It’s become a familiar act on the first Tuesday of every month, or at least those months where we see a rate cut.
A few hours after the RBA announces its cut, Australia’s business lobby groups start releasing their statements.
Yesterday, as is usual after a cut, they were largely united in their applause for the RBA, with the possible exception of the Australian Retailer’s Association who are always looking for the next rate cut.
But alongside the applause for the RBA decision to cut from 3.75% and 3.5% was a familiar refrain: The rate cut is most welcome, but it is time for the banks to do the right thing.
There is an almost weary note to the chorus now – the business groups know they’re not going to get their wish and the banks will keep at least part of this rate cut to further protect their margins.
But, this time at least, it should be different. The familiar arguments the banking sector uses to defend itself should be put aside. The banks should do the right thing and pass on the full cut.
Yes, I know a strong banking system is a crucial part of the shock absorber that Australia has been able to build into its economy.
I know most Australians are invested in the success of the banks, either directly or through their super funds.
And I know that the European crisis is creating real funding pressures for our banks, even if the severity of these pressures is difficult to determine from the outside.
But I also know the banks have managed to hold on to every rate cut that’s been made since the start of the year, including a good-sized chunk of May’s 50-basis-point cut. They’ve had a good chance to protect their margins and they’ve taken it.
I also know the banks understand the state of the non-mining economy. Their economics units produce a constant stream of sales indicators, business confidence readings and consumer sentiment indices.
I know the banks understand the psychological boost that the businesses and households would receive if the full cut was passed on.
I know that for the best part of five years – since the GFC started in 2007 really – we’ve heard the banks say they are ready, willing and able to help their SME customers. For many customers, the reality is different, but let’s put that aside for now.
I know there is no better way for the banks to show their solidarity with the customers they understand are doing it tough than to pass on this rate cut in full.
I know it’s the right thing to do. I reckon the banks do too.