From the AFR:
Prime Minister Malcolm Turnbull has demanded big banks pass on the full rate cut from Tuesday and if not, explain why, or risk exposing themselves further to calls for a Royal Commission.
With the clamour growing for a Royal Commission into the banks, Mr Turnbull, who does not support a commission, warned the banks as he did earlier that they operated with a social licence from the people.
“They operate with a very substantial social licence and they owe it to the Australian people and their customers to explain fully and comprehensively why they have not passed on the full rate cut and they must do so,” he said.
“It’s not my job to manage the banks or tell them how to manage different products because they’ve all got different risk profiles and so forth, but it is absolutely clear that they have made a conscious decision not to pass on the full extent of the rate cut, and they should have done that.’
Why should they? As PM Turnbull knows full well, the banks need to protect their net interest margins or their profits will fall. Their share prices will also fall. And with that so will their lending. Then house prices will follow.
Those are the same house prices that PM Turnbull just protected in the election by resisting negative gearing reform at the price of his electoral majority.
Turnbull was the great champion of doing nothing – no reform – in the election lest it upset borrowers. Well, now the piper is calling.
An externally funded housing ponzi scheme in a small open economy demands banks be more profitable than elsewhere or they’ll be paying much higher interest rates in short order.
