RBA Stands by Overnight Cash Rate Decision as ANZ Hosts Hotel Party

Both the Reserve Bank of Australia and the ANZ Bank are apparently sending mixed signals to the public when it comes to interest rates.

While RBA Governor Glenn Stevens said on one hand that the large Australian banks are not too profitable, he maintained on the other hand that the overnight cash rate of 4.25 per cent is where it should be even if the big four have lifted their lending rates.

"Overall, as of present, it is about where we should be.... These rates are roughly where we think is appropriate for the circumstances we face," Mr Stevens told the House of Representatives' Economic Committee hearing in Sydney on Friday.

"The shifting relationship between the cash rate and other rates in the economy is a factor the Board takes into consideration in setting the cash rate. Recent developments do not materially affect the capacity of monetary policy to achieve its goals," Bloomberg quoted the RBA official.

He said signs of a rapid collapse in global demand are not visible as it was in 2009.

However, in the same hearing, Mr Stevens said given the option of choosing between profitable and unprofitable lenders, he would opt for profitable banks. However, he said that based on the extent of the banking problems in Europe, he does not see banks making a good return.

On the question if Australian banks are too profitable because of perceptions that the lenders raised their rates despite the RBA decision and the big four earning a combined $25 billion profit in 2011, the governor said based on the central bank's assessment "the rates of return on equity at our banks over a lengthy period of time they're actually broadly in line with the listed company sector in general."

Mr Stevens also told the MPs the RBA has no plans yet to intervene in the currency markets to weaken the Australian currency which has been blamed for the loss of hundreds of jobs in the manufacturing and export sectors by making Australian products more expensive for importers.

He explained the strong Australian dollar to the booming resources sector and the continent's geographical closeness to Asia.

"I'm not saying we'd never do it, but we have not done so to date," ABC quoted Mr Stevens.

The big four raised their interest rates by 6 to 10 basis points, which Treasurer Wayne Swan criticised. However, Mr Stevens said he understood the lenders' decision, despite being unpopular with borrowers, due to the hike in wholesale funding costs sourced overseas.

Borrowers who have to pay more on their mortgages would probably follow Mr Swan's advise to take their business elsewhere amid reports that ANZ, which declared independence from RBA's interest rate policy, is allegedly hosting a hotel party for its staff just two weeks after hiking their interest rates.

News.com.au reports that the ANZ's top financial planners will hold a five-day conference at the Surfers Paradise Marriott Resort and Spa, which includes two days free time when they could "swim and snorkel with an array of tropical fish" at the hotel's saltwater lagoon.

The ANZ event, dubbed as a week of partying by people in the finance industry, said that ANZ allegedly asked the attending staff not to wear any item of clothing to indicate that they work for the bank. ANZ insisted the team-building conference was organised 12 months earlier long before the bank decided to raise its interest rate and axe 1,000 jobs to save money.

"Its primary purpose is a strategy session for 30 of our top financial planners from throughout Australia, where they will be discussing business strategy and improving customer service," News.com.au quoted the ANZ spokesman.

The Herald Sun also reported that Commonwealth Bank will hold a pirate party at Lorne for its home lenders.