New Inquiry Into Big Banks To Probe Why Interest Rate Cuts Haven't Been Passed In Full

The federal government is expected to give the competition watchdog the green light for an inquiry into why banks have not fully passed on interest rate cuts.

Treasurer Josh Frydenberg is set to tell the Australian Competition and Consumer Commission to investigate mortgage costs amid concerns about gouging, The Courier-Mail reports.

Frydenberg said the failure of the banks to fully pass on recent interest rate cuts left them exposed to claims they were putting profits before customers.

"This is not a good outcome for either their customers or the economy as a whole and comes just months after the royal commission shone a bright light on misconduct in the banking sector," he told the newspaper.

"With this new inquiry, the government is providing the banks with an opportunity to transparently account for their decision making and how they balance the needs of borrowers, savers, shareholders and the wider community."

The official cash rate is now at a record low of 0.75 percent after the Reserve Bank cut interest rates three times this year.

READ MORE: RBA Drops Interest Rates Again To Even Lower Historic Low

However, the major four banks on average passed only 75 percent of savings to their customers.

The ACCC's preliminary report is due by March 30 next year, six months before the final report.