The Meeting Place

Rates cut again but banks play their own game as usual

Another rate cut by the Reserve Bank of Australia (RBA) – to a new historic low of 0.75 per cent – and another case of the big four banks failing to quickly pass on the cut, in full, to consumers. Situation normal?

None of the big four had passed on the rate cut in full as their interest margins become squeezed and profits trimmed, Nine is reporting. Commonwealth Bank of Australia (CBA) was the only one of the big four to move, offering a 0.13 percentage point cut on standard variable lending rates. Investor-only loans will get the full 0.25 percentage point reduction while deposit rates will be reduced by 0.05 per cent.

“What this means for an Australian family with a mortgage of $400,000 is $720 less a year in interest payments,” said Treasurer Josh Frydenberg.

What this means for retirees with money in the bank is a further challenge.

KPMG chief economist Brendan Rynne said “a short, sharp fiscal boost” was missing and that raising the Newstart allowance was a way to achieve that.

Government house economics committee chair Tim Wilson described the rate cut as “disappointing” and said: “The price of money is not an issue. I’ve yet to be convinced cuts have any positive impact. The reverse is likely by discouraging savings and those who have to spend.”

The RBA will reportedly consider implementing “unconventional monetary policy measures including printing money to buy government bonds if interest rates hit 0.5 per cent” as expected in February.

Mr Frydenberg said the Government was focused on creating more jobs and ensuring the economy continued to grow.

How do you plan to grow any savings that are currently sitting in a bank account?

8 comments

Well we can bitch and moan all we like about the banks but nothing will change what is happening unless we go back to the days of government owned banks and the finance industry being regulated and folks, that ain't gonna happen. Back when we were all much younger there was the government owned Commonwealth Bank and each state had its own bank as well. The Reserve Bank controlled interest rates and when they decided to move rates up or down all of the banks had to fall into line. The state banks gave competition and as they didn't have to keep shareholders happy they were able to keep the fee structure low thus forcing the private banks to follow suit.

Fast forward to what we are having thrust at us today we have gone from 8 major banks, some private, some government to 4 private banks appearing to ignore customers and politicians and maximising the return to shareholders. We can yell and scream all we want but banks, just like big oil, are only answerable to shareholders and nobody else. I have just lost 5 minutes of my life writing this because no matter what is said or written, nothing will change. The only people who can change what is happening is the banks, not politicians, not shock jocks and certainly not the little people like you and me.

 

Oh, and to answer the question about what I'm going to do to grow savings, not a lot I can do unless I take a risk with my hard-earned and chance losing the lot in a dodgy investment. My main purpose will be to hang on and try and find an account that is fee free.

There are other banks such as Bank Australia which grew out of a number of Credit Unions combining and also Members Equity Bank which was set up by Industry Super Funds. I have both of these to be good to deal with and to date have been fair and square unlike the the BIG banks.

I will never forgive Hawke and Keating for privatising the CBA which in Government hands, altho' competing with the other banks, acted as a brake on the excesses we have seen over the last few years.

 

There are other banks such as Bank Australia which grew out of a number of Credit Unions combining and also Members Equity Bank which was set up by Industry Super Funds. I have both of these to be good to deal with and to date have been fair and square unlike the the BIG banks.

I will never forgive Hawke and Keating for privatising the CBA which in Government hands, altho' competing with the other banks, acted as a brake on the excesses we have seen over the last few years.

 

“What this means for an Australian family with a mortgage of $400,000 is $720 less a year in interest payments,” said Treasurer Josh Frydenberg.

This may encourage borderline property buyers to take the leap but is fraught with danger of becoming unaffordable when rates go up again

With this government hopelessly fixated on a budget surplus they have failed miserably on cost of living, the farmers, infrastructure and much much more.

yeh lets go back to a nationalised society,I liked it the trains no longer ran on time ,sweets were rationed and I didnt see a banana for 7 years ,it was worse than when Hitler was living on our doorstep,kids drew all over freshly painted walls on the stations and when caught said """Our dad says its our railways now ,we can do what we like ""and in the factories concientious Bill only got the same wages as "Dont care Fred """

The number of times I heard "It,s not my job to do that ""

Remember the car industry in OZ and UK '''More money ,less work"""

yeh lets go back to a nationalised society,I liked it the trains no longer ran on time ,sweets were rationed and I didnt see a banana for 7 years ,it was worse than when Hitler was living on our doorstep,kids drew all over freshly painted walls on the stations and when caught said """Our dad says its our railways now ,we can do what we like ""and in the factories concientious Bill only got the same wages as "Dont care Fred """

The number of times I heard "It,s not my job to do that ""

Remember the car industry in OZ and UK '''More money ,less work"""

And your point is Gerry??

Never mind the banks passing on the rate cuts what about our government.

