The Australian Government announced a second stimulus package worth A$42 billion, whilst the Reserve Bank of Australia cut interest rates by another 100 basis points taking official lending rates to 3.25 percent.
Business borrowing fell by the second biggest monthly drop on record in December, largely resulting from a reduction in foreign currency lending according to the Australian Central Bank the RBA.
The market share held by non banking finance companies in the home loan markets has collapsed to a record low reducing pressure on big banks to pass cuts in official interest rates on to their customers.
The deal reached by Citi and Morgan Stanley over the weekend for Morgan Stanley to pay US$ 3 billion to Citgroup, forming a joint stock broking venture using Citi’s retail stock broking franchise Smith Barney as the basis for the business, signals the end of Citigroup’s universal banking business model and the entry of Morgan Stanley as a major retail stock broker in Australia.
The majority of credit card issuers have still not cut their interest rates despite four successive cuts to official interest rates since September.
Australian lenders have been criticized for adding to the problems already faced by small business from the financial crisis by failing to pass on the full extent of official cuts in interest rates to their business banking products.
Reserve Bank of Australia data shows that bank term deposits have increased by more than 50 per cent 2008 which is the fastest growth in term deposits in nearly 20 years.
The Australian Prudential Regulatory Authority (APRA) published new research last week showing that in the year to June financial institutions accrued income from fees and commissions totalling A$ 22.6 billion. The amount represented at least a ten per cent increase in fee and commission based income from the previous year which amounted to A$ 20.48 billion.
The trading group of eight banks that set Australian daily interbank financing rates has dropped Citi and Deutsche Bank from its pool after credit rating agency Standard & Poor’s cut both lenders global risk ratings.
Westpac on Tuesday announced that in the run up to Christmas, it customers would be receiving the added bonus of lower interest rates on selected cards issued by the bank. Westpac is cutting the interest rate on some of its cards by up to 1.25 per cent.