The Reserve Bank’s decision to cut the cash rate by a quarter of a percentage point one week ago today was meant to be a moment of relief for households.
Within moments of the announcement, the Big Four banks lined up to declare they would pass it on in full – issuing press releases and pushing out carefully rehearsed lines about helping Australians through tough times.
Yet once the headlines faded, the reality was exposed for what it always is: another stitch-up.
The Commonwealth Bank and ANZ will not implement the cut for variable mortgage holders until August 22, this coming Friday. NAB not until next Monday, and Westpac – last of all – on August 26.
The banks trumpeted their generosity the very day the RBA moved, but they delayed actually passing on the benefit to borrowers for nearly a fortnight. Why?
Because the delay leaves mortgage holders paying the higher rate for longer, earning these highly profitable institutions tens of millions of dollars more at the expense of homeowners. It’s an utter disgrace.
The argument the banks falsely try and run is that it takes time, administratively, to make the cuts. But that’s rubbish.
The real reason is profits at the expensive of ordinary Australians.
As many as 70 to 80 per cent of mortgage holders are with the Big Four banks… And Westpac is the worst offender – not cutting its variable rate until August 26
In the meantime, the banks moved swiftly to cut the return on savings accounts, stripping interest from depositors almost immediately.
It’s proof that their line that it ‘takes time’ to implement the rate cut is completely false.
They cut savings interest rates quickly because doing so adds to their profits, reducing the returns on anyone with money earning interest in the bank.
All of this is a legal scam the politicians should shut down.
Borrowers keep paying at the old higher rate while savers are punished with lower returns. The banks’ margins fatten during the lag time, and no one in government seems prepared to do anything about it.
The excuses are familiar: outdated IT systems, complex adjustments, logistical delays.
Yet many smaller, newer lenders manage to pass on cuts instantly, sometimes within minutes. Unfortunately the overwhelming majority of mortgage holders – estimates vary between 70 and 80 per cent – bank with the Big Four.
The truth is that the Big Four are not technologically incapable, they are simply unwilling to surrender the extra profits that come from stringing out the process.
By dragging their heels, they quietly pocket wads of your cash while congratulating themselves for passing the cut on ‘in full’, avoiding the wrath of the politicians in the process.
What makes this worse is how routine it has become. The PM and Treasurer mumble about keeping an eye on the banks but never act.
Regulators shrug their collective shoulders, treating the practice as business as usual. The public barely blinks at the ruse anymore, accustomed to being fleeced.
All the while, households under pressure from cost of living pressures continue to shoulder the burden of a system tilted against them.
This conduct would be called misleading and deceptive in any other sector. Yet when it comes to the banks, it’s tolerated.
The conduct of the big banks would be considered misleading and deceptive in any other sector… but when it comes to the big banks, it’s tolerated
That is why it has to be called out. If the government won’t call this out, the opposition should.
The banks have made an art form out of dressing up self-interest as benevolence.
They want the reputation boost of announcing immediate relief, but they refuse to deliver it until the maximum profit has been wrung from borrowers and savers alike.
Make no mistake, senior executives within the banking sector have told me about the meetings they have when deciding the timing of passing rate cuts on to borrowers.
They specifically strategise about how long they can wait before the blowtorch might be applied to them publicly.
It’s all about maximising profits. A strategy that relies on inertia from Canberra and complacency from regulators.
And surprise, surprise, when rates are rising and the RBA lifts the cash rate rather than cuts, the banks pass that on to mortgage holders immediately, instead delaying the rise for savings account holders.
We saw that time and time again during the era of high inflation.
Enough is enough. The government needs to stop playing along with the charade and pass laws for genuine accountability.
If a rate cut is passed on, it should mean exactly that: effective from the date of the RBA’s decision, not weeks later.
Let’s not forget Australian banks enjoy government protections via guarantees that prop up their credit ratings. The result is a windfall measured in the millions every single day.
Here’s an idea for your round table, Jim Chalmers — why not force the big banks to immediately pass on Reserve Bank cuts to borrowing rates. Above, the Treasurer with Anthony Albanese and Finance Minister Katy Gallagher on Tuesday morning
Today the Treasurer starts his productivity round table to discuss ways of cutting red tape.
While that’s necessary, it should use the threat of more red tape to tie banks to honouring rate cuts when they announce them as a means of locking in productivity improvements elsewhere.
If savings rates are slashed instantly, borrowing rates should fall at the same pace.
The current set-up is nothing more than an orchestrated rip-off, enriching the banks at the expense of the rest of us.
The banks will not change their collective behaviour voluntarily.
They have shown time and time again that they will squeeze every last cent out of the gap between rhetoric and reality.
The only way to end this cycle is to shut it down through regulation, to force honesty where there is now only spin.
Because what is happening now is not some minor quibble or technical inconvenience.
It is a systematic rort.
