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Too a degree maybe. It is interesting to note that so far only the 2-year rates have been cut. It will be interesting to note where rates head over the next month!

That was my suspicion, interesting stuff.

This raises the following question for me. If it is becoming relatively cheaper for banks to use domestically sourced credit won’t this lead to an improvement in our current account position. If we believe our current account deficit is too large, shouldn’t we allow banks to lift interest rates to attract further domestic credit – in a sense allowing the current recession to correct the imbalances in the domestic economy.

I guess the Bank feels that consumer confidence and domestic demand is falling “too quickly” and so we need to prevent interest rates from rising domestically in order to slow down the process of correction.

I’m not sure – I think the focus needs to still be on inflation expectations – even if that means mortgage rates will rise further. Unemployment is fricken 3.6%, its not like we’re looking down the barrel of a full scale depression here. I guess we will see

While that might be fine for Kiwibank, it does not answer my question about ASB.

The only response I have received so far is that ASB may be trying to gain some market share – but I was wondering if there is any specific reason why ASB is able to do this while other Bank’s cannot.

I understand that the only profit Kiwibank makes is from agency fees from POstbank i.e. fees that POstbank was earning prior to the creation of KIwibank.

A cyncical Act voter like me might suggest that KIwibank can reduce it’s rates because it is subsidised by us long suffering taxpayers. Lets hope John Key flogs it off to one the Aussie banks it is always criticizing.

Bryan