Federal Treasurer Wayne Swan has refused to pressure banks to pass on the full amount of any cut in the official cash rate.
The Reserve Bank is tipped to announce a rate cut when it meets next week, but because of the global credit crunch it is possible some or all of the big four banks will not pass the full cut on to mortgagees.
Under questioning today, Mr Swan refused to call on the banks to pass on the full amount of any cut.
"We are in a more complicated environment,'' Mr Swan told ABC Radio. "Certainly I would encourage them (banks) to act as responsibly and as competitively as they possibly can.
"I can assure you that I will be putting maximum pressure on the banks to ensure they pass on the maximum amount that is economically responsible given events in global markets.''
Mr Swan pointed out the credit crunch was showing little sign of coming to an end.
"As we've heard overnight there have been further developments in Europe as well,'' he said.
Overnight, Irish Prime Minister Brian Cowen said his government would protect banks and guarantee all deposits for two years.
In continental Europe, the governments of Belgium, France and Luxembourg joined together to save Dexia, a key local government lender, with a 6.4 billion euro ($11.5 billion) bailout.
"Certainly it's not encouraging news from Europe, but whatever is happening in Europe and whatever is happening in the United States, our regulators advise us here that our system is fundamentally sound,'' Mr Swan said.
"We are not experiencing the same problems that they are experiencing.''
The Reserve Bank of Australia board holds its monthly meeting on Tuesday and investors are increasingly betting the central bank will lower rates by half a percentage point to 6.5%.
AAP
