7.30’s Leigh Sales challenges Treasurer Josh Frydenberg on big banks failing to pass on full RBA rate cut

Leigh Sales has taken Treasurer Josh Frydenberg to task asking why the Government is seemingly powerless to force the banks to pass on the RBA cut.

ABC 7.30 host Leigh Sales has grilled Treasurer Josh Frydenberg over the big four banks’ failure to reduce interest rates in full.

On Tuesday, the Reserve Bank (RBA) announced it would cut the cash rate by a further 25 basis points to a historic low of 0.75 per cent, yet the banks failed to follow suit.

Westpac and NAB cut rates by 15 basis points and ANZ by 14 points. But stingiest of all was Commonwealth Bank that shaved just 0.13 of a percentage point off its interest rate — barely half the amount of the RBA’s rate cut.

“For years now we’ve seen governments of both stripes lecture banks about passing on interest rates in full,” said Sales.

“Let’s level with the viewers. It’s hot air, isn’t it? There is nothing you can actually do about it?”

ABC 7.30's Leigh Sales said Government criticism of the big banks was just “hot air” that didn’t change anything. Picture: ABC.

Mr Frydenberg said it was up to savvy customers to show the banks who was boss.

“We continue to put pressure on the banks and ultimately it is the customers who can vote with their feet and go to their bank and seek the best possible deal. And if not take the business elsewhere.”

The ABC report said if the three full rate cuts since June which added up to 0.75 per cent had been passed onto customers, the average interest rate would now be at 3.18 per cent, yet it was significantly higher. That added up to an average of $972 extra per year for each household.

However, the Treasurer was determined to look on the bright side.

“(The big banks’ cuts are) still going to leave somebody with a $400,000 mortgage more than $1500 a year better off in lower interest payments.

“I also note that five of the smaller lenders have passed on the rate cuts in full. So, the big banks may have thumbed their nose at their customers but some of the smaller lenders have actually done the right thing.”

Sales asked if Mr Frydenberg would put a rocket under infrastructure spending to help the economy go up a gear.

He said Prime Minister Scott Morrison had written to state premiers about bringing infrastructure projects forward.

However the Treasurer said the much talked about tax cuts, coming through as tax returns are completed, may already be doing their bit — we just haven’t noticed it yet.

“More than $18 billion has made its way from the Tax Office to hard working Australians and it was not reflected in the June accounts because the legislation passed after that date.

“Let’s wait and see as to the next set of economic numbers but the Australian economy continues to grow.”

With China and the US locked in a trade war, however, a few hundred dollars of tax cuts was just a drop in the fiscal ocean.

Perhaps the Government should be less concerned about a surplus and divert that money elsewhere to stimulate the economy, asked Sales.

“Returning the budget back into surplus is, of course, good news because it means that we’re getting our spending under control.

“But also that we’re getting more people into work, which means that they are moving off welfare and that is the real success behind our balanced budget, the first in 11 years.”

Besides, said Mr Frydenberg, that was a promise the Coalition took to the election and they were jolly well going to fulfil it.

Treasurer Josh Frydenberg said customers could take their banking business elsewhere. Picture: ABC.

How about diverting that surplus money to drought stricken farmers? What about that, asked Sales?

There was already billions going in that direction, said the Treasurer: “We have $7 billion committed to immediate needs for income support for local governments, support for not-for-profit organisations who distribute vouchers to farmers and long term investment in water infrastructure to build the drought resilience of the communities.

“But having met with a number of community leaders and local shop owners and others across Inverell and now in Warwick, I have to say I have been struck by just how much these people are hurting.”

Earlier today, Mr Morrison laid into the banks and accused them of profiteering.

“They never learn, they honestly never learn and it’s disappointing,” he said in an interview on Sky News this afternoon.

“All mortgage holders have a reason to be disappointed in the banks basically profiteering.”

The banks have failed to pass on the full RBS rate cut. Picture: AAP Image/Dan Himbrechts.

ANZ retail and commercial executive Mark Hand said the major lender was forced to weigh up the needs of its customers in a period of extremely low interest rates with the performance of its business.

“While we recognise many customers will use this as an opportunity to pay down their existing home loans faster, we hope this provides the economic stimulus the Reserve Bank is wanting to generate,” he said in a statement.

“We have also announced a new fixed rate of 2.98 per cent for homeowners paying principal and interest with either two or three year terms available from tomorrow. This is the lowest residential rate on record for ANZ.”

But Mr Morrison said it will now be up to Australians to express their own displeasure at the response from the banks.

“They’ll put their explanations out there and the public will judge them based on what they say but I’m not buying it,” he said.

Many of the smaller lenders have enacted the full reduction, however, including Athena, Homestar, Auswide, and UBank. The latter of which is part of NAB which has refused the full cut for customers who have a home loan with its main brand.