Treasurer Wayne Swan says the Bank of Queensland (BOQ) has thrown down the gauntlet to the major banks, by promising not to raise its lending rates out of step with central bank decisions.
The Treasurer's comments comes as the ANZ holds its rate setting meeting on Friday, amid concerns the big four banks may start lifting interest rates to offset rising funding costs driven by the European debt crisis.
Mr Swan says the government's banking reforms have put power back in the hands of consumers and have supported smaller lenders like BOQ so they can put competitive pressure on the big banks.
Meanwhile, the Reserve Bank of Australia will get the chance to expand on its reasoning for leaving the cash rate at 4.25 per cent when it releases its quarterly statement on monetary policy.
