An interest rate cut from Australia’s Reserve Bank has caused controversy in the small business banking sector, with Treasurer Josh Frydenberg praising small banks and criticizing larger ones for their response to the rate cut.
According to SmartCompany reports Wednesday (Oct. 2), smaller banks have seized on the opportunity of the Reserve Bank’s decision to cut the cash rate to a new low of 0.75 percent, and passing that on to their small business customers.
It’s a competitive advantage over larger lenders, reports said, with two of Australia’s largest banks deciding not to pass the entirety of those savings onto SMBs. Commonwealth Bank (CBA) and National Australia Bank (NAB) are reportedly withholding much of those savings from their small business borrowers.
“As the Reserve Bank cash rate has reached record lows, we face a difficult balancing act between the multiple, valid interests of our stakeholders,” said CBA group executive of retail banking services Angus Sulivan in a statement this week. “It is currently not feasible to pass on the full rate reduction to more than $160 billion of our deposits which are at, or near, zero rates.”
Reports noted that at the time of publishing, the nation’s other two top banks, Westpac and ANZ, had not announced how they would respond to the cut.
In response to CBA and NAB’s decision, however, Frydenberg encouraged consumers and small businesses to “shop around,” claiming that the big bands are “going against” the government as well as “against the advice of the Reserve Bank.”
He added that he has seen smaller lenders pass on the cuts in full to their customers.
According to reports, small business borrowers are in especially high need for such a financial boost from their banks.
“Although we are still to see the full impact of the earlier reductions in the cash rate and personal tax cuts, we believe the timing is right to boost parts of the economy that continue to struggle,” said Australian Chamber of Commerce and Industry CEO James Pearson in a statement this week. “With slowing economic growth and lower consumer confidence, small businesses have been doing it tough over the past year.”