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Treasurer ‘deeply disappointed’ at ANZ and Westpac

by Annie Kane14 minute read
Treasurer ‘deeply disappointed’ at ANZ and Westpac

Federal Treasurer Josh Frydenberg has said that both government and customers are “deeply disappointed” with two major banks for not passing on the RBA rate cut in full, adding that “people need to shop around and get the best possible deal”.

All four major banks have now announced reductions across their variable home loan rates, following the Reserve Bank of Australia’s (RBA) decision to reduce the official cash rate by 25bps to 1.25 per cent.

Despite the banks being implored to pass on the cash rate reduction in full by both RBA governor Philip Lowe and Treasurer Josh Frydenberg, not all lenders have decided to do so.

Two of the major banks have committed to passing on the rate in full, while the remaining half have taken differing approaches. Both CBA and NAB have said they would reduce standard variable rates (SVR) on home loans this month, ANZ outlined that it would be reducing rates by 18 basis points, while Westpac has said it will cut rates by 20 basis points for owner-occupiers and up to 35 basis points for investors (on interest-only loans).


Speaking of the schism, Mr Frydenberg told various media outlets that government – and ANZ and Westpac customers – are “disappointed” of the outcome.

Speaking after ANZ’s announcement on Tuesday evening (4 June), Mr Frydenberg said that he believed the bank had “let down its customers”.

The federal Treasurer added: “This is deeply disappointing from the ANZ. We heard from commissioner Hayne just months ago that the banks were putting profits before people.

“Actions like this don’t give the Australian people any comfort that the banks have changed their behaviour. And, as Treasurer of Australia, I have made it very clear to the banks that the public have a legitimate expectation that they will see the full benefits of rate cuts such as announced by the RBA.”

Building on these comments on Wednesday (5 June), the Treasurer told Sunrise on 7: “We’re deeply disappointed in these decisions from the ANZ and Westpac, and so should their customers be. Because there is a legitimate expectation that when the RBA cuts rates – as it has done for the first time in almost three years – that it is passed on in full. And we heard the Reserve Bank governor himself depart from usual practice and call on the banks to pass on this interest rate cut in full. And so therefore we welcome what NAB and the Commonwealth Bank have done but are disappointed in the announcements from the ANZ and Westpac.”

Meanwhile, Mr Frydenberg told Fran Kelly on Radio National that the call from Philip Lowe “underscores that he knows that the funding costs of the banks have significantly come down and there is no reason why they shouldn’t pass on this rate cut in full”.

“Now, we welcome what the National Australia Bank and the Commonwealth Bank has done, but I think the customers of both the ANZ and Westpac can rightly feel let down by their bank,” he said.

When asked whether the government would use intervention powers with the banks, Mr Frydenberg emphasised that while government “can’t force the banks to pass on the full rate cut”, he said “their customers though, can vote with their feet”.

“Ultimately, people need to shop around and get the best possible deal.”

Mr Frydenberg continued: “We are not [planning on intervention] but what I would say to the banks is that here is an opportunity – post royal commission – to do the right thing by your customers and, in the case of the banks that didn’t pass on their rate cut in full, their customers and the government are deeply disappointed.”

The federal Treasurer built on this theme when speaking on 3AW Mornings with Neil Mitchell, stating: “[I]t’s fair to say that many customers of both the ANZ and Westpac would be today scratching their head, asking themselves are they being best served by their bank? Should they be shopping around and looking for a better offer?

“I’ll say, again, it’s very disappointing. The Reserve Bank governor has made it clear they should pass it on. I’ve made it clear in my private conversations with them they should pass it on, as well as in my public comments and its up to them to explain to their customers why they will not see the full benefit of yesterdays rate cut...

“Theyve got to act in the best interests of their customers and their shareholders. But if theyre not delivering for their customers, their customers will walk.”

ANZ CEO defends decision – increases depositor rates

While the Treasurer has been voicing his “disappointment” on media outlets, ANZ CEO Shayne Elliott defended the bank’s actions on Tuesday evening (4 June), emphasising that the major banks were not all in the same position in terms of rate.

Speaking to Ross Greenwood on Money News this week, Mr Elliott highlighted that ANZ had “the lowest rate in the market” before the RBA announced its cash rate reduction and that, while he “understood” that home loan customers might be disappointed that they will not be getting the full 25 basis point cut, the bank had considered both mortgagors and depositors when reaching a decision on its rate reduction.

He continued: “[The major banks] all have slightly different business, you wouldn’t expect us all to do exactly the same thing, we have different customer bases, we have different cost of funds, we have different ways of funding ourselves and… we have to do what is right with ANZ and taking into account all of those issues. And that is what we did.

“And remember, we also have to balance the needs of our depositors. Now our depositors always get forgotten in these conversations, but when we cut rates or increase rates, we do the same on the deposit side as on the borrower side and we forget that depositors have done it tough for a long period of time.”

Mr Elliott therefore argued that ANZ was not putting profits ahead of people, adding: “This is a case we are always confronted with; the circumstances of the day where we have to set and get a balanced decision. Remember we have a lot of stakeholders here… we have people who are shareholders, we have people who are depositors and we have people that are borrowers and, in many cases, they are the same people, which is the Australian public. So to choose one set of people over another, while that might be politically expedient for us, it’s not the right thing to do.”

He concluded: “We came out first, we came out because we have done our homework and we said… we think that is the right thing to do to get the balance of all Australians in a balanced way – whether they are shareholders, depositors or borrowers.”

Indeed, ANZ announced on Wednesday afternoon (5 June) that it would increase the 11-month term deposit rate to 2.35 per cent to offer “a highly competitive savings rate in the current record-low rate environment”.

ANZ group executive, Australia retail & commercial, Mark Hand commented: “We recognise it has not been an easy environment for customers who are trying hard to save their money and get a decent return.

“In making this decision, we have sought to get the balance right to provide a highly competitive rate for savers over an 11-month term on the back of yesterday’s announcement to cut home loan rates.

“We’re making an effort to provide an attractive option for savers and retirees who rely on interest income.”

[Related: Broking industry reacts to cash rate move]

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