PM Tony Abbott congratulated Treasurer Joe Hockey after the rate cut in an awkward encounter.
TREASURER Joe Hockey will be “very angry” if the nation’s banks don’t pass on the latest official rate cut in full.
The Commonwealth Bank, Australia’s largest home lender, will pass on just 20 basis points of the Reserve Bank’s 25 basis point reduction, while increasing rates on deposits.
“The banks are making very good profit and we need our banks to be profitable but when the Reserve Bank acts, we expect the banks to also act in full as well,” Mr Hockey told reporters in Queanbeyan on Wednesday.
THE Commonwealth Bank’s cut puts its standard variable rate to what it says is the lowest in its history at 5.45 per cent.
But in an unusual move, the CBA has also rewarded savers, announcing it would raise its interest rate by 0.55 basis points on its 8 month term deposits to 3.05 per cent.
Announcing the changes, Matt Comyn, group executive retail banking services said: “While the circumstances of each RBA cash rate decision will always vary, we’ve carefully considered the impact of the current environment and moved to balance the needs of our customers.
“Today we’ve reduced our mortgage rates to a record low and also considered the needs of the almost seven million Australians who have savings accounts with us.”
The CBA was responding to the Reserve Bank’s lowering of the official interest rate to a historic low of two per cent on Tuesday.
Consumer group Choice has criticised the bank, however, calling the decision not to pass on the rate cut in full as “cynical” and signalling a “return to business-as-usual from the ‘big four’ in the domestic mortgage market”.
“No sooner has David Murray’s Financial System Inquiry run its course than we see the biggest Australian bank clip the ticket on savings for mortgage customers,” said Choice director of campaigns and communications, Matt Levey.
“While we welcome the bank’s decision to raise some deposit interest rates, CBA is hardly on struggle street, and its mortgage customers deserve better,” Mr Levey said.
The Commonwealth Bank won’t pass on the full rate cut, but has a bonus for savers.Source:Getty Images
ANZ was the first of the big four banks to respond, lowering its standard variable rate by 25 basis points to 5.38 per cent.
“We hope by announcing this decision today we’re able to provide certainty for our customers looking to manage their household budgets as well as playing our part in supporting the broader economy,” ANZ Australia chief executive Mark Whelan said.
But the banks are expected to rake in as much as $30 million in profits by waiting an extra week to pass on the cuts.
Meanwhile, Australian dollar is higher on expectation the Reserve Bank won’t be cutting the cash rate any further.
At 6.30am AEST on Wednesday, the local unit was trading at 79.39 US cents, up from 78.69 cents on Tuesday.
SPEND, SPEND, SPEND, SAYS TREASURER
Treasurer Joe Hockey said the cuts would help stimulate the economy and create more jobs.
“Now is the time to borrow and invest ... invest in the things that help to create jobs,” Mr Hockey told reporters in Canberra. Mr Hockey said there were many green shoots in the economy.
“This interest rate cut will help to facilitate those green shoots,” he said.
“It’s as much about putting fertiliser on the green shoots as anything else.”
He said the Budget to be delivered next Tuesday would further boost the economy with a record spend on infrastructure and a small business package.
“I would say to the business community, `go out and invest and create more jobs’,” he said.
“We will do everything we can to facilitate that sort of investment.”
He said at a time of low interest rates it is unacceptable to increase tax on superannuation, as suggested by Labor.
“It is unacceptable to have any increases in taxation on superannuation in the upcoming Budget because now is not the time to hit superannuants who are facing potentially many years of lower returns on their savings in bank accounts.
The ANZ was the first of the big banks to react.Source:AFP
PM Tony Abbott congratulated Treasurer Joe Hockey after the rate cut in an awkward encounter.Source:News Corp Australia