Rate cuts don t always stimulate: NAB boss
Rate cuts don't always stimulate: NAB boss

National Australia Bank boss Cameron Clyne says rate cuts don't always stimulate economic activity, and not because the banks have failed to pass on cuts in full.

After delivering a 22 per cent fall in NAB's full year net profit to $4.1 billion, Mr Clyne said he expected the year ahead to remain challenging.

Demand for loans was likely to stay weak as businesses and consumers were cautious because of global uncertainty and slowing activity in Australia, he said.

That's despite the Reserve Bank of Australia's recent cuts to the cash rate, totalling 100 basis points - or one percentage point - since April.

"Obviously the cuts are important in the sense that it does provide some additional cash flow, but I think people also realise that some of the cut is a result of the fact that people are concerned about the economy," Mr Clyne told reporters.

"So that can also make people cautious.

"It has an impact, but it is not always entirely stimulatory."

Mr Clyne rejected a suggestion the RBA had cut so frequently in recent months because the banks were not passing on the same size cuts on their rates.

"I think it's not correct to suggest that the bank rates that are charged are not necessarily in line with where the RBA would like to see them," he said.

And he defended NAB's recent undersized rate cuts, saying the cash rate was "immaterial" to its cost of funding loans.

NAB has offered the lowest standard variable home loan rate among the major banks for more than three successive years, but is now considering whether to maintain that record into 2013.

The West Australian

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