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AUSTRALIA 
Banks 'obliged to pass on rate cuts to customers'
Friday, 1 August, 2008
Prime Minister Kevin Rudd admits the economy is slowing, but refuses to say whether it's happening too rapidly. (AAP)
Prime Minister Kevin Rudd has warned banks they have a "responsibility" to pass on to borrowers any cut in official interest rates.
Economic data showing a slump in housing approvals, weak retail spending, and consumer and business pessimism have led to calls for a cut in interest rates, presently at 12-year highs.
Economists are tipping the Reserve Bank of Australia will reduce the official cash rate before the end of the year.
Commonwealth Bank chief Ralph Norris has declined to guarantee the CBA would lower its interest rates if official rates were cut.
"I think the banks will be under huge pressure in the market place to act in response to official interest rate changes," he told Fairfax Radio Network today.
"Operating in the market, these banks have a responsibility to act, despite recent adjustments both by the NAB and by ANZ in response to some bad decisions, lending decisions, made in the past.
"Look at the overall profitability levels of ... our banks. They are huge. Therefore, I believe they have got a responsibility to pass on."
The government had introduced measures that made it easier for unhappy customers to change banks, Mr Rudd said.
Economy slowing, but Rudd won't say it's too fast
Mr Rudd admits the economy is slowing, but refuses to say whether it's happening too rapidly.
"It's obviously happening out there" he told Fairfax Radio Network when asked whether the economy was slowing.
"It is going to be tough - tough in the sense of the impact on people's family budgets."
Mr Rudd was less forthcoming on suggestions the government and the Reserve Bank were responsible for the economy slowing too quickly.
"We believe that when it comes to budget policy, we have done the right thing, it is the right course of action," he told ABC Radio.
"And as I said, a $22 billion surplus is the best way you can position this economy going forward. It gives you a buffer for the future."
Monetary policy remained the preserve of the central bank, he said.
"If you start to have governments preaching to the Reserve Bank about particular levels of monetary policy at particular times, it is not a good recipe for the long-term future, because then you have the monetary authorities subject to day-to-day political pressure."
Mr Rudd was reluctant to predict more job losses as slowing economic activity took its toll on business.
"We have had inflation running at 16-year highs as of when we came into office, that then flows into interest rates and we have had 12 of those on the trot going up.
"That then affects the level of activity in the economy and that in turn affects, ultimately, employment.
"(But) when it comes to the statistics provided by the ABS (Australian Bureau of Statistics), it is not appropriate for politicians or prime ministers to speculate on future data."
Mr Rudd warned banks they have a "responsibility" to pass on to borrowers any cut in official interest rates.
Source: AAP
Economic data showing a slump in housing approvals, weak retail spending, and consumer and business pessimism have led to calls for a cut in interest rates, presently at 12-year highs.
Economists are tipping the Reserve Bank of Australia will reduce the official cash rate before the end of the year.
Commonwealth Bank chief Ralph Norris has declined to guarantee the CBA would lower its interest rates if official rates were cut.
"I think the banks will be under huge pressure in the market place to act in response to official interest rate changes," he told Fairfax Radio Network today.
"Operating in the market, these banks have a responsibility to act, despite recent adjustments both by the NAB and by ANZ in response to some bad decisions, lending decisions, made in the past.
"Look at the overall profitability levels of ... our banks. They are huge. Therefore, I believe they have got a responsibility to pass on."
The government had introduced measures that made it easier for unhappy customers to change banks, Mr Rudd said.
Economy slowing, but Rudd won't say it's too fast
Mr Rudd admits the economy is slowing, but refuses to say whether it's happening too rapidly.
"It's obviously happening out there" he told Fairfax Radio Network when asked whether the economy was slowing.
"It is going to be tough - tough in the sense of the impact on people's family budgets."
Mr Rudd was less forthcoming on suggestions the government and the Reserve Bank were responsible for the economy slowing too quickly.
"We believe that when it comes to budget policy, we have done the right thing, it is the right course of action," he told ABC Radio.
"And as I said, a $22 billion surplus is the best way you can position this economy going forward. It gives you a buffer for the future."
Monetary policy remained the preserve of the central bank, he said.
"If you start to have governments preaching to the Reserve Bank about particular levels of monetary policy at particular times, it is not a good recipe for the long-term future, because then you have the monetary authorities subject to day-to-day political pressure."
Mr Rudd was reluctant to predict more job losses as slowing economic activity took its toll on business.
"We have had inflation running at 16-year highs as of when we came into office, that then flows into interest rates and we have had 12 of those on the trot going up.
"That then affects the level of activity in the economy and that in turn affects, ultimately, employment.
"(But) when it comes to the statistics provided by the ABS (Australian Bureau of Statistics), it is not appropriate for politicians or prime ministers to speculate on future data."
Mr Rudd warned banks they have a "responsibility" to pass on to borrowers any cut in official interest rates.
Source: AAP
