SYDNEY (Reuters) - Australian Prime Minister Scott Morrison said on Wednesday he was disappointed in the country’s major banks for “profiteering” by denying borrowers the full benefit of the latest central bank monetary easing.
On Tuesday, the Reserve Bank of Australia (RBA) cut its benchmark rate for a third time this year by 25 basis points (bps) to an all-time low of 0.75%.
The four biggest lenders - Commonwealth Bank of Australia (CBA.AX), Westpac Banking Corp (WBC.AX), ANZ Banking Group (ANZ.AX) and National Australia Bank - responded by lowering their variable mortgage rates by between 13 bps and 15 bps.
“They never learn and it’s disappointing,” Morrison told Sky TV in an interview, referring to banks. Borrowers “have a reason to be disappointed in the banks basically profiteering,” he added.
Banks “have put their explanations out there and the public will judge them based on what they say but I’m not buying it.”
As the cash rate shrinks, banks are grappling with maintaining lending margins and profitability, making monetary policy less effective with interest rates headed close to zero.
The banks’ decisions have also added fuel to a debate over how much lower the RBA can push interest rates before it starts to hurt the health of financial institutions so much that they stop lending, in turn damaging the economy.
Banking analysts have warned that the three rate cuts this year and any more central bank easing may further squeeze Australian banks’ net interest margins.
Nearly 80% of Australian housing loans and a large chunk of corporate credit are tied to variable interest rates.
In a statement on Wednesday, ANZ pointed to the “dynamics of record low interest rates” for its decision to only partially pass on the rate cut.
“This was a considered decision balancing the needs of our customers in a low rate environment as well as the performance of our business and our role in stimulating the economy,” ANZ said.
The other three major banks have expressed similar views.
Reporting by Swati Pandey; Editing by Richard Borsuk