Both Reserve Bank of Australia (RBA) and major Australian banks' moves have been easy to predict in terms of overnight cash rate reductions and the response of the local lenders.

Meeting analysts' forecast, the RBA not unexpectedly cut by 25 basis points the key lending rate, bringing down to a three-and-a-half-year low the benchmark interest rate to 3 per cent.

A day after the RBA reduced the interest rate, three of the big four banks announced they will pass 20 basis points to borrowers and pocket 5 points. Again, this move was anticipated since it was similar to previous responses of the large banks to the central bank policy.

As in previous RBA rate cuts, the banks justified their decision to keep part of the interest rate reduction to balancing needs of depositors and borrowers.

"A significant factor impacting this balancing of needs has been the increased competition in the domestic deposit market which has benefited many customers, including those who rely on interest earnings to meet their living expenses," the banks said in a statement.

With this decision, Westpac will bring down to 6.51 per cent its new standard variable rate on Dec 17, while the Commonwealth Bank of Australia will cut its rate to 6.4 per cent and National Australia Bank will lower its rate to 6.38 per cent beginning Dec 10.

NAB pointed out that despite keeping 5 basis points, it still offers the lowest standard variable loan rate among the big 4 for 41 months. "Our track record of being competitive speaks for itself, NAB group executive for personal banking Lisa Gray said in a statement.

ANZ Bank, which will likely adopt the same policy, will announce its decision on Dec 14, the second Friday of the month.

The anticipated move of the big 3 came despite an appeal from Prime Minister Julia Gillard for the banks to pass the rate cut in full. Treasurer Wayne Swan has been making the same appeal the past RBA rate cuts, but it was heeded by the banks only once.

However, Yellow Brick, a financial services company, passed in full the RBA rate cut which brought down its variable home loan rate to 5.25 per cent for the first year. ING Direct made a similar move, while the Bank of Queensland also pocketed 5 basis points.