So, the RBA has kicked the banks from under its skirts. There’ll be no easy ‘clipping the ticket’ as the rate cut sidles casually by. If the banks are as good as their word then they need to raise interest rates to offset rising funding costs. All four CEOs, and Chairmen as well, have told us so in a campaign that began last year during the shareholder’s meeting season.
More recently, MB has pointed out that there is good evidence that the banks have a case. There is a relationship between profitability and the supply of lending and with covered bonds going in the vicinity of the price of discount mortgages there’s no money being made. I want profitable banks as well as ones that heed their own risk. According to the same banks the housing market is teflon coated so there’s no impediment there.
Yesterday the big banks made a tactical mistake sending the industry mouthpiece, Stephen Munchenburg, onto the hustings to tell us how much control the RBA still has. It was clearly an effort to sooth our concerns in the face of an imminent seizure of basis points. Ubank actually cut its deposit rates yesterday in a clear case of, as one commenter put it, jumping the shark. The banks were convinced that the cut was coming.
But surely, if any of the rhetoric of the past several months is true, then the banks still need the basis points.
The banks are never going convince Australians that their funding issues are real if they mince around every RBA rate move. A cigar-wielding Mike Smith, CEO of ANZ, has been more dismissive than most about any support provided to the banks and, by extension, any need to take the public interest into account on rates decisions. And his lieutenant, Phil Chronican, has established a separate interest rate infrastructure for just such occasions as this. It makes its decision this Friday.
It’s time for the ANZ to man-up and lead a round of “out of cycle” rate rises. Otherwise it’s quite simply a case of the banks who cried wolf.
