All of the big four banks have announced cuts to their home loan interest rates, after the Reserve Bank dropped its cash rate to a record low of one per cent.
All four big banks have promised to pass on the latest Reserve Bank interest rate cut, but only one of them in full.
ANZ was widely criticised last month when it passed on just 0.18 percentage points of the Reserve Bank of Australia's 0.25 percentage-point cut, so this time the bank is passing on the full amount.
The Commonwealth Bank later announced it was passing on the RBA's rate in full for its interest-only standard variable rate home loan, but will only cut its principal and interest variable rate home loans by 0.19 percentage points.
Meanwhile the NAB announced it would make a 0.18 percentage-point cut to its home loan interest rates.
The NAB and the CBA passed on June's RBA rate cut in full.
Westpac will reduce most variable home loan rates, including those for owner-occupier mortgages, by 0.2 percentage points, although interest-only investors will get a reduction of 30 basis points, after making a similar move in June.
The Reserve Bank's two consecutive cuts have taken its cash rate to a record low of one per cent.
Treasurer Josh Frydenberg said the banks must fall in line.
"The government expects all banks to pass on the benefits of sustained reductions in funding costs," he said in a statement on Tuesday.
Two of the four big banks didn't pass on the full rate cut to customers in June, and product comparison site Canstar says they've only passed on half of the full rate cuts since 2011.
Rival site Mozo estimates the big four banks have pocketed $3.96 billion in extra revenue since 2016 because they've held onto some of the rate cuts.
Mr Frydenberg rejected Labor's suggestion the cut showed the economy was struggling under the coalition.
"The RBA has made clear that it expects the economy to grow at around trend," he said.
Reserve Bank Governor Philip Lowe said the cut would drive jobs growth and stimulate a flagging economy.
"Consumption growth has been subdued, weighed down by a protracted period of low income growth and declining housing prices," he said in a statement.
"Conditions in most housing markets remain soft, although there are some tentative signs that prices are now stabilising in Sydney and Melbourne."
Labor leader Anthony Albanese said the rate cut was a "cry for help" from the Reserve Bank.
Labor wants a planned 2022 change to the 32.5 per cent tax threshold - from $90,000 a year to $120,000 - brought forward, while also putting off further changes planned for 2024.
"If that's good policy in 2022, let me tell you, today's decision by the Reserve Bank screams that that's good policy in 2019," Mr Albanese told Sky News.
But Mr Frydenberg says the five years worth of tax cuts must be "passed in full".
Labor's shadow treasurer Jim Chalmers said the rate cut showed a lack of confidence in the economy.
"A treasurer that looks at a cash rate of one per cent and tries to pretend everything is hunky dory is a rubbish treasurer," he told reporters.
Commonwealth Bank senior economist Belinda Allen said the tax cuts would be worth as much to the economy as two rate cuts.
"If passed this week, we could begin to see the impact on consumer spending from July," she said.
Interest rate set at record low
The RBA is hoping that a second straight monthly reduction in the cost of borrowing will help offset global uncertainty and sluggish domestic wage growth.
The first consecutive 0.25 percentage point cut since 2012 had been widely anticipated by the market after RBA Governor Philip Lowe had suggested one alone would not be sufficient to boost economic growth.
The last cut came a day before the release of another disappointing quarterly GDP result and was the first move in any direction since August 2016.
Dr Lowe on Tuesday noted that, with wage growth still stubbornly low, the outlook for household consumption remained uncertain.
He said US-China trade tariff disputes had also led to expectations of easing monetary policy by major central banks - which would lower the cost of funds for Australia's major banks.
"The uncertainty generated by the trade and technology disputes is affecting investment and means that the risks to the global economy are tilted to the downside," Dr Lowe said.
Figures out last month showed Australia's economy grew by an underwhelming 0.4 per cent during the March quarter as household spending weakened and the property construction downturn rolled on.
He again reiterated that the RBA was trying to boost employment growth and lift inflation back into the range it believes supports healthy economic growth.
Commodity price rises have contributed to a pick-up in activity in the resources sector, while increased infrastructure spending is also helping offset downward pressures.
Dr Lowe last month denied June's decision to cut was a response to a deteriorating economic outlook since the RBA's May meeting, but also noted that a 5.2 per cent unemployment rate and stubbornly low GDP growth indicate that few inroads are being made into the economy's spare capacity.
On Tuesday, he repeated the advice of last month that the RBA board would closely monitor the labour market for signs that further policy adjustments were needed.
The Aussie dollar immediately dipped from 69.79 US cents to 69.70 US cents on the announcement before climbing back to 69.83 US cents by 2:55 pm AEST.