The Reserve Bank cut interest rates more than it otherwise would have needed to over recent years to offset rises in bank funding costs.
RBA deputy governor Philip Lowe told the Australian Conference of Economists in Melbourne that the cash rate was about 1.5% points lower than it would have been had commercial lenders felt able to pass on all the official rate cuts in full.
“In effect, what we are seeing as a result of both market and regulatory developments is an increase in most interest rates in the economy relative to the cash rate,” Lowe said.
He said the RBA had spoken about the rise in bank funding costs “at length” and it had been an “important factor” in the setting of monetary policy over recent years.
“In particular, this increase in interest rates relative to the cash rate has been offset by the Bank setting a lower cash rate than would otherwise have been the case,” Lowe said.
Aid to Spain fast-tracked
Up to €100 billion ($A121.37 billion) in aid to Spain’s banks will be disbursed by the EU over the next 18 months, with the first tranche due by the end of July, the Spanish economy minister says.
The €30 billion ($A36.41 billion) to be released in July is a “kind of security cushion,” Luis de Guindos told a press conference in Brussels after a meeting of European Union economy and finance ministers.
In its morning note, ANZ noted a “positive start” to the day in currency markets after aid was fast-tracked for Spain’s banks alongside a year’s extension for Spain to cut its deficit.
Stockmarket opens lower
The Australian stock market opened lower following sharp falls on Wall Street overnight as investors digested a positive start to the US earnings season and the eurozone deal to help support Spain.
At the official market opening, the benchmark S&P/ASX 200 index fell 0.33% to 4,084.5 points, while the broader All Ordinaries Index dropped 0.32% to 4,124.6 points.
Coles warns strike impact will spread
Coles has warned the impact of a strike that started at a warehouse in Melbourne’s north will now be felt across Australia’s eastern seaboard.
Fairfax reports that the supermarket has applied to Fair Work Australia today to stop what it says is unlawful industrial action by workers at its Goulburn food distribution centre.
The application says Coles expects the strike that started yesterday at the Coles National Distribution Centre in Somerton, in Melbourne’s north, to spread.
Coles has now stood down hundreds of workers at its Goulburn distribution centre.