The Bank of Queensland and ING Direct have been the first lenders to cut their interest rates after the Reserve Bank (RBA) eased the official rate on Tuesday.
The RBA lowered the official cash rate by 25 basis points to 3 per cent, the same level as at the peak of the financial crisis.
The Bank of Queensland was the first bank to move, slicing its standard variable mortgage rate by 20 basis points.
But ING Direct is the first to pass on the full amount of the rate cut, handing borrowers a 25-basis-point reduction.
All eyes are now on the big four banks, who say their rates are currently "under review".
The Chamber of Commerce and Industry says the big banks must pass on the rate cut quickly.
The chamber's spokesman, Greg Evans, says the RBA's action should not be stifled by commercial banks holding back.
"One of the issues...
is how quickly this rate reduction will be passed on," he said.
"The spotlight is firmly on the commercial banks and they need to pass on the official rate reduction in full and they need to pass it on quickly." Big four bide time Despite the intense pressure, the Australian Bankers' Association says lenders may not be able to pass on the RBA's rate cut in full, because of elevated funding costs.
The Reserve Bank governor Glenn Stevens said in his statement yesterday that banks have little trouble accessing funds on global markets.
However, the association's chief executive Steven Munchenberg says Mr Steven's statement did not mention the price of that funding.
"Or, more importantly, the price that we're paying for deposits here in Australia," he added.
"So, as recently as last month, the RBA confirmed funding costs have gone up relative to the cash rate, and the other thing the RBA has consistently said is that it, the RBA itself, doesn't expect the banks to pass on rate cuts in full." The big four banks have not yet announced their response to the Reserve Bank's latest official rate reduction.
However, Mr Munchenberg says the delay is driven by competition for customers, not public relations.
"It's not a PR thing, they are literally sitting there, desperately wishing their competitors would show their hands first so that they can undercut them and protect their market share and so that they can win new customers," he said.
"I know it's frustrating, but it is actually competition at work, because each of those banks would like to undercut their competitors." Political reaction The Federal Opposition says the RBA rate cut foreshadows tough times ahead for the Australian economy.
Coalition treasury spokesman Joe Hockey says the move shows the RBA is intervening to counter Labor's big spending policies like the promised Gonski education reforms and the National Disability Insurance Scheme (NDIS).
"The Government and the Reserve Bank are working against each other," he said.
But Treasurer Wayne Swan says given how well the Australian economy is faring compared to other countries, the Coalition cannot claim the glass is half empty.
"It's a big win for Aussie families, particularly around Christmas time," he said.
However, Mr Swan concedes Wednesday's national accounts figures could show a slight moderation in growth.
Economists say the interest rate cut is a form of insurance in case the US economy deteriorates.
RBA governor Glenn Stevens says the board took the decision to foster "sustainable" growth and to keep inflation within the bank's target range.
Mr Stevens says the move is "appropriate now" and will help other sectors in the economy as the peak in mining investment approaches.
Economists had widely tipped the 25 basis point reduction and Citi senior economist Josh Williamson says the cut appears to be partly prompted by the mining investment slowdown.
"Cutting today may have also provided some insurance over that December-January period, which is going to be the crux period for those fiscal deliberations in the US," he said.
The RBA has eased rates by 175 basis points since November last year.