Bill Shorten says PM Malcolm Turnbull is ‘weak’ on banks failing to pass on full rate cut

WITH the big banks failing to pass on the full rate cut to homeowners, Bill Shorten says the PM is too weak on the issue.

The four big banks all failed to pass on the full interest rate cut despite the Reserve Bank’s decision.

BILL Shorten condemned “empty lectures” to banks as their refusal to pass on full interest rate cuts ramps up chances of a Royal Commission into the finance sector.

Mounting disenchantment with banks within the Coalition — particularly among Nationals — and the arrival of a feisty Senate cross bench could be shifting the odds.

The Labor leader accused Prime Minister Malcolm Turnbull of a “weak and pathetic” chastisement of big banks.

“The decision by the banks to hold back the rate cut from hardworking Australians does nothing to help their credibility,” said Mr Shorten.

“Mr Turnbull will give the big banks another empty lecture and a tax cut. I’ll give the banks a Royal Commission.”

The Reserve Bank this week cut official interest rates by 0.25 percentage points to 1.25 per cent after a low inflation rate roused worries about the economy’s performance.

The four big banks have declined to pass on the full rate cut to borrowers, denying mortgage holders a saving of around $20 a month.

They have instead boosted the return to depositors and share holders, arguing they need to maintain their financial security.

Mr Turnbull yesterday demanded the banks explain their decision but, like Labor prime ministers before him, was unable to force any change of policy.

Mr Shorten today said Mr Turnbull’s demands had been empty talk and warned him of rebels on the government’s backbench.

Homeowners would save about $20 a month if the rate cut was adopted by all banks. Picture: Glenn Hunt/Getty Images

“Yet again he has just wagged his finger at them and delivered another empty lecture. He is too weak and his government is too divided to stand up to the banks,” he said.

“Confidence and trust in the financial services industry has been eroded by a wave of unethical and illegal behaviour. That’s why Labor wants a Royal Commission.

“The RBA cut the cash rate to help grow the economy and support households — not to boost the profits of the banks. Australians are rightly angry at this behaviour.”

Last night former Reserve Bank board member John Edwards said “some kind of inquiry” could be warranted, and the full rate should be passed on.

“I think it’d be helpful for the Australian economy and I rather think that’s what the RBA would have intended,” he said on ABC’s 7.30.

“When you make a decision to cut by 25 basis points, your intention is to effect household demand and lending and that effect is going to be muffled.”

On an inquiry Mr Edwards said: “I think we do need to do a lot more work on the quality of financial advice being offered by banks, particularly because they’ve become such a huge presence in funds management and because the population is ageing.

“Their authority in that area is becoming vastly bigger than it was even a decade ago and I think that’s where we need to get a better idea of what the culture is and how good the performance and practice is.”