AUSTRALIAN banks are seeing a ”relentless” increase in costs even as they shift their reliance from wholesale funding to deposits, ANZ’s Australian boss Phil Chronican said.
His comments come as the ANZ is later this week expected to follow its big-bank rivals and hold back some of the Reserve Bank’s 25-basis-point interest rate cut.
The Commonwealth Bank, Westpac and NAB last week faced criticism when they each lowered their standard variable mortgages by less than this month’s cut in official rates. CBA and NAB said they would reduce their rates by 20 basis points to 6.6 per cent and 6.58 per cent, respectively, while Westpac cut its rate 18 basis points to 6.71 per cent.
Since the start of the year, the ANZ has been conducting its own monthly review of interest rates. The go-it-alone pricing strategy takes place every second Friday and seeks to break the link in consumers’ minds between official rate moves and the rates charged by the commercial banks.
Mr Chronican told ABC television yesterday the cost of funding had ”gone up and up”, although he noted costs had started to stabilise this year.
Even so, ANZ was currently refinancing borrowings that were made between three and five years ago ”at materially lower costs”.
In addition, the cost of retail deposits had not fallen by as much as the cash-rate target, Mr Chronican said.
Australian banks have been cutting back their reliance on global money markets to fund their lending book since the global financial crisis. Instead, they have been using more deposits to write loans.
Meanwhile, Treasurer Wayne Swan continued to urge disgruntled bank customers to shop around, saying the timing was right for home owners to review their mortgage.
”While government policies play an important role in fostering a competitive market, consumers also play an important role,” Mr Swan said yesterday.
”When a bank decides to pocket some of an interest rate cut on a home loan, it’s betting you’ll put up with it.
”But you don’t have to cop it quietly on the chin. If your bank doesn’t do the right thing by you, tell them, and if they don’t lift their game, look around for a better deal.”
In the past two months, the ANZ has left its rates unchanged without mention of higher costs.
When the Reserve Bank cut official interest rates to 3.25 per cent last Tuesday, it said the banks were having ”no difficulty” in accessing funds, after a recent lift in financial market confidence.
Mr Swan acknowledged some parts of the Australian economy were under pressure from global headwinds, a high dollar and changing consumer behaviour.
However, he said it was ”encouraging” that the much lower interest rates come at the same time as unemployment is low and economic growth is healthy.
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