(Adds Westpac's rate cuts, analyst comment)
By Byron Kaye and Paulina Duran
SYDNEY, June 4 (Reuters) - Australia's treasurer accused Australia and New Zealand Banking Group ANZ.AX of putting "profits before people" on Tuesday, after the bank, unlike several rivals, failed to pass on the full benefit of a central bank interest rate cut to borrowers.
As expected, the Reserve Bank of Australia (RBA) lowered the policy rate by 25 basis points, the first easing in three years to support an economy forecast to grow at its slowest pace in a decade. the country's third-largest lender, followed soon after by cutting its standard mortgage rate by 18 basis points, provoking a fierce response from Treasurer Josh Frydenberg.
The treasurer, who plays a key role in economic policymaking of the government, said ANZ was ignoring a year-long public inquiry into the finance sector which in February found a culture of rampant fee-gouging and profiteering.
"The ANZ has let down its customers," Frydenberg told reporters in Melbourne.
"After what they've been through with the Royal Commission you would expect that the banks were more sensitive to the Australian consumers, to their own customers' concerns."
Commonwealth Bank CBA.AX , the country's largest lender, and National Australia Bank NAB.AX , the smallest of the Big Four, said they would lower mortgage rates for its customers by 25 basis points from June 25 and June 17, respectively.
"Because the cost of short term funding has moved down, the banks (CBA and NAB) are now in a position to pass the full RBA cut and keep their margins stable," said Azib Khan, senior banking analyst at stockbroker Morgans.
Westpac Banking Corp WBC.AX said it would lower variable rates for home owners by 20 basis points while passing on the full RBA cut and more - a total 35 basis point cut - to the rate applying to property investors with interest-only mortgages. Its changes would apply from June 18, the bank said in a statement.
ANZ said in a statement it made its decision after weighing customer benefits against its business profitability.
"While we recognise some home loan customers will be disappointed, in making this decision we have needed to balance the increased cost in managing our business with our desire to provide customers with the most competitive lending and deposit rates possible."
Khan said that ANZ would likely try to protect its market share by offering promotional discounts to new customers only.
Australian bank margins have been under pressure due to low credit growth on top of about A$8 billion in regulatory and remediation costs stemming from the Royal Commission inquiry.
"I have made it very clear to the banks that the public have a legitimate expectation that they will see the full benefits of rate cuts such as announced by the RBA today," Frydenberg said.
"I'm very disappointed in the decision by the ANZ."
ANZ shares closed up 0.8% and CBA shares closed up 0.65%, compared to a broader market rise of 0.2%.