Banks must pass on rate cut: businesses
Industry groups are demanding banks play their part and fully pass on the Reserve Bank of Australia's (RBA) 50 basis point cut in the cash rate.
The RBA's decision to reduced the cash rate by 50 basis points to 3.75 per cent on Tuesday was the largest single cut since February 2009, and the first time it had lowered interest rates since its December 2011 board meeting.
The RBA said the large reduction was "necessary in order to deliver the appropriate level of borrowing rates".
But business groups are worried the retail banks won't fully pass on the cut to borrowers.
Australian Chamber of Commerce and Industry chief executive Peter Anderson urged them to be sensitive to the difficult financial circumstances faced by customers.
"The banks have to play their part," he told reporters in Canberra on Tuesday.
"If the retail banks do not pass this decrease on in full, they will be placing themselves above the Reserve Bank.
"That is not a responsible position for our retail banks to take."
Australian Retailers Association president Roger Gillespie said a 50 basis point cut to borrowing rates would help the local retail sector, which has been struggling because of low consumer confidence and a surging Australian dollar.
"Over the past couple of months, retailers have paid for the big banks' greed after they raised interest rates despite the RBA's hold on the cash rate in March and April," he said in a statement.
"Retailers are today calling on the banks to follow the RBA's lead."
Master Builders Australia chief executive Wilhelm Harnisch said the RBA should not rule out further rate cuts in 2012, to ensure a sustainable recovery in the building industry.
Mr Harnisch also called on the banks to cut lending rates by the full amount to help rekindle home buyer interest and boost confidence.
"There would be no justification for the banks to delay or withhold the reduction," he said.
Australian Industry Group chief executive Innes Willox said the rate cut will help industries on the wrong side of the resources boom.
"A full pass-on of the cut by banks to business and household borrowers is essential if the move is to play a part in lifting the economy from its slump," he said.
Meanwhile, Mr Anderson, commenting on the recent political instability in Canberra, said such uncertainty was "undesirable" for business confidence.
"I would urge our political parties and political leaders to focus on getting the job done," he said.
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