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Each of the big four sat on its hands Tuesday rather than immediately respond as they once used to, leaving it the smaller Bank of Queensland, which passed on 0.20 points and ING Direct, which passed on all 0.25 points.
The prime minister, treasurer and shadow treasurer Joe Hockey all implored the banks to pass on the cut in full, Mr Hockey qualifying his appeal by saying that if they did not cut in full they should give their customers a complete explanation of the reasons why.
The Reserve Bank calculations show the banks in a better cost position than they were in October when the Commonwealth, ANZ and National Australia banks passed on only 0.20 points of its 0.25 point cut and Westpac only 0.18 points.
Reserve Bank governor Glenn Stevens said in a statement released with the rates decision that Australian banks had “no difficulty accessing funding, including on an unsecured basis”.
Treasurer Wayne Swan said while ING Direct had done the right thing by its customers, the other banks had not.
Prime Minister Gillard said with Christmas approaching the big four “should take into account that Australian families will be looking to them to pass the interest rate reduction on in full”.
If fully passed on the cut would slice a further $47 from the monthly cost of servicing a $300,000 mortgage, bringing the total saving since the cuts began last November to $270 per month.
The Bank board cut rates because of signs the business investment outlook is weakening, not only in mining but also in the non mining economy... It pays close attention to the National Australia Bank survey of business confidence which shows business conditions their weakest in three years. It wants to strengthen other parts of the economy in order to take up the slack as the mining investment boom passes.
If necessary it will cut rates again in order to sustain economic growth, restrained only by its inflation target. Late Tuesday the futures market assigned a 67 per cent probability to a further cut of 0.25 points at the board’s next meeting in February.
The board does not believe it has cut rates to “emergency levels”.
Mr Hockey said Tuesday the Bank was “trying to catch a falling Australian economy. It had “dropped rates to emergency levels, not because the economy is doing well but because it is facing huge challenges”.
The cut from 3.25 per cent to 3.00 per cent brings the Bank’s cash rate to the low point reached at the trough of the 2009 global financial crisis.
But unlike during the financial crisis it has not been brought there by a series of dramatic, unprecedentedly large cuts. Unlike during the global financial crisis it has not be accompanied by a dramatic boost in government spending. Unlike during the financial crisis it has not been accompanied by an unusally low Australian dollar but by a near-record high dollar.
“Anybody who would go out there and describe rates now in the same context that they were at the height of the global financial crisis is simply unqualified for high office,” Mr Swan said.
“We are having an attempt to sensationalise this rate cut, not just by the Liberal opposition, but elements of the media. Anyone who can't welcome a cut as such good news for families and business is somebody who is just being negative about everything.”
In today's Canberra Times, Sydney Morning Herald and Age
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