Rudd wishes banks were as quick cutting rates

Posted by LC Team, Thursday, November 5, 2009

Prime Minister Kevin Rudd wishes retail banks would cut interest rates as quickly as they raise them in response to official cash rate moves.

The Reserve Bank of Australia (RBA) raised the cash rate by 25 basis points on Tuesday, its second consecutive monthly increase.

ANZ Bank matched the increase on its standard variable mortgage rate within minutes of the RBA decision, and the other major banks soon followed suit.

“I do note a contrast between, shall I say, the speed which interest rates are brought down on the part of the commercial banks and the speed with which they are put up,” Mr Rudd told Fairfax Radio Network on Wednesday.

He warned the banks not to lift rates further than the official rate increase.

“What I would be very, very concerned about is if any of the commercial banks then proceeded to increase interest rates in anything in excess of the 25-basis-point adjustment.”

Some retail banks chiefs have said they can’t always guarantee they will be able to limit rate increases because of funding pressures.

AAP

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3 Comments

Phil November 6, 2009

Yeah well do something about it ! Krudd your all talk.

Rob November 6, 2009

Phil, we all know Rudd has no say in what happens with interest rates. The cash rate is determined by the RBA and it is the RBA that indirectly (via monetary policy) has some say in what banks should be pricing their funds at. However, due to Australia’s inability to save, Rudds decision to extend the first home owners grant meant the banks had to borrow more money from the capital markets to fund these home loans. Whilst the capital markets have opened up a little, funding remains quite expensive putting pressure on the banks margins so you can’t blame them for raising rates straight away. Why should they wear the additional costs? Like any other corporation their there to make money for their owners / shareholders. Rudd should be encouraging people to reduce debt and not to get further in debt. The less people are in debt the less impact interest rates has on people.

SMc November 8, 2009

Rob, he hasn’t got any say on rates, but that isn’t the subject of this article. It’s about how the banks don’t pass on cuts for over a month, but pass on increases in 2 days. Government decisions and economic circumstances have led to a massive increase in the bank’s market share, profits and doubling of share prices. In essential economic services such as banking and finance, where there are monopolies between a few (and getting fewer), it’s not only his right to comment, but his duty to act - well overdue. It’s unacceptable that with people’s government having guaranteed deposits that the people continue to fund the high profits. Simply, the banks results don’t support the rhetoric of your and their supposition of higher funding costs. What part of that reality don’t you accept?

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