The Reserve Bank is almost guaranteed to cut the official cash rate tomorrow, and the odds are pretty high that banks will not pass on the full OCR cut to their customers - primarily people on floating and revolving credit loans. Their argument will be that funding costs, and other costs in their businesses, are rising.
However, our Prime Minister John Key says, they should pass on the full cut. Here's what he said at the post-Cabinet press conference this week:
"If the Reserve Bank cuts, then we'd like to see the banks pass that on in full if they can."
He went on to say: "By definition, as good corporate citizens, if their cost base is reducing, then we would expect them to pass that on to consumers. What we wouldn't want to see is a reduction in the costs to the banks and an increase in the profits for the banks without any flow on effect to consumers."
Key knows there will be a public outcry if the full cut is not passed on. He knows full well bank bashing is a popular sport. And it's not the government's job to tell banks how to price their loans.
