Defined Terms and Documents       

RBA did naught to require Credit Card Issuers to lower interest rates in line with the fall in the Cash Rate

"Prior to 1985 the maximum rate that could be charged on credit cards had been set at 18% pa by the Reserve Bank of Australia.  In April 1985, this rate was deregulated." (bottom of page 7 therein). 

Margin Between Average Business Card Purchase Interest Rate And Official Cash Rate Has Increased from 8.07% (as at 1 June 2007) to 13.79% (as at 1 June 2013) - a 71% increase in the implicit interest profit margin for Credit Card Issuers.  This has since increased to a 74% spread (based on the Cash Rate of 2.50% as at 12 June 2014 - even higher spread now with the Cash Rate down to 2.25% as at 31 Jan 2015).  In the last 7½ years, the RBA has lowered Credit Card Issuers cost of funds, namely the Cash Rate from 6.75% to 2.25% as at 12 June 2014(now 74% less).  Yet the RBA has not sought Credit Card Issuers to pass on any of its massive 'funding costs' savings to Credit Cardholders.

Cash Rate notes that it has fallen from 4.75% since end 2010 and presently is down to 1.5% since 2 Aug '16.  Housing loan interest rates have fallen commensurately.  Yet plenty of Credit Card Products are still charging 20% on Purchases and 22% or more on Cash Advances.   

"The ACCC and the Payments System Board (RBA) should monitor the delivery fees charged on credit and debit cards while the ACCC should monitor the rules of international credit card associations to ensure they are not overly restrictive". quote from Chapter Nine: 'Stability and Payments' of The Wallis Report on the Australian Financial System: Summary and Critique - 23 June 1997.

Below is a quotation from Westpac's submission to the Wallis Inquiry, submitted by former CEO, Bob Joss.  The Writer's investigations suggest that the Wallis Inquiry did not adopt Westpac's prudent recommendation in either its Discussion Paper - Released Nov 1996.  Or its Final Report - Released March 1997):            

    "Also relevant is the Inquiry’s concern with fairness, or the equitable treatment of the various users of the financial system."

    On-going monitoring of credit card pricing in anticipation of a substantial inquiry into the effects on consumers of the deregulation of credit card interest rates"

The RBA ignored then Westpac CEO, Bob Joss' above recommendation to the Wallis Inquiry - March 1997 - for "Protection of consumers -On-going monitoring of credit card pricing in anticipation of a substantial inquiry into the effects on consumers of the deregulation of credit card interest rates" .

How to capture the full extent of price stickiness in credit card interest rates? - 2012 (Wollongong University) extracts include:

• Abstract: We present a new approach to evaluate the full extent of Price Stickiness in Credit Cards interest rates by modifying the existing asymmetric models so that they can be adopted for testing both the amount and adjustment asymmetries as well as the lagged dynamic inertia. Consistent with similar studies, banks behave asymmetrically in response to changes in the Reserve Bank of Australia’s (RBA) target interest rate. Rate rises are passed onto the consumer faster than rate cuts and the credit card interest rate showed a very significant degree of downward rigidity. Based on the magnitude of the pass-through parameters obtained from short-run dynamic models, rate rises had a full one-to-one and instantaneous impact on credit card interest rates. However, in absolute terms the short-run effects of rate cuts were not only less than half of the rate rises but also were delayed on average by three months.

• "In the contemporary literature the asymmetric behaviour of credit card interest rates could also be referred to as “rockets-and-feathers hypothesis”. In a similar context, Bacon (1991) argued that gasoline prices “shoot up like rockets” in response to a positive rise in oil prices and “float down like feathers” in response to a fall. Hannan and Berger (1991)...."