Banks are charging around 75 basis points more than they did seven years ago, and defend their stance saying bank funding costs are about 20 to 30 basis points higher now than they were in 2002, plus banks also had to take account of higher risks in the market place.
Fujitsu Consulting managing consulting director Martin North blamed the collapse of competition in the banking sector for the difference in interest rates.
"About 90 per cent of loans are now being written by the four majors, and therefore there is much less competitive tension," Mr North said.
"The net effect of that is they are trying to recover some of the margin pressure that they've experienced over the past five years."
Last week the Reserve Bank cut official interest rates by 100 basis points, but only a handfull of lenders passed on the cuts in full, with others only passing on 0.80 oer cent of the cuts. Treasurer Wayne Swan has slammed the banks, saying they must explain why they have not passed on the latest rate cut in full. Mr Swan also wants banks to reduce the interest on credit cards.
Opposition Treasury spokeswoman Julie Bishop has echoed Mr Swan's calls for credit card rate relief, particularly for low-income earners.