The head of a property investment company has called on the government to pressure major banks to pass on interest rate cuts.
Property Club president Kevin Young has argued that Treasurer Scott Morrison should “hammer” the major banks into passing on the full cut dealt this month by the RBA. Young said a strong approach by former Treasurer Peter Costello during the Howard government saw the major banks fall into line with the RBA.
“As a result of this strong approach all of the RBA rate cuts were passed on in full during the Howard/Costello period unlike the Turnbull/Morrison reign,” he said.
But Young accused Morrison of “making excuses” for the major banks.
“The big banks in Australia are already the most profitable in the world with their profit equating to a staggering 2.9% of GDP, making Australian banks effectively the most profitable in the world. That means 2.9% of every $100 earned in Australia ends up as bank pre-tax profit, compared to the US and UK at $1.2 and 90 cents per cent respectively,” Young said.
Young also lambasted the RBA, saying the decision of the Bank of England to cut rates to 0.25% showed the RBA’s interest rate setting of 1.25% was “an international joke”.
“Currently, the UK had an unemployment rate of just 4.9% compared to nearly 6% in Australia despite our interest rates are now six times higher. The RBA has presided over world high interest rates and an arrogant banking sector that is dominated by the big four banks. It is a fact that the RBA has the levers to pull that could force the banks to pass on the full rate cut to mortgage holders,” he said.
Young said the Property Club supported calls for a royal commission into the banking sector, but believed the scope of the commission should be widened to examine the operations of the RBA.