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The banks' fear that they will have to pay more when borrowing funds seems very difficult to believe.
To begin with, as soon as the Reserve Bank correctly reduced the cash rate, the banks followed by paying less for funds they borrow. Now, we constantly hear that people are spending less money. Retailers suffer because of that. So there must be more money available for lending. The sharemarkets are pretty dead, so people definitely do not buy many shares. The real estate turnover in the last year was not high and the prices were static. Yet we have more people in the workforce and the wages have risen, so more money again became available.
But let us think what happens when the banks say they have to replace cheap finance with expensive finance. It is nonsense. Our interest rates have dropped, not risen. So the banks are better off again when they borrow.
http://www.businesss...d20120105-Q7QWJ
To begin with, as soon as the Reserve Bank correctly reduced the cash rate, the banks followed by paying less for funds they borrow. Now, we constantly hear that people are spending less money. Retailers suffer because of that. So there must be more money available for lending. The sharemarkets are pretty dead, so people definitely do not buy many shares. The real estate turnover in the last year was not high and the prices were static. Yet we have more people in the workforce and the wages have risen, so more money again became available.
But let us think what happens when the banks say they have to replace cheap finance with expensive finance. It is nonsense. Our interest rates have dropped, not risen. So the banks are better off again when they borrow.
http://www.businesss...d20120105-Q7QWJ
