THE big four banks face mounting pressure to pass on Tuesday's official interest rate cut, with a union urging a member boycott and Wayne Swan warning that the government has tough new laws to combat price signalling and anti-competitive behaviour.
As the four main banks - Commonwealth, NAB, Westpac and ANZ - yesterday maintained that rates were "under review" after the Reserve Bank decided to cut official rates by 0.25 percentage points, the Treasurer said families and small businesses "will be rightly very angry if they fail to pass this rate cut on".
Asked whether the big banks' silence was a form of price signalling or collusion, Mr Swan said the government had put in place price-signalling legislation "to stop some of the anti-competitive behaviour that people were suspicious about". It had also abolished mortgage exit fees and supported small-bank lenders.
His comments came as the head of the Construction Forestry Mining and Energy Union, Michael O'Connor, said he would advise the 113,000 members of his union to consider looking elsewhere if their bank refused to pass on the the full 25-basis-point cut. Mr O'Connor said any bank that had not announced a rate cut by the end of the week would be named and shamed in the letter to members.
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"Jobs and the national interest are at stake here," Mr O'Connor said. "Clearly the RBA has recognised the struggle faced by employees in trade-exposed industries such as manufacturing, tourism, retail and education.
"For this rate cut to have the desired effect, the big banks need to come to the party. Failing to pass on this rate cut would be economically irresponsible."
Australian Council of Trade Unions president Ged Kearney said last night the banks' "tardiness" in passing on the rate cut showed they did not have the community's interest at heart and might need to be subject to greater regulation.
Mr Swan said he expected the cut to be passed through in full.
"They are among the most profitable banks in the world. I think that is understood very clearly by their customers and if their customers are unhappy with the behaviour of their bank they can go down the road and get a better deal."
Finance Minister Penny Wong said she understood they were operating in a tough global environment. "But the banks also have to understand the tough environment that their customers, families and small business face."
Mr Swan said he was heartened to see smaller lenders exposing the big banks to competition after they cut rates. He said the government had provided substantial support for smaller lenders and credit unions to ensure they could compete in the market.
As the big banks held out, ME Bank cut its rate by the full amount to 6.74 per cent, and the Bank of Queensland also passed it on but its rate remains higher at 7.36 per cent. BoQ also offered 1.05 percentage points off its standard loan for new borrowers.
A series of NSW mutuals - including Heritage Bank, QT Mutual Bank, My Credit Union, Select Credit Union, Bankstown City Credit Union and Northern Beaches Credit Union - passed the rate cut on in full. Queensland's Electricity Credit Union and the WA-based Police & Nurses Credit Union also did so.
Competition law expert Frank Zumbo said the large banks' behaviour was "appalling" and called for a "full-scale independent banking inquiry". While "silence can send a signal", he said, the banks' behaviour was unlikely to be deemed unlawful under Mr Swan's new legislation, which required the banks to make a disclosure of pricing information.
Professor Zumbo said the public needed to know if there was any communication going on among the banks.
"The longer the silence continues, the greater the danger that there may be behind-the-scenes 'discussions' about interest rates that may be anti-competitive or just inappropriate," he said.
"The other question is obviously what role, if any, the Australian Bankers Association is playing in relation to the interest rate question.
"The ABA must be very careful not to be sending any pricing signals of their own or making comments as to what banks may or may not do with interest rates."
CBA head of communications Bryan Fitzgerald would only say the bank's rates were "under review".
ABA chief executive Steve Munchenberg said that, while holding back a rate cut would be very unpopular with customers, "the cost of money has gone up".
"I'm aware of what the Treasurer has been saying and I have no doubt that he would very much like the banks to pass on the full rate cut, particularly here a few weeks before Christmas," he told Sky News.
Opposition Leader Tony Abbott said Mr Swan must ensure the rate cut was passed on, citing a history of the banks ignoring the Treasurer. "Wayne Swan keeps telling the banks that they should pass interest rate cuts on in full and pretty consistently they thumb their nose at him."
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