National Australia Bank CEO Cameron Clyne yesterday warned customers to virtually ignore to the RBA's cash rate.

Those movements would be largely inconsequential to bank's decisions to alter variable interest rates because funding costs continued to rise, he said.

Mr Clyne said banks had been hiding behind the Reserve Bank rate decisions for too long and now had to act independently to protect their profit margins.

The warning came as Mr Clyne attacked Australia's banking community, which, he said, had failed to properly explain where banks get their funding.

"The Reserve Bank cash rate is only very small component of how we are funded," he said.

"It is incumbent on all of us to have an informed debate about interest rate movements and funding costs because if we are continually creating the perception that the Reserve Bank cash rate movements are the driver of bank interest rate movements, I think we will create a very difficult situation."

The stance taken by the NAB chief gives weight to the growing argument that mortgage customers have possibly seen their last interest rate cut this year.

Despite delivery a $2 billion half-year profit yesterday, Mr Clyne said the cost of funding was continuing to hurt the bank.

Daily Telegraph - Andrew Carswell
April 29, 2009