Change bank if it won’t cut rates

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Not only in Australia, this appllies to all the major banks all over the world, saying that they’re struggling but recording booming profits and rewarding their chief executives with generous pay rises while at the same time cutting jobs.

AUSTRALIA’S big banks are profitable and their customers would be angry if they failed to pass on an interest rate cut in full, Wayne Swan says.

In a pre-emptive strike ahead of the Reserve Bank of Australia decision tomorrow on whether to make a third successive cut to the official cash rate, the Treasurer warned banks it was now easier than ever for dissatisfied customers to take their business elsewhere.

He said the banks were saying they should have a right to maintain huge profitability forever, irrespective of market conditions.

The official cash rate stands at 4.25 per cent, with almost all market analysts tipping a 25 basis point cut to four per cent tomorrow.

Mr Swan said bank net interest margins were back where they were before the global financial crisis and return on equity was unlike that of just about any of their peers elsewhere in the world.

“But the banks are making it very clear that they’re prepared, perhaps, to do a range of things, to keep that huge profitability in place,” he told ABC TV.

“Their customers will be very angry if they don’t pass (rate cuts) through in full. I say to their customers, `have a look around, you’ve got a greater capacity to shop around now than you’ve ever had before’.”

Mr Swan released Treasury data showing banking sector reforms, including bans on mortgage exit fees, was encouraging more people to shop around.

In the five months since the reforms, 320,000 households had taken out no-exit-fee loans. From July 1, customers can switch deposit accounts with the stroke of a pen.

“Lenders now have to win the loyalty of their customers with good service and competitive lending rates. Banks can no longer assume that once a customer signs on the dotted line, they’ll stick with them,” Mr Swan said.

Opposition treasury spokesman Joe Hockey disputed Mr Swan’s claim that families were paying less in interest than they were under the Coalition.

“Effective interest rates paid by homebuyers and small businesses were lower under the coalition from 1996-2007 than they have been under Labor since the 2007 election,” he said.

ACTU president Ged Kearney said Australia’s big banks recorded booming profits and rewarded their chief executives with generous pay rises while cutting jobs.

“Australia’s big banks are not struggling,” she said.

“It is crocodile tears for them to be crying poor and even to be contemplating refusing to pass on an interest rate cut at the same time as they are hurting so many workers’ livelihoods.”