The ANZ Banking Corporation Ltd and Westpac Banking Corporation said today they cannot guarantee passing on any interest rate cut made by the Reserve Bank of Australia.

As the first of the major banks to front a Parliamentary inquiry into competition in banking, the ANZ was grilled over its stance on interest rates.

"We would like to cut those interest rates but we will have to assess what is happening to our funding costs at that time," said ANZ's managing director for mortgages, Michael Rowland.

Labor MP David Bradbury, whose NSW seat of Lindsay covers far western Sydney, led most of the questions to the ANZ on interest rates.

"There are many people in electorates like mine who are really doing it tough at the moment," Mr Bradbury told the bank.

"If the Reserve Bank takes a view, and takes a decision to cut rates, they will be the very people the Reserve Bank has in mind.

"If they do not receive the full benefit of what the Reserve Bank has intended, then in a way that's subverting what the Reserve Bank is trying to do through its monetary policy."

When Mr Bradbury urged the ANZ's Mr Rowland to give a clearer answer on the bank's intentions, Mr Rowland responded, "The strongest indication I can give you is that we want to pass on an interest rate cut, if funding costs allow.

"At the end of the day, we're a commercial organisation."

The House of Representatives Economics Committee is looking at whether competition in the financial sector has been reduced following the global credit crunch.

The ANZ told the hearing that the big banks' share of the home lending market had increased in recent months as non-bank lenders were forced from the market by higher costs.

But Mr Rowland said he expected the non-bank lenders to return when conditions improved.

The ANZ home lending boss also noted that his bank's profitability on each loan it made had been reduced by the high cost of funding.

Meanwhile, Westpac said the local economy has slowed more than it expected, and that it believes the central bank is looking to cut official interest rates.

"Obviously, there are a number of factors that we have to consider at the time of making a rate move," chief executive Gail Kelly told investors today.

Mrs Kelly said the bank would have to consider its cost of funding, the competitive environment and the effect on its customers.

"Clearly , we