Australians spent up on little luxuries in August as income tax cuts took effect, but Treasurer Josh Frydenberg is frustrated the big banks won't push more money into the economy.
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The latest retail data from CommSec Research shows spending at chains and large retailers rose 0.7 per cent in August, leading to a 4.8 per cent jump for 2019.
But the treasurer has called on mortgage holders to leave banks who did not pass on the full 25 basis point cut after the Reserve Bank chopped interest rates to a new record low.
"The only way they're going to hear the message is if the customers of these banks go and make their displeasure known, and if they can't get a better deal, take their business elsewhere," Mr Frydenberg told ABC radio on Friday.
The Reserve Bank cut interest rates to 0.75 per cent on Tuesday in a bid to drive unemployment down and wages up.
"There's been three rate cuts since June, that's 75 basis points. Of those, 57 basis points have been passed on to the banks," the treasurer said.
"So if you're an Australian family with a $400,000 mortgage that means you'll be $1500 a year or more better off with reduced interest payments."
CommSec economist Craig James said the August retail spending data was the strongest in the past six months.
"The data is the first real indication that tax cuts are starting to flow through the economy," Mr James said.
"Spending is likely to have lifted further in September, suggesting a solid contribution to economic growth in the quarter."
Labor leader Anthony Albanese said the government should do more to ensure the banks passed on rate cuts and customers switched over.
"There are a range of policy measures that would be supported across the Parliament, to impose sanctions against the banks if they don't do the right thing," he told reporters.
"How about they spend a bit of that advertising dollar on actually saying to the big four banks that they're doing the wrong thing, and enhancing the reputation of those smaller financial institutions that have passed on the full amount?"
Westpac and ANZ joined the Commonwealth Bank and NAB on Wednesday to reveal their standard variable rates would drop between 13 and 15 basis points.
ANZ did pass on the full rate cut for people paying interest-only home loans.
The banks state they need to keep some margins in a low interest rate environment, and protect customers who save deposits.
The Australian Competition and Consumer Commission has asked Mr Frydenberg for his support in an inquiry into the big banks, looking at barriers to entry for new players in the banking sector.
The Reserve Bank is preparing to cut rates further if the economy remains stagnant.
Australian Associated Press
