We are living through an incredible time for Australia and the world. The economy continued to operate as you would expect in January, although the people we entrust with the responsibility of exercising Monetary Policy were on holidays.
As both individuals and companies throughout Australia have struggled to come to grips with the changes they are facing on a daily basis it is completely unacceptable for the Reserve Bank to be unavailable to make timely decisions as is the demand of the world in which we live.
Our country deserves a Reserve that is nimble and able to respond to any crisis we are faced with. The Reserve not meeting in January is unacceptable and it’s a situation that needs to be changed immediately.
The effectiveness of the Reserve is greatly hindered by the failure of Banks to pass on interest rate cuts in full to both home loan and credit card customers. The importance of consumer spending for growth cannot be understated.
I am not a fan of the Banks – that is well known. I recently saw a bank baiting consumers on television (they would call it advertising their product), where they were offering an introductory rate of 2.9% for balance transfers. I read the fine print at the bottom of the screen which stated that the full rate (20%) was payable immediately on any cash withdrawals.
This is not only a disgrace but is a perfect example of why we need urgent and immediate legislation limiting how far above the official cash rate Banks can charge. They can of course choose to be competitive within those limits without gouging money from their clients at levels which are simply not justifiable.
The failure of Banks to pass on rate cuts in full affects each and every one of us. Their interest is short term profit and their share price and the power of the banks must be controlled. This will protect consumers and importantly give the Reserve a far greater ability to affect consumer confidence and spending.
This may be a controversial idea but it is long overdue and will benefit those most in need right now. It doesn’t matter by how much the Reserve cuts rates if those cuts are not passed on in full to consumers for home loans, credit cards and all other products.