The Prime Minister has been reaching out to the business community amidst the criticisms over key issues like carbon tax and the government’s insistence on delivering a budget surplus. 

Kelly said business leaders should engage constructively with the Prime Minister. She acknowledges that Gillard is reaching out and consulting to all sectors affected. 

The support of the financial services chief is a much-needed boost for the Prime Minister, who suffers from a low approval rating. 

Kelly said that based on her personal experience, she knows that the Prime Minister listens. She added that even when one has a different point of view, Gillard will try to understand. 

The chief executive also said that she has had many discussions with the Prime Minister over policy issues. She said that although they may have different standpoints on things, they enjoy a healthy respect on each other. 

It is not a surprise that Kelly is showing support to Gillard. Westpac and its competitors also faced tough criticism over different issues like job cuts in the bank and mortgage pricing. The banking sector was also criticized for failing to meet the cuts of the Reserve Bank. 

Just last week, Westpac’s retail bank passed just 37 basis points of RBA’s 50 basis point cut. 

Kelly, however, declined to comment whether her talks with Gillard also focused on banking issues.

The lending rate adjustment is the result of a move by the Reserve Bank, which slashed down cash rates to support the economy. Analysts said that in doing this, the big four banks can retain their margin even with mortgage rates down. Such as with a 40 basis point cut in standard 25 year $300k variable, where the monthly repayments can go from $81 to $1998. 

Deposit rates for CBA have yet to be adjusted. The bank said this is still ‘under review.’ 

Reports also indicated that Westpac and ANZ are making similar announcements in the next few days. 

According to Westpac chief executive Gail Kelly, the organization is delaying mortgage rates discussion to a later day as the company is still focusing on its profit briefings. Westpac has just announced their first-half profits despite that rise of funding costs and pressures in the banking industry. 

ANZ, meanwhile, has already raised its lending rate variables two times this year last February and April. The move has angered the public and has gone against the derivatives of the central bank. ANZ has also released a report of its first-half profit, which has been pegged under $3 billion.

They will not be particularly attractive from a banks’ point of view once those liquidity standards take effect from the beginning of 2015. That does not seem to have affected the pricing of these products yet, but it will be interesting to see how that evolves both in terms of pricing and product design as we approach that date.

Some banks have been offering interest rates of as much as 6% for term deposits, and have particularly sought out the smsf market to build cash reserves. The strategy of attracting deposits has been a hallmark of the deposit pricing war as banks attempt to top each other’s savings rates.

The online accounts generally don;t require a minimum balance, but can’t be used to make payments. This makes them unsuitable for a day to day account, but also makes them less costly for banks to administer.

However, according to Debelle, when new global liquidity standards known as Basel III are introduced, these products could become a lot less attractive for the banks to offer.

The liquidity requirements will encourage the banks to seek deposits for fixed terms in order to satisfy the Basel III changes expected to be introduced in the next few years.