The Reserve Bank has played down the significance of a sharp drop in wholesale funding costs for lending rates, saying competition for deposits remains the key influence on banks' costs.
In a finding that the big banks are likely to welcome, RBA researchers said lending rates had tended to move in line with costs in the past year.
During 2012, the gap between the cash rate and mortgages continued to widen, sparking accusations the banks were gouging their customers. But the Reserve said the main reason for this was the battle to attract deposits. Over 2012, the cost of deposit funding had fallen by only 90 basis points, compared with the 125-basis-point fall in the cash rate, the RBA said.
It also said the cost of raising new wholesale debt had fallen to its lowest since 2009 - but banks were still replacing some cheaper debt that had been issued before the global financial crisis.
"Although the recent narrowing of spreads on long-term wholesale debt will eventually put downward pressure on funding costs, developments in deposit competition will have a larger impact on movements in funding costs," RBA staff members Benn Robertson and Anthony Rush wrote.
The comments come as the industry debates whether the war for deposits has further to run.
Bendigo and Adelaide Bank said last month it expected deposit pricing to ease this year because banks were able to get more of their funding from wholesale debt markets.
But the chief executive of the country's biggest credit union, CUA, Chris Whitehead, said on Thursday he saw no signs the war for deposits was losing steam.
New regulations had pushed banks to chase deposits more aggressively, he said. At the same time, many consumers were demanding a better return on their savings as they weighed up entering the sharemarket or investing in property.