Business groups are urging the Commonwealth Bank and NAB to withhold interest rate hikes after increases from ANZ and Westpac, warning it could shatter the confidence of small firms.
Peter Strong, executive director of the Council of Small Business of Australia, says if CBA and NAB do decide to raise interest rates, the impact on confidence will surpass the financial impact.
“It’s a confidence thing with small business people… What it does is create a situation where you can’t have any confidence in interest rates remaining the same,” Strong says.
“If you negotiate a loan, the banks could stick it up [regardless of the actions of the Reserve Bank]… This is sending a very bad message, and [the banks] need to be careful.”
Strong’s comments come after ANZ and Westpac increased interest rates for mortgages and small business by six and ten basis points respectively, citing an increase in funding costs.
ANZ was the first of the big four to move, followed by an even bigger rise from Westpac.
Westpac raised its standard variable rate by 10 basis points, or 0.1%, to 7.46%, making it among the highest standard variable rates of the big four banks.
Meanwhile, ANZ has increased its standard variable mortgage rate to 7.36% per annum, from 7.3%. The new rates will be effective from February 17 for ANZ and February 20 for Westpac.
The move comes amid immense pressure for banks to pass on cuts to the official cash rate by the Reserve Bank.
The Australian Retailers Association is now calling on NAB and CBA not to raise rates, with executive director Russell Zimmerman saying the banks need to “show some backbone”.
“The decision by two of the big four banks to raise interest rates is a clear abuse of their market power in an economy where other key sectors are struggling,” Zimmerman said in a statement.
“Retail is one of the sectors of the economy struggling to post growth. Unmanageable interest rates are just one of the impediments to stimulating consumer spend.”
“Retailers have been struggling with poor trade for at least the last two years, with many forced to close their doors or hand over to administrators already.”
Zimmerman said if NAB and CBA do decide to raise interest rates, due to the “oligopolistic nature” of Australia’s banking system, business and consumer customers will wear the cost.
“The big four banks hold approximately 90% of the home loan market. This is a clear indication of why Australia’s banking industry needs some serious competition reform,” he said.
“The wider economic implications of being forced to cut jobs are of serious concern to the retail sector.”