Swan takes credit for rates drop
TREASURER Wayne Swan says the Reserve Bank's decision to cut the cash rate for a second consecutive month is an endorsement of the Federal Government's determination to drive the budget back to surplus.
The RBA cut 25 basis points from the cash rate on Tuesday, taking it to 3.5 % after the 50 basis points reduction in May.
In easing monetary policy RBA governor Glenn Stevens cited economic volatility in Europe, slowing growth in China, a subdued domestic housing market and Australia's inflation outlook.
Mr Stevens's statement made no mention of last month's Federal Budget and its forecast $1.5 billion surplus for the 2012-13 financial year, a point Shadow Treasurer Joe Hockey delighted in making.
But that did not stop Mr Swan claiming credit when he fronted reporters in Canberra shortly after the central bank released its decision.
He said bringing the budget back to surplus gave the RBA "maximum flexibility" to adjust rates.
"It's a win for households and a dividend of returning our budget to surplus," Mr Swan said.
"The five interest rate cuts that we have seen have all been made possible by our disciplined approach to the budget."
Bank of Queensland wasted little time in announcing it would cut its variable loan customers, although the 0.2% reduction was less than the RBA's move. BOQ's cut will come into effect on June 16.
The big four banks - Westpac, NAB, Commonwealth and ANZ - took to Twitter to say rates were being reviewed.
In that front Mr Swan was doing his best to pressure the banks to pass on the cut in full.
He said the banks continued to be "very" profitable and net interest margins had returned to pre-global financial crisis levels.
"I think that their customers will not treat them kindly if they do not pass this through in full. I think their customers will be every angry," he said.
Not surprisingly Opposition Leader Tony Abbott and Mr Hockey used the RBA's decision to continue their anti-carbon price crusade.
Mr Abbott said waning consumer confidence at home and uncertainty on world economic markets had left the central bank with little choice but to cut the cash rate.
"Under these circumstances it's hardly surprising that the Reserve should have reduced the rate," Mr Abbott said.
"This is much more a reflection of weak economic conditions than it is of strong economic management."
He said the Treasurer could show leadership by abandoning plans to implement the carbon price on July 1 and ensuring banks passed on the cut in full.
Mr Hockey said the 3.5% cash rate was only marginally higher than the emergency levels employed during the GFC.
WHAT IT MEANS
How much home loan customers on a variable interest rate will save per month if the RBA's cut is passed on in full*:
- $300,000 mortgage...$48
*Based on a cut of 0.25% from 7.15% to 6.9% on a 25-year home loan.