Pressure mounts on banks to pass on interest rate cut immediately

Business groups have welcomed the Reserve Bank’s cut to the official interest rate yesterday which reduced the rate to 3% but have called on the banks to pass on the cut immediately.

So far National Australia Bank is the only one of the big banks to pass on some of the reduction with an announcement this morning that it will reduce its standard variable rate by 0.20% to 6.38%.

Peter Strong, chief executive of the Council of Small Business Australia, told SmartCompany the cut was welcome but it was important for business that the banks passed on the rate cut before Christmas.

“They have got to pass it on, they passed it on last Christmas and this year they haven’t passed much on at all. With Christmas coming and consumers not as confident at spending it sends a message to cut the rates and cut it by the full amount or even more,” he says.

Strong says if the banks pass on the cut it will add to the confidence of the community and send a good message before Christmas across the small business sector.

“People tend to focus on retail but it goes right across the economy. If we sell more goods then manufacturers, hospitality, travel and service industries are all impacted. There are a lot of other sectors that are hit in a positive way.”

The Australian Retailers Association also welcomed the cut, with ARA executive director Russell Zimmerman, describing it as a “welcome Christmas present for retailers”.

However, Zimmerman called on the banks to act on the decision immediately and cut rates for consumers under mortgage stress.

“The rate cut decision could not have come at a better time, given consumers need all the cash available to them for the festive season and retailers are relying on this to make the most of Christmas trade,” Zimmerman said.

“With the RBA being more accommodative in its approach to monetary policy and household budgets clearly stretched beyond reasonable limits, there is absolutely no excuse for the banks not to pass on the full benefit of the 3% interest rate to their customers, including business customers who rely on finance to operate.”

Urban Property Australia managing director, Sam Tamblyn, told SmartCompany while yesterday’s interest rate cut will be positive for the property market as a whole, buyers remain uncertain.

Tamblyn says the property market needs further cuts.

“[Buyers] have been hindered by the uncertain economic environment and job security concerns and further cuts are needed to stimulate the housing market,” he says.