Banks could spoil Christmas cut

THE Reserve Bank of Australia unwrapped an early Christmas present yesterday, but the banks could be the grinch to spoil the season.

The cash rate was cut to 4.25% from 4.5% at its December board meeting, its second consecutive monthly cut and the lowest that rates have been since April last year.

Mortgage holders will be among the biggest beneficiaries, providing the banks pass on the .25% cut in full.

If they do, the average homeowner would save just under $50 a month on repayments on a $300,000 mortgage.

Federal Treasurer Wayne Swan told that "many families and small businesses will be very angry if there is not a full pass through of this rate cut by the banks".

Henzells Mooloolaba principal Greg Young said he was "half-expecting" yesterday's news.

"It's going to be a welcome Christmas present for people with a mortgage, as long as the bank passes the rate on," he said.

"What we're finding is that prices on the Sunshine Coast have come back to a limit where the investors are coming back.

"The decrease in interest rates would encourage more investors to look into Coast properties.

"It's a good thing to happen."

Mr Young said the Sunshine Coast region had undergone a price correction during the past 18 months.

"That's putting us ahead of Sydney and Melbourne," he said.

Loan Market Sunshine Coast broker Carol King said the cut was the appropriate course of action.

"A recent survey we ran showed that the issues occurring in Europe were top of mind for Australian consumers when considering their financial position," she said.

"These issues are not going away short term and there will be more work to do to stimulate sectors of our economy.

Mrs King said that with inflation at the lower end of the acceptable range for the RBA, there was room to move to get consumers back in the market.

"The last 12 months have definitely been the most challenging the home finance sector has experienced in the past decade," she said.

National Retail Association executive director Gary Black said the best performing retail categories continued to be essential spending, such as food and some parts of household goods, with discretionary spending struggling.

"In the lead-up to Christmas retailers are very much looking for a boost to consumer spending in those discretionary areas," he said.

"A rate cut is just what they needed."

"This announcement by the RBA today will boost retailers' hopes of a strong Christmas-new year trading period and a better 2012."

PJ Burns Builders managing director John Thurtell said the timing could not be better.

"It's fantastic news," he said.

"These interest cuts will help get the people out there."