Scott Morrison failed to ‘beat his chest’ over rates said Chris Bowen
3 August 2016
Malcolm Turnbull has called out the chief executives of Australia’s largest banks after they passed on barely half of yesterday’s official interest rate cut in favour of supporting their own profits.
The Reserve Bank has lowered the official rate at which it supplies cash to banks by 25 basis points to a record low 1.5 per cent — half the rate described by then-treasurer Wayne Swan as being an “emergency” level during the 2008-09 global financial crisis.
Although the Prime Minister would not speculate on suspected collusion by the banks in their response to the rate cut, he heaped pressure on the institutions to pass on the total saving.
“They should do that, and if they are not prepared to do it, as appears to be the case, then their chief executives should explain very clearly to the Australian people and their customers why they have not done so,” Mr Turnbull told reporters in Canberra.
“They should be fully accountable and it is up to them. They are big institutions, they operate with a very substantial social licence, and they owe it to the Australian people and their customers to explain fully and comprehensively why they have not passed on the full rate cut.”
Mr Turnbull’s rhetoric was more bullish than that of Treasurer Scott Morrison, whom Labor today accused of failing to match his own “chest beating” pre-election rhetoric about standing up to the big banks.
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Mr Morrison yesterday said it was up to the banks to explain their response to the Reserve Bank rate cut.
“It’s their decision and they have to explain their decision to their customers and I’m saying there is no cost of funds issue offshore that would prevent them from passing on that full rate,” the Treasurer told Sky News.
Chris Bowen, the opposition treasury spokesman, today said Mr Morrison’s new rhetoric jarred with efforts to “beat his chest” before the election about standing up to banks.
“The Treasurer has no special powers in a deregulated financial market to ensure full flow-through, but the Treasurer before the election beat his chest and said that he would call the banks in and make sure they didn’t pass on increased compliance costs,” Mr Bowen told ABC radio.
“Yesterday again he was silent on this issue, so he had one approach before the election and another approach after.”
Mr Morrison, announcing an additional tax on banks in April to fund financial sector law enforcement, pressured the institutions not to pass the additional cost on to customers.
“I would be furious if I thought this was being sought to be passed on … and you can be absolutely assured they will be getting that message from me and in fact would already have got that message from me,” he said at the time.
Mr Bowen said the interest rate cut underscored his claim during the election that the Treasury’s key budget assumptions were “unrealistic and heroic”.
“It was always inevitably the case, putting aside yesterday’s decision, that those forecasts would be downgraded in the next update whether it was iron ore prices which were highly optimistic, whether it was nominal wages growth which was just simply not realistic at all,” he said.
“The last budget … was filled with a range of just unrealistic forecasts to get them through an election, to have a chimera of a return to budget surplus.”
Mr Bowen, asked whether Labor’s proposed royal commission into the banks would shake brittle confidence, said it was in Australia’s interest to have a “good, strong and profitable financial system ... that works for all”.