NAB won't commit to rate cuts

NAB says it can't commit to passing on any further rate cuts because of increased volatility in international credit markets.

NAB won't commit to rate cuts

NATIONAL Australia Bank (NAB) says it can't commit to following any further official rate cuts by the central bank that occur in coming months, because of increased volatility in international credit markets.

"In this time of unprecedented volatility it would be hard for us to make a commitment at this stage as to whether we can pre-emptively pass on a 25 basis point rate cut,'' NAB general manager of mortgages Steven Shaw told a House of Representatives economic committee hearing in Sydney.

Mr Shaw said that out of the past eight months, the last two weeks had seen the greatest market volatility with bank funding cost rising to 78 basis points yesterday, from 30 basis points on September 3.

He said NAB was able to pass on the Reserve Bank of Australia's 25 basis points rate cut this month because there had been two to three weeks of stability in funding markets leading up the September 2 reduction.

In response to NAB's comments, committee chairman Craig Thomson said he was disappointed that the bank hadn't committed to passing on further rate cuts, but he said the Federal Government's position was that it expected all the banks to do so.

He also commended NAB for being the first bank to commit to follow the RBA's September move.

Mr Shaw also said that there was robust competition in the Australian mortgage market, which was illustrated by the fact that the banks did not pass on higher funding costs to their customers for five months earlier this year.

The RBA this month cut the cash rate to sever per cent, from 7.25 per cent.

Financial markets expect it to make another cut in October.