When are they going to pay us the reduced deeming rates

No sign of this yet, how hard can it be to get a computer programme going and back pay pensioners the piddling deeming rate reduction?

 

 

... this might be a "dumb" question - but - saw lil Joshy "Friedegg" on the news earlier saying "Nothing the Govt. can do to make the banks adhere to the rate cut".....really?  Why can't the Govt. FINE them mega bucks if they don't pass on the rate to consumers??

Banks got fined after the Royal Comm. didn't they?

Yes Foxy that is a dumb question. Banks are not legally required to charge or give a specific interest rate, they can set the rates as high or as low as they wish. Banks were deregulated in the 1980's.

It is also "dumb" to bastardize someone's name. The name is Josh Frydenberg.

The ability of banks to pass on a cut in full to borrowers is getting tough because, it is as they say, the interest rates on transaction accounts are already below par. 

How to "grow savings lying in a savings account?" - the safest way besides investing in property is blue chip shares (if you are lucky to get them). If you have the expertise and time to devote in buying and selling on the stock market, way to go. Buy low, sell high, but you have to be on the ball. There are other simpler ways, do some research and talk to people. 

Just a soft reminder that we don't have to accept the current monetary system.

Confessions of a former fiscal conservative

 

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Yes, I used to be so proud of the elevated moral ground I stood on when proclaiming my fiscal conservatism. I mean what can be more right than making "hard decisions" to "get our house in order", right?  

Yeah, I knew that meant the most vulnerable will probably feel the pinch the worst, but I had worked hard and it paid off for me - why couldn't they just do the same?  Ugh!

 

So why do I say "former" fiscal conservative?

 

It's quite simple, really. The fatally flawed premise of fiscal conservatism is that the federal government is like a business (or household if you prefer). That is, it earns revenues and has expenses, and like all of us, it has to balance it's check book or it will get in trouble. Yep - I did say fatally flawed. It's complete nonsense - and we all know it if we just sit and think for a moment about what it means to have a legal money printing press.  

A currency-issuing sovereign nation is nothing like a business. It operates on a completely different fiscal paradigm. It has been granted monopoly control of a national monetary system that provides the ability to create spending power out of thin air whenever directed to do so for the common good. What business or household has this power? None!

 

How did we come to forget this? It would be funny if it weren't so tragic.

 

What we think of as fiscal conservatism is, in reality, nothing less than the reckless waste of valuable resources. We fail to maintain and enhance critical infrastructure that powers our economy and serves our peoples needs; we abandon large portions of our population to live on welfare, refusing to employ and educate them so that they could enhance their own lives and those of others in the community; we let capital and businesses sit idle when they could be put to productive use; we lay off scientists and close labs that could be inventing the next medical or technological breakthrough.

 

This is the height of fiscal irresponsibility. There's no moral high ground here - only a web of misinformation and folly that has entrapped western civilization in a cycle of impoverishment and inequality. 

 

Real fiscal conservatism in a nutshell is this: utilize fiscal policy to whatever measure is necessary to ensure that the private sector is fully employed. 

 

Period. No irrelevant squabbles over debt-to-GDP ratios and arbitrary debt ceilings. No meaningless metaphors of deficit black holes, drunken sailors, or per-capita debt burdens on our descendants. No hysteria over imaginary fears of hyperinflation. It's all irrelevant.

 

We can and we should debate all the other government investments, programs & benefits on their merits, but never on the question of affordability or with arbitrary limits based on annual tax receipts.  

 

So take it from a former fiscal conservative: if you want to balance taxes and government spending with zero regard for the impact that has on the economy, employment, and the lives of citizens, you are neither conservative nor fiscally responsible. Rather, you are harming the economy, people's lives, and contributing to the destruction of capitalism. 

 

Let's redefine REAL fiscal conservatism, and return our economy to full capacity. And any time you see someone talking about balancing the federal budget, please kindly educate them about how a sovereign currency works!

PS. if you want to look at other opinions from the originating website,

http://itsthepeoplesmoney.blogspot.com.au/2014/11/confessions-of-former-fiscal.html   Lookfar.

 

Easy for the government to blame the banks for not being finnancialy responsible, but it is itself guilty of the same thing.

It seems to be more intent on the surplus than on doing anything significant to boost the economy.  A government surplus will do nothing to get the economy moving, it is just a gimic to give the impression that a tired government that has no idea about which direction it is heading can give the impression that they are comptent.

"but it is itself guilty of the same thing".

I agree exPS perhaps the thieving bastard SLO-MO could take a break from swanning around having his photo taken and do something about deeming rates to start with

I really can't see why deeming rates aren't set using the interest rate set by the RBA.

They do not have to be the same, but the deeming rate should be at least based on it.

If the government expects the banks to take heed, they should follow their own advice what ever happened to leading by example?  I would settle for just leading.

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