ID :
16191
Sun, 08/17/2008 - 19:30
Auther :
Shortlink :
http://m.oananews.org//node/16191
The shortlink copeid
Follow Reserve down, Swan tells banks
(AAP) Australia's largest bank says it is looking forward to a cut in interest rates as Treasurer Wayne Swan warns it and other lenders they have no excuse but to follow the Reserve Bank's expected lead next month.
Most economists believe the central bank will cut the official cash rate by between0.25 and 0.50 of a percentage point after its September board meeting.
Retail banks won't guarantee home loan interest rates will follow the Reserve down,saying global funding costs are affecting loan book margins.
The Commonwealth Bank of Australia says the costs of its mortgage book have risen 15per cent because of global funding, while income has fallen five per cent.
"Which just underscores the fact that our funding costs were higher than what weactually recovered," CEO Ralph Norris told ABC Television.
"We're a few basis points behind at this point so obviously (we're) looking forwardto the interest rate cuts that are forecast for next month.
"It's going to be an interesting situation to see exactly where our funding position is at that point." Mr Swan acknowledged borrowing costs on international financial markets had forcedthe banks to put up their rates outside the official Reserve bank "cycle".
But a substantial proportion of their borrowing costs would reduce when the Reservebank moved rates down, he said.
"I think it's all pretty simple - when the official cash rate goes down, if it goesdown, then borrowing costs should follow," Mr Swan told ABC TV.
"As Reserve Bank assistant governor (Philip) Lowe said earlier in the week, the banks have simply no excuse, no excuse at all, for not following the official cashrate down.
"So, I think the public have got a right to expect when official rates come down, then rates set by the banks come down as well." Mr Swan said short-term interest rates were coming down on international financialmarkets.
"So, in the longer term, if those rates continue to come down then the banks should be passing on those benefits as well when it comes to their unofficial cash rate rises that occurred over the last few months." The major banks have pushed up their home lending rates by about one percentagepoint this year, double the Reserve's two official cash rate hikes totalling 0.50.
Most economists believe the central bank will cut the official cash rate by between0.25 and 0.50 of a percentage point after its September board meeting.
Retail banks won't guarantee home loan interest rates will follow the Reserve down,saying global funding costs are affecting loan book margins.
The Commonwealth Bank of Australia says the costs of its mortgage book have risen 15per cent because of global funding, while income has fallen five per cent.
"Which just underscores the fact that our funding costs were higher than what weactually recovered," CEO Ralph Norris told ABC Television.
"We're a few basis points behind at this point so obviously (we're) looking forwardto the interest rate cuts that are forecast for next month.
"It's going to be an interesting situation to see exactly where our funding position is at that point." Mr Swan acknowledged borrowing costs on international financial markets had forcedthe banks to put up their rates outside the official Reserve bank "cycle".
But a substantial proportion of their borrowing costs would reduce when the Reservebank moved rates down, he said.
"I think it's all pretty simple - when the official cash rate goes down, if it goesdown, then borrowing costs should follow," Mr Swan told ABC TV.
"As Reserve Bank assistant governor (Philip) Lowe said earlier in the week, the banks have simply no excuse, no excuse at all, for not following the official cashrate down.
"So, I think the public have got a right to expect when official rates come down, then rates set by the banks come down as well." Mr Swan said short-term interest rates were coming down on international financialmarkets.
"So, in the longer term, if those rates continue to come down then the banks should be passing on those benefits as well when it comes to their unofficial cash rate rises that occurred over the last few months." The major banks have pushed up their home lending rates by about one percentagepoint this year, double the Reserve's two official cash rate hikes totalling 0.50.
