ANZ has become the first major bank to move in the wake of the RBA's rate cut, followed closely by the other majors and two second tiers.
Amid mounting government pressure on the banks, ANZ has announced it will pass on the full 25bp cut delivered by the Reserve Bank on Tuesday. ANZ Australia chief executive Philip Chronican blamed increased funding pressures for the delay in the bank's decision.
"In the face of the economic and banking crisis in Europe, our decision on the size of the interest rate change has been one of the most difficult we have made in recent times. Retail banking margins have been contracting as the cost of funds has progressively risen over the last six months," he said.
Chronican vowed that ANZ would now announce its rate decisions on the second Friday of each month, but argued that bank funding costs were becoming increasingly detached from moves by the RBA.
"This provides a measure of predictability for customers on when rate changes will occur and it provides us with the flexibility to reflect movements in funding costs across the full
spectrum of funding sources – not solely in response to the Reserve Bank’s cash rate," Chronican said.
The rate cut will come into effect from 16 December, and will take the bank's standard variable rate to 7.30%. Chronican also announced a special two-year fixed rate offer of 5.95%, to be made available from 12 December.
Both ING Direct and Bankwest followed the move by ANZ within hours. Both banks passed on the full 25bp cut, dropping ING Direct's standard variable rate to 6.62% and Bankwest's to 7.20%.
The other majors also bowed to pressure following the ANZ move, with Westpac, CBA and NAB all announcing they would pass on the full rate cut. Westpac's subsidiary brands, BankSA, St. George and Bank of Melbourne also passed on the cut.
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