What is Credit Actually Worth?
Are you one of those businesses who have been asked by The Treasurer to go out and spend money due to the low cost of borrowing? It certainly makes sense that with the cash rate at a historic low of 2.00%, that there has been no better time to take out a loan in order to invest in your business.
However, the same cannot be said for credit cards. Remarkably, the gap between interest rates from major credit providers and the Reserve Bank of Australia's (RBA) cash rate is greater than it has ever been since records commenced in the 1990s.
It will be an entertaining time in Senate Estimates today when Senator Sam Dastyari drags the Assistant Governor Frank Campbell and other officials from the RBA into his committee to examine whether or not Australia’s banks are gouging on credit card rates.
Speaking on ABC’s AM this morning, Mr Dastyari rejected the idea that due to credit card balances being largely unsecured, that the banks were entitled to compete among themselves to ensure best value for the consumer. “What we've seen time and time again is that interest rate cuts, falls in the cash rate have not been passed on to credit card holders and frankly it's time we got some answers.”
The RBA also meets tomorrow for it’s monthly discussion on interest rates. Many observers consider there is no chance of a change in the official cash rate – whether upwards or downwards for another 12 months.