Swan accused of putting bank first

AAP- Treasurer Wayne Swan has been accused of putting the profits of the big banks ahead of the interests of ordinary Australians by refusing to demand they pass on in full an expected cut in the official interest rate.

The Reserve Bank of Australia (RBA) board is widely expected to cut the official
cash rate when it meets on Tuesday.
An AAP survey of 19 economists showed they were unanimous in their expectation of a
rate cut, with 11 of those surveyed tipping the central bank would slash rates by
half a percentage point.
Such a move would take the cash rate to 6.50 per cent.
But few expect the major banks will pass the cut on in full.
Mr Swan clung to a line used by Prime Minister Kevin Rudd last week when the Labor
leader said he expected the banks to provide an "absolute maximum pass-through" to
customers of any RBA rate cut.
He said it would be a welcome move if the RBA was to cut the official cash rate.
"But what I would expect from the banks is a maximum possible pass-on of that rate
cut," he told Network Ten.
Mr Swan said that with the turbulence in financial markets expected to continue for
some time to come, it was absolutely vital for Australia to maintain a stable
banking sector.
"There's no doubt we're going to go down a rocky road for some time."
On Friday, short-term borrowing costs had risen to six times their normal level, the
treasurer said.
"We've just been through the biggest upheaval in financial markets in over 70
years," Mr Swan said.
"The consequence of that is that funding costs have increased substantially and that
does impact on the capacity of our banks to lend."
But opposition treasury spokesperson Julie Bishop said Mr Swan was putting bank
profits ahead of the interests of ordinary Australians.
"In the Reserve Bank's latest financial stability review it is pointed out that our
banks are strong, they are well capitalised, and they are making record profits," Ms
Bishop said.
"Yet on the other hand, Mr Swan is telling the Australian people that banks cannot
afford to pass on an interest rate cut should the Reserve Bank cut interest rates
next week."
Ms Bishop said the banks had increased their margins by half a percentage point
above the official cash rate since the beginning of the year by arguing they were
facing increased funding costs.
"That's when interest rates were going up and yet they still recorded record
profits," Ms Bishop said.
"We need the banks to step out from behind Mr Swan and tell the Australian people
why they should get the benefit of an interest rate cut and not the small
businesses, the home owners, the families who need relief at this time."
The ongoing turmoil in financial markets spawned by the credit crisis is expected to
see the Australian stock market open lower on Monday, on the back of another sorry
day on Wall Street.
Despite the passing of the $US700 billion ($A908 billion) bailout of the US banking
system by the House of Representatives, US stocks ended the week with a fall.
US President George W Bush said his administration would move quickly to implement
the rescue package, but warned it would not bring instant relief.
"The benefits of this package will not all be felt immediately," Mr Bush said.
"The federal government will undertake this rescue plan at a careful and deliberate
pace to ensure that your tax dollars are spent wisely."
The Dow Jones industrial average fell by 1.5 per cent on Friday, while the
tech-heavy Nasdaq slumped 1.48 per cent, and the broad-market Standard & Poor's 500
index shed 1.35 per cent.
Analysts are predicting a fall of about one per cent on the Australian sharemarket
when it opens on Monday, with the futures index pointing to a loss of 48 points.
The Australian market will trade as normal on Monday despite a Labour Day holiday in
NSW, South Australia and the ACT.