KARL STEFANOVIC:
Well finally all the big four banks have responded to the latest interest rate cut. Both sides of politics have been pressuring them to pass the cut on in full, after the Reserve Bank delivered a 0.25 per cent cut to the official cash rate, bringing it to a new low of 0.75 per cent. Each of the big four has dropped its rates, but none by the full amount. Commonwealth Bank was the first to move. They dropped their variable home loan rate by 0.13 percentage point last night. NAB followed suit, with a cut of 0.15 per cent. Westpac also cut its variable home loan rate by 0.15 per cent. And last to go was ANZ, just as we came on air today, which will cut its mortgage rate for owner occupiers paying principal and and interest by 0.14 per cent, and to interest only home loans by 0.25 per cent. So, in short, none of the big four banks have passed the cut on in full. Now, there is no obligation for them so follow the Reserve Bank's lead obviously, they can set their rates however high or low they want. But after vowing to be better corporate citizens in the wake of the Royal Commission, it was hoped the banks would do everything they can to reduce the burden on customers with a mortgage. They're starting a long way behind, aren't they? And still, and still they delay. Well, now it appears they have missed the boat once again. Treasurer Josh Frydenberg is on the line. Treasurer, good afternoon.
JOSH FRYDENBERG:
Good afternoon to you, Karl.
KARL STEFANOVIC:
This is making you fairly angry, I'd imagine?
JOSH FRYDENBERG:
I'm very disappointed, because the banks have to explain to their customers why they haven't passed on this rate cut in full. For a family with a four hundred thousand dollar mortgage, a full twenty five basis point rate cut would be worth around $720 less a year in interest payments, so that's not insignificant. And, we would obviously expect the banks to answer to their customers as to why they haven't passed this rate cut on in full.
KARL STEFANOVIC:
We've just had a Royal Commission where all the big banks promised to be better corporate citizens, haven't we? They continue to not be. Do you, you can't do anything about it can you?
JOSH FRYDENBERG:
Well, look, this is a pattern of behaviour from the banks. I mean, when Labor was last in office, there were rate cuts fourteen times and only five of those times where the rate cuts were passed on in full, and so we would expect the banks to do better when it comes to passing on the full benefits of these rate cuts.
KARL STEFANOVIC:
You can't force them to do anything though, can you?
JOSH FRYDENBERG:
We're not about to legislate to do that. It is a market. But your listeners, Karl, can actually shop around, get the best possible deal, because we know some of the smaller lenders have actually reduced their rates by the full twenty five basis points.
KARL STEFANOVIC:
How big of a concern is it for you that the rate cuts so far haven't stimulated the economy? How much of a concern is it becoming?
JOSH FRYDENBERG:
Well, what we have done is passed tax cuts, and they are now playing their way out across the economy, with more than $18 billion making its way into the pockets of Australians. We're spending more money on infrastructure than even before, and the housing market has stabilised. So, rather than talk down the Australian economy, people need to understand that we continue to grow, and that while other countries in the world have had negative economic growth, the Australian economy has had a better performance than that.
KARL STEFANOVIC:
The problem is that any money they've got so far in any savings and also in the tax cuts, they've used to pay down their own debt. And it looks like they're going to continue to do that in terms of credit debt and their own mortgages.
JOSH FRYDENBERG:
Well, those are decisions for individual Australians.
KARL STEFANOVIC:
It doesn't help the economy in stimulating the economy, does it?
JOSH FRYDENBERG:
Well, it all does. Because, while some people are spending money at the local shops or with their local tradie or taking a holiday within the country, others are, as you say, are paying down their mortgage, and that means lower interest payments and lower interest payments will then free up more money in people's pockets to ultimately spend in the economy. It will just be a question of timing.
KARL STEFANOVIC:
Where's the stimulation going to come from?
JOSH FRYDENBERG:
Well, we have seen more money come into the pockets of Australians through the tax cuts, we have seen the infrastructure spending. So, that is going to help the economy over time. But also, we want to deliver the Budget surplus, as promised. And we have delivered the first balanced Budget in eleven years. So, while the Labor Party went to the last election talking about $387 billion of higher taxes, we talked about lower taxes, and that's what we're delivering.
KARL STEFANOVIC:
Josh, just before we go. Many retirees rely on interest on their savings to get by. This latest rate cut is just not good news for them at all.
JOSH FRYDENBERG:
Well, you're right that people who put their money in the bank will now get a lower return from those rate cuts, but at the same time, people who are borrowing, particularly those who, either are expanding their business or looking to buy a first home, they will see benefits. And we have seen a jump in the number of home loan approvals, and that is good news for home buyers and people with a mortgage.
KARL STEFANOVIC:
There seems to be a lot of negativity around about the Australian economy at the moment, and you've got no reason to believe that we should be worrying at all?
JOSH FRYDENBERG:
Well, my view, and this is also the Reserve Bank's view, is that the labour market has been strong, we've got a record number of Australians who are in a job, and we've got our AAA credit rating, and we've now delivered a balanced Budget, so people should not be talking down the economy, people should be realistic, as we are, about the challenges we face, like the trade tensions between China and the US, like the, you know, the terrible drought and floods that we've seen across our country. But we can also be very confident that we're very well prepared for the challenges ahead.
KARL STEFANOVIC:
I think people see the Reserve Bank reducing interest rates even further as it nears on zero now, and they think 'what is going wrong?'.
JOSH FRYDENBERG:
But Karl, that is a pattern than we've seen from central banks right across the world. And in their statement yesterday, the Reserve Bank said that they took in to account the movement in global interest rates. And just a week ago, the Reserve Bank Governor made a speech where he said the Bank could not ignore that movement to lower interest rates around the world.
KARL STEFANOVIC:
Josh, just before we go. On another matter, does the Australian Government have anything further to add in relation to this Mueller investigation? Does the investigation have everything it needs to? Or everything that we have in relation to the compiling of any of the evidence that Alexander Downer brought to the Australian Government?
JOSH FRYDENBERG:
Well, Karl, firstly, the Government has made a statement and that has been very clear in terms of our position. And that has been we've always been ready to assist, to shed a light on some of the matters under investigation, and that was what was confirmed in that conversation.
KARL STEFANOVIC:
Nothing more to add?
JOSH FRYDENBERG:
Nothing more to add.
KARL STEFANOVIC:
Good to talk to you this afternoon, Josh, and keep at those banks for us.
JOSH FRYDENBERG:
Thank you.