CBA, NAB pass on full RBA cut; ANZ doesn't

RBA announces June cash rate

The major lender was the first of the big four to pull the trigger on its own cut, less than after the RBA announced it would slash the official rates to 1.25 per cent on Tuesday afternoon.

Treasurer Josh Frydenberg is urging banks to pass on the full extent of the Reserve Bank's historic interest rate cut to its customers.

The RBA's governor, Philip Lowe, announced the cut in a statement today (June 4), saying it was made to "support employment growth and provide greater confidence that inflation will be consistent with the medium-term target".

The consensus among economists is that the rate will be lowered by an additional 0.25% in the near future, a majority forecasting the second decrease to be implemented in August.

"The economic outlook remains reasonable, with the main downside risk being the worldwide trade disputes, which have intensified recently", Mr Lowe said.

"Unless the bank becomes more bearish on the central economic outlook, a move below 1% is not imminent", David Plank, head of Australian economics at Australia & New Zealand Banking Group Ltd., said in a note after the speech.

"It will assist with faster progress in reducing unemployment and achieve more assured progress towards the inflation target".

"Are interest rates going to be reduced further?"

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Borrowers with an average home loan of $400,000 would save about $58 on their monthly repayments if the cut was fully passed on.

"Given this, the possibility of lower interest rates remains on the table".

"The royal commission highlighted how the culture within financial institutions needed to improve ... and how the conduct had fallen below public expectations", he told The Australian on Tuesday.

"Customers are discerning and customers look for the best deal", he said.

While Commonwealth Bank and NAB said they would pass the entire 25 basis point reduction, ANZ said it would only reduce its variable mortgage rates by 18 basis points.

Attention now turns to the national accounts data, a measure of the strength of the economy, which will be released later today and is expected to show growth remained soft in the March quarter.

Dr Lowe said there had been few inroads into the spare capacity in the jobs market, but increasing labour force participation, a high vacancy rate, reports of skills shortages and an expected pick-up in wages augured well.

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