Australia's banks have pocketed tens of billions of dollars by delaying and reducing the size of rate cuts passed on to consumers.

On Tuesday the Reserve Bank dropped the official cash rate to a record low of 0.5 per cent.

Many banks were quick to announce they would pass on the full rate cut to their home loan customers.

However, some of those banks – including the big four – will not immediately pass on those cuts.

Instead, they will delay them until March 13 for ANZ and NAB customers, March 17 for Westpac customers, and as late as March 24 for Commonwealth Bank customers.

According to consumer comparison site Mozo, that decision will add millions to the banks' revenue streams at the expense of customers.
Rate cuts a profit winner

Mozo's Kirsty Lamont told The New Daily banks have been "profiteering on rate cuts" for decades using two main strategies to "wring extra profits out of those cuts".

"The first thing they're doing is not passing on the full benefit," she said.

"The second thing they're doing is delaying the effective date of their home loan rate cuts.

"By not making those cuts effective until days or weeks after the Reserve Bank rate cuts come in, they're effectively denying their customers immediate rate relief and making themselves millions of extra profit."

Research by Mozo found the big four banks alone have added $23.3 billion to their coffers since the RBA began cutting rates in 2011.

A whopping $1 billion is attributable to just the past three cuts, which commenced on June 5, 2019.

All together, ANZ, Commonwealth Bank, NAB and Westpac have seen their revenues increase by a combined average of $446 million per month over the past nine years as a result of the cuts.

See RateCity’s live list of rate cuts here.


The Australian Banking Association, the peak representative body for Australian financial services, did not respond to The New Daily's repeated requests for comment.

But Reserve Bank data shows the banks' net interest margins – the difference in interest rates for borrowing and lending – is shrinking.

How banks are ‘profiteering’ from Reserve Bank rate cuts_1

These margins are a major profit driver for banks, and banks have been known to squeeze both borrowers and savers to ensure the gap between the two remains wide.

But it will be savers who bear the brunt of the cost.

"For borrowers, it’s time to rejoice and be happy your home loan rates will be going down," Ms Lamont said.

For savers, the news is pretty grim.

"While the big banks drag their heels passing on cuts to home borrowers, they are much more likely to cut savings rates effective immediately."

Meanwhile, in a speech addressing Australia's response to the coronavirus, Prime Minister Scott Morrison said the government expected the major banks to pass on the RBA's cuts in full.

"Government would absolutely expect the four big banks to come to the table and to do their bit in supporting Australians," he said.