RBA to 'order banks to pass on rate cut'

The Reserve Bank of Australia (RBA) is set to demand that the nation's big banks pass down the rate cut when it comes to credit cards, according to reports.

Although the retail banks acted sharply in cutting standard variable rates, they are dragging their metaphorical heels in terms of credit cards, the Australian claimed.

The newspaper suggested that the delay since the RBA reduced official interest rates to seven per cent last week has seen the banks generate an extra $1.5 million in interest income.

RBA governor Mr Stevens said that the banks were sitting comfortably enough to help their customers realise the full benefit of the recent cut.

"At the moment their costs overall have come down and that is why they were able to reduce their loan rates," he told the newspaper.

Market speculators are predicting further interest rate cuts over the next 12 months and Mr Stevens said the key question is whether "we hold" or "we go down more from here".

The Australian reported that the likelihood of a further rate cut next month is 83 per cent.

Last week it was reported in the same newspaper that Australia's major banks are earning around $225,000 a day by not cutting the rates on their credit cards.

The RBA's decision to reduce the official interest rate by 25 basis points to seven per cent from September 3rd was the first time it had done so in seven years.

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