After the Reserve Bank of Australia decided to slash the cash rate for the third time this year, treasurer Josh Frydenberg urged banks and lenders to pass on the cut in full.
In the efforts to stimulate stronger showing in the economy, the RBA decided to cut the official cash rate by 25 basis points, bringing it to a historic low of 0.75%.
"It is the government's expectation that the banks will pass on this 25 basis point rate cut in full. What this means for an Australian family with a mortgage of $400,000 is $720 less a year in interest payments," Frydenberg said.
Also read: Investors Not Cashing In On Rate Cuts?
Shadow treasurer Jim Chalmers agreed with Frydenberg sentiments, adding that this recent cut highlights the urgent need for the governments to step up their efforts to stimulate the economy.
"After three rate cuts since the May election, record low interest rates are now one quarter of what they were during the depths of the global financial crisis. The government is leaving all of the heavy lifting to the Reserve Bank," he said.
Two of the biggest banks in Australia have already responded to the central bank’s rate cut. Despite the pressures to pass on the cuts in full, Commonwealth Bank and National Australia Bank opted to make partial changes to their standard variable rates instead.
CBA said it will lower rates by 13 basis points for owner-occupiers and investors taking out principal-and-interest-rate home loans. The full 25-basis-point cut will only be applied to property investors with interest-only home loans. The changes will take effect starting October 22.
Also read: RBA Hints At More Rate Cuts
For its part, NAB will also lower rates for owner-occupiers and investors. However, only a 15-basis-point cut will be applied to its variable-rate home-loan products. Interest-only investors, on the other hand, will get to enjoy a bigger 0.3-percentage-point discount.
CBA group executive Angus Sullivan said it is not possible for the bank to pass on the full cut due to its profit margins.
"As the Reserve Bank cash rate has reached record lows, we face a difficult balancing act between the multiple, valid interests of our stakeholders," he said.
NAB chief customer officer for consumer banking Mike Baird also raised concerns about deposit rates.
"While these changes further support our 930,000 home loan customers, we are aware of the growing impact reductions in interest rates have on our three million savings and investment customers and will continue to offer competitive interest rates on savings and term deposits," he said.