People who have mortgages with Westpac and ANZ are being told to shop around if they are upset the banks haven’t passed on all of the Reserve Bank’s interest rate cut.
Treasurer Josh Frydenberg says the banks owe their customers an explanation after keeping some of the rate cut for themselves, despite their own funding costs recently falling from high levels.
The rate reflects what the central bank charges commercial banks on overnight loans, and therefore influences other interest rates.
The central bank’s cut is intended to encourage borrowing and investing, ultimately stirring economic growth by helping more Australians find jobs and controlling inflation.
There is no reason why Westpac and ANZ couldn’t have passed all of the cut on, Mr Frydenberg believes.
“I think their customers have been let down by this decision,” he told Nine’s Today program on Wednesday.
“We know that people can move between banks and seek a better deal as well, and I’d encourage them to always look for the best possible deal for themselves and for their families and their businesses.”
Mr Frydenberg says he can’t force the banks’ hand but has reminded them of the recent damning financial services royal commission.
“Here was an opportunity, post the royal commission, to do the right thing by your customers,” he told ABC Radio National.
The cash rate was dropped by 25 basis points to 1.25 per cent on Tuesday, marking the first cut in nearly three years, with more expected to follow.
The Commonwealth Bank and NAB have said they would pass on the full cut to those who hold mortgages with them.
Shadow treasurer Jim Chalmers says Westpac and ANZ’s choice not to do the same is “disgraceful”, as the nation grapples with a slowing economy.
“We can’t afford to have banks pocket some of this interest rate relief,” he told ABC News on Wednesday.
Mr Chalmers has also reminded customers they can express their distaste by going elsewhere if they’d like.
“They should certainly shop around to see whether they can get a better deal somewhere else.”
National accounts data – a measure of the strength of the economy – to be released on Wednesday is expected to show growth remained soft in the March quarter.
The market consensus forecast is for anaemic gross domestic product growth of 0.4 per cent in the quarter and 1.8 per cent annually.
Mr Frydenberg insists the “fundamentals” of the economy are sound and is confident it will continue to grow at 2.75 per cent for 2019 and 2020, despite headwinds.
“We are facing economic challenges both domestically and internationally, particularly from the trade tensions between China and the US.”
But Mr Chalmers argues the Reserve Bank’s need to cut the interest rate and the likely weak figures show the economy isn’t in good hands.
“It’s not enough to pretend that you’re good economic managers,” he said.