Just read the following article from news.com.au. I'm disappointed but not surprised that the banks are not likely to fully pass on future interest rate cuts.
Future rate cuts won't be passed on By Scott Murdoch and Rebecca Urban September 19, 2008 01:46am
AUSTRALIAN banks are unlikely to pass on the benefits of future interest rate cuts to customers as concerns for the deteriorating global financial markets grow.
While banks were quick to follow the Reserve Bank's rate cut earlier this month - its first in six years - experts predict that they will resist cutting rates for the remainder of the year in a bid to offset their own borrowing costs.
The Reserve Bank is set to cut interest rates in October and November to stimulate the slowing economy and protect Australia from the global financial market fallout, The Australian reports.
Economists are also tipping a further two rate cuts over the coming 12 months.
But this week's shock collapse of Wall Street investment bank Lehman Brothers and the US Government's emergency bail-out of insurance behemoth American International Group have sparked a sharp liquidity crisis, with banks moving to hoard cash as market volatility worsens.
"It's difficult for the banks to pass on an interest rate cut from the RBA when their sources of funding have gone through the roof," said Adam Carr, a senior economist with interdealer broker ICAP. "With global markets the way they are and the RBA cutting, the banks could think this is a good opportunity to lift margins."
Such a move could attract further ire from banking customers already angered by moves by several lenders to hike rates independently from the central bank over recent months.
The warning on interest rates coincided with steep declines on the Australian share market, which spurred a renewed round of margin calls to investors who have borrowed to invest in shares.
Future rate cuts won't be passed on By Scott Murdoch and Rebecca Urban September 19, 2008 01:46am
AUSTRALIAN banks are unlikely to pass on the benefits of future interest rate cuts to customers as concerns for the deteriorating global financial markets grow.
While banks were quick to follow the Reserve Bank's rate cut earlier this month - its first in six years - experts predict that they will resist cutting rates for the remainder of the year in a bid to offset their own borrowing costs.
The Reserve Bank is set to cut interest rates in October and November to stimulate the slowing economy and protect Australia from the global financial market fallout, The Australian reports.
Economists are also tipping a further two rate cuts over the coming 12 months.
But this week's shock collapse of Wall Street investment bank Lehman Brothers and the US Government's emergency bail-out of insurance behemoth American International Group have sparked a sharp liquidity crisis, with banks moving to hoard cash as market volatility worsens.
"It's difficult for the banks to pass on an interest rate cut from the RBA when their sources of funding have gone through the roof," said Adam Carr, a senior economist with interdealer broker ICAP. "With global markets the way they are and the RBA cutting, the banks could think this is a good opportunity to lift margins."
Such a move could attract further ire from banking customers already angered by moves by several lenders to hike rates independently from the central bank over recent months.
The warning on interest rates coincided with steep declines on the Australian share market, which spurred a renewed round of margin calls to investors who have borrowed to invest in shares.
