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17 August 2008

Australia's PM warns banks on interest rates

Extract from the Australian Network (17/08/2008):

Australian prime minister, Kevin Rudd is keeping up the pressure on the major banks over interest rates, saying their reputations will be damaged if cuts in the official cash rate are not passed on to customers.

The deputy head of the Reserve Bank, Ric Battellino, has told a parliamentary inquiry in Sydney today that financial turmoil during the past year has made it impossible for commercial banks to keep their rates in line with the official cash rate.

Mr Rudd says the banks will be judged harshly if any future cuts by the RBA are not passed on."

If you're going to produce profit lines like we saw registered yesterday by the Commonwealth Bank, and then in the same breath say if official rates comes down that we may not pass on all of the cut to those who are making mortgage repayments, I think the banks collectively suffer real damage to their reputation."


Extract from The Australian (17/08/2008):

But the Commonwealth Bank, Australia's biggest home lender, and rival ANZ continued to defy calls to guarantee customers would get the full benefit of Reserve Bank rate cuts expected to start as early as next month.

Unveiling a record $4.8billion annual profit, Commonwealth chief executive Ralph Norris said the effects of the world financial crisis were still ricocheting through the bank, raising its own costs.

The nation's lenders have in the past year lifted interest rates faster than the Reserve Bank, taking the standard variable mortgage rate close to 10 per cent, as the fallout from the sub-prime crisis in the US raised their own cost of borrowing funds.

Mr Norris said the RBA's target cash rate, currently at a 12-year high of 7.25 per cent, was only one ingredient in the bank's average cost of funding, which continued to increase despite pressures easing in international debt markets over the past two weeks.

"What we're saying is we'll do our best to pass as much (of any rate cut) as we can," he said.
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