Printing Industries has called on Australian banks to fully pass on the latest cut in official interest rates. Effective from April 8 official interest rates will be cut by a further 25 basis points to just 3.0 per cent, their lowest rate since 1960, according to the association.
A Reserve Bank of Australia (RBA) statement said the contraction in the global economy continued during the first few months of this year, and most assessments of the near‑term outlook had been further marked down.Hagop Tchamkertenian, national manager for policy and government affairs at Printing Industries welcomed the latest cut in official interest rates and urged banks to pass on the rate cuts in full to both households and businesses.
Tchamkertenian says, “The RBA felt that further modest monetary policy stimulus was justified at the moment to help insulate the Australian economy from the global economic recession.”
He continues, “It is imperative that the banks assist the RBA's objectives by fully passing on the interest rate cuts to both businesses and households.”
Printing Industries also says that with most countries committing to further stimulus packages, the RBA remained confident this should help contain the downturn over the rest of the year. The RBA also said there were tentative signs of stabilisation in several countries, including China, though it is too early yet to judge how durable these will prove to be.
Progress towards a resolution of banking system difficulties in the United States and other major countries have contributed to gradual improvements in global financial markets, however the RBA said that sentiment remained fragile and the contraction in economic activity was affecting the asset quality of financial institutions.
The RBA said that while the Australian economy was contracting, the downturn was less than those of our trading partners. The medium term inflation outlook had improved with capacity utilisation falling from its peak, and was expected to decline further over the rest of the year. With demand for labour weakening, growth in labour costs is also forecast to fall. Hence inflation over the medium term was likely to be lower than it has been over the past two years.
The RBA says there has already been a major change in both monetary and fiscal policy in Australia with market and mortgage rates at very low levels by historical standards and business loan rates below recent averages, reducing debt‑servicing burdens considerably.
With both monetary policy and fiscal policy supporting domestic economic activity, the RBA believes that this will provide significant support to domestic demand over the period ahead.
Tchamkertenian adds that since September 3, 2008 the RBA has cut official interest rates six times and by a cumulative 425 basis points. During this period variable interest rates on home loans have fallen by 375 basis points while small business overdraft rates have fallen only between 265 to 275 basis points.
He says, “So that the full impact of the official interest rate cuts is felt throughout the economy, the banks must pass on in full the latest rate cut especially since they have failed to fully pass the past rate cuts to businesses.”
