken against the failure of the big 4 to pass in full to borrowers the 25 basis points cut in overnight cash rate the Reserve Bank of Australia (RBA) made last week. The groups also did not spare the central bank for failing to persuade the lenders to follow its monetary policy.
In the three times that the RBA cut the key lending rate, the banks had only passed in full once the rate cut to borrowers, while twice they pocketed part of the rate reduction.
Both the Commonwealth Bank of Australia and National Australia Bank pocketed 5 basis points out of the 25 basis points rate cut made by the RBA, while ANZ Bank is expected to announce its policy on Friday. Westpac has yet to make any announcement, while smaller banks such as the Banks of Queensland and St George similarly kept a part of the rate cut.
Russell Zimmerman of the Australian Retailers Association said the industry would definitely benefit from a substantial rate cut at this time of the year when they are acquiring stock and enter into overdraft position. He added that consumers, who also pay mortgage dues would appreciate higher savings with lower rates which they could spend in retail outlets for the yearend holidays.
Mr Zimmerman estimated that up to 60 per cent of retailer's yearly revenues are made during the fourth quarter.
Council of Small Businesses of Australia Chief Executive Peter Strong admitted the interest rate issue is a complex matter, but expressed disappointment with the inaction of the banks on passing in full to borrowers the rate cut.
"I think there's a mixture here of greed, keeping share prices up, and then there are other pressures as well in the banking world they have to consider as well," Money.au.com quoted Mr Strong.
"But what the banks have to understand is that if they don't pass the interest rate cut on, then the customers are going to struggle, and that means in turn that the banks will struggle," he added.
Canberra writer Nicholas Stuart, in an opinion piece published by the Canberra Times on Monday, described the RBA as impotent for the "callous insouciance" that the major Aussie banks have treated RBA Governor Glenn Steven's policy on interest rates which was lowered to 3.25 per cent.
The large banks, despite their large profits, insist they cannot afford to pass in full the RBA's rate cut which may prompt more of mortgage holders to switch lenders. However, an Ernst and Young report which found that 66 per cent of borrowers believe there are better deals available, the ones with lower rates must simplify their mortgage products viewed by many borrowers as complicated.
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