By not lowering interest rates in tandem with the RBA, Australia’s four largest banks earned an additional $7 million from their variable rate mortgages and credit cards, according to an analysis by the Sunday Herald Sun. That leaves little doubt as to how they earned multimillion dollar profits in a year of financial hardship for many Australians—by increasing the differential between their variable rates and the official RBA cash rate to as much as a full percentage point.

Now, through this “decoupling” process, the Big Four stand to earn even more. This is despite the protection they received during the global financial crisis from the government’s asset guarantees.

Numbers crunched by the Sunday Herald Sun show that, for the homeowner with a $300,000 mortgage, the higher interest rates cost an extra $3,129 average during the past year. The banks also earned roughly $3,000 more per year from credit card account holders, as well as other loan holders subject to variable interest rates.

Treasurer Wayne Swan has repeatedly urged the banks to fully pass on the central bank’s rate movements—no more, no less—and repeatedly his requests have been ignored. During the past week, three of the four major banks raised their variable rates for mortgages and credit cards by more than the RBA’s stated amount, Westpac within hours of the central bank’s announcement. Only NAB listened to Mr. Swan’s urgings, sparing themselves his most recent bitterness.

“I have said before, there was no justification for Westpac and I believe no justification for the Commonwealth Bank or ANZ,” said Mr. Swan.

Greater than 97% of Australian home loans are subject to variable interest rates and thus the rate movements of the lending bank.

Source: heraldsun.com.au