The Franchise Council of Australia has called on banks to pass on official interest rate cuts to small business borrowers following yesterday’s reduction by the Reserve Bank of Australia. Executive director Steve Wright said “banks had made a pledge at a recent meeting with small business representatives and the Minister for Small Business Dr Craig Emerson, to pass on interest rate reductions to small business borrowers”.

“Mortgage rates for consumers have dropped much more rapidly than loans to small businesses. It is time the banks stepped up to pass on the benefit of the cuts to the official interest rates, especially given that many small business borrowers are securing their loans against their homes.

“Small businesses — especially franchising — will be drivers of a return to economic growth and it is imperative for the national economy that banks facilitate this by continuing to lend to small business – and doing so at a fair rate,” said Wright.

The Australian Retailers Association (ARA) said the Reserve Bank of Australia (RBA) was acting with responsible caution by reducing the cash rate by 25 basis points.

ARA executive director Richard Evans said yesterday’s modest reduction, taking the official cash rate to three percent, indicated the RBA was taking a considered approach and waiting to evaluate the effects of other economic stimuli yet to impact the market.

“Retailers support any RBA or government policy that puts cash back in consumers’ pockets and help stimulate consumer spend,” Evans said.