Wong to banks: Think carefully on rates

8 Feb 2012, 6:25 pm   -   Source: AAP

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Finance Minister Penny Wong says retail banks must think carefully about their customers when making decisions on their lending rates.

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Finance Minister Penny Wong hopes retail banks think carefully about their customers and the wider community when making decisions on lending rates, amid fears increases may be on the way.

The Reserve Bank of Australia (RBA) left the official cash rate unchanged at 4.25 per cent at Tuesday's first board meeting of the year, when the central bank was widely expected to cut the rate again by 25 basis points.

In the run-up to that meeting, the major banks warned they might not be able to pass on any official reduction in full because of increasing costs linked to offshore fund raising.

With ANZ Banking Group due to make its own statement on lending rates on Friday, there are concerns it could hike and encourage other banks to do likewise.

Senator Wong said decisions on lending rates were up to individual banks.

"But in making that decision I would hope they would think carefully about their customers and the views of broader community," she told the National Press Club on Wednesday.

"They are big businesses that operate within the community, and there are expectations Australians do have about how they operate."

Prime Minister Julia Gillard said she would understand people getting angry if they didn't see proper and fair treatment flowing through to them from their bank.

"We as a government have made it easier than ever before to take their business, walk down the road and get a better deal," she told reporters in Canberra.

Australian Greens MP Adam Bandt did not agree that political interference was a threat to the banking system.

"The (big banks) say they want government and politicians kept out of banking, and soon as they get into trouble, they are the first ones to come cap and hand, asking for assistance," Mr Bandt told reporters in Canberra.

The Greens are pushing parliament to approve private legislation that aims to force banks to offer "tracker" mortgages among their suite of products that have rates that rise or fall in line with RBA decisions.

Independent MP Bob Katter has questioned whether the decisions of the RBA are in keeping with its charter in helping to maintain full employment when it has a cash rate well above those in other advanced economies.

The decision to leave the rate unchanged resulted in the Australian dollar jumping to a six-month high of 108 US cents, which the Queensland MP said would price more Australian goods and services out of the world market.

"Would you not agree that the continuation of fight-inflation-only policy jeopardises hundreds of thousands of jobs," Mr Katter asked Treasurer Wayne Swan in parliamentary question time.

He compared the RBA's cash rate to those in the US (0.13 per cent), Japan (0.5 per cent) and the EU and Canada (1.0 per cent).

Mr Swan said that both fiscal and monetary policy were appropriate and reflected the strength of the Australian economy relative to the rest of the world.

He reminded Mr Katter that in the countries he mentioned there were "very, very high" levels of unemployment and "very big problems" in terms of sovereign debt.

"We don't want those problems in this country. We haven't got those problems in this country, because we have deployed fiscal and monetary policy in an appropriate way."

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