The Reserve Bank of Australia’s (RBA) quarterly monetary policy statement shows that prior to last week’s official rate cut, only 69 basis points of the 125 basis points in cuts since September had been passed on to small business by major lenders.

Larger businesses fared only slightly better after receiving an 80 basis points reduction.

The RBA also slashed its growth forecasts to 1.5 per cent for the 2008-09 financial years.

“The full official rate reduction must be passed on when conditions in financial markets ease,” Australian Chamber of Commerce and Industry (ACCI) spokesman Greg Evans said.

“The cost and availability of credit combined with changes to lending criteria are becoming serious business impediments and will exacerbate the impact of the slowdown.”

ACCI believes an additional fiscal stimulus, including tax measures to encourage spending and business investment, supported by significant cuts in interest rates, will be necessary to bolster confidence.