Fed: NAB throws down gauntlet matching RBA rate rise

AAP General News (Australia)
12-03-2009
Fed: NAB throws down gauntlet matching RBA rate rise

By Colin Brinsden, Economics Correspondent

CANBERRA, Dec 3 AAP - There was relief for some homeowners after the National Australia
Bank (NAB) said it was matching this week's official interest rate rise, throwing down
the gauntlet to its rival Westpac.

Treasurer Wayne Swan was quick to heap praise on the bank on Thursday after his scathing
attack on Westpac earlier in the week.

Westpac had shocked borrowers by jacking up its key home loan rate by nearly double
that of the Reserve Bank of Australia's (RBA) official 25 basis point rate increase.

Westpac lifted its standard variable mortgage rate by 45 basis points, increasing the
monthly repayment on a $300,000 home loan by around $85.

While economists had expected the other major banks to follow suit, NAB on Thursday
announced it was lifting its home lending rate by the same margin as the RBA, which would
be around a $47 increase on the same sized mortgage.

"We are determined to be competitive, to offer our customers a better deal and attract
new customers to NAB," group executive for personal banking Lisa Gray said in the statement.

"Today, we are sending a message to customers at Westpac, and the other banks, that
NAB can offer them a better deal."

Commonwealth Bank of Australia and ANZ have yet to declare their hand on rates.

Mr Swan said NAB had done the "right thing" by its customers and the wider community.

He said families looking to take out a mortgage would obviously take close notice of
the different rates available and "it's encouraging to see competitive pressure on other
big banks".

"I think the community generally will be looking to the other banks to follow this
positive example set by NAB," Mr Swan said in a brief statement.

"The contrast with the behaviour of Westpac earlier this week could not be more stark."

New data released on Thursday showed that consumers took the RBA's October rate rise
- the first in its current policy tightening phase - in their stride, posting a modest
rise in retail spending.

The Australian National Retailers Association (ANRA) described the seasonally adjusted
0.3 per cent increase in retail trade as "at best sluggish" and was concerned that there
hadn't been the rebound that would justify three consecutive interest rate increases.

RBA's rate rise this week was its third increase in as many months, a trend that economists
expect to continue next year.

ANRA CEO Margy Osmond is concerned about the usual lagged affect of rate increases
on future spending.

"It doesn't bode particularly well for the first quarter of next year, which is traditionally
the most difficult for retailers," Ms Osmond told AAP.

Myer on Thursday said its department store sales were tracking forecast growth of three
per cent for the Christmas period.

"Christmas will be a good Christmas without being a great Christmas," Myer chief executive
Bernie Brookes told reporters in Sydney.

Thursday's data showed department stores led the way in October spending, rising 1.9
per cent, but food retailing eased for a second month in a row.

Ms Osmond said some areas would do extremely well during the Christmas period, anticipating
a surge in food retailing.

"We may even still see extremely good sales in some electronics (stores) ... because
of the state of the Aussie dollar and their capacity to keep prices fairly low and some
really good bargains," she said.

But, she said, other sectors would find it increasingly difficult to cut prices without
severely affecting margins.

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