Major strikes down hopes for rate cut outside RBA

by AB08 Jul 2013

Westpac CEO, Gail Kelly, has struck down hopes of an interest rate cut outside the RBA cycle, despite growing speculation that major lenders would consider the move.

At the launch of the 100 Women of Influence awards, Kelly told an Australian Financial Review reporter that banks’ own funding costs are rising.

“Funding costs had been on a lovely decline earlier in the year and you could see that actually coming through; the funding costs were lower than they’d been a year ago and two years ago and three years ago. Right at the moment, they’ve picked up again. In fact, people are not out there raising money through off-shore wholesale funding opportunities.”

“Unfortunately, it’s still a pretty volatile world out there and I guess we shouldn’t be surprised – the GFC is enormous in its impact. Any financial crisis has a long-run impact. We’ve probably got a few more years of real volatility to weather.”

Kelly says credit demand is also ‘very low’.

“I recall the decade before the GFC…overall credit growth was about 12.6%. That’s three times GDP growth. Credit growth in the last couple of years has been 3%. It’s not going to go back up to those sorts of levels, it’s going to remain at around GDP level.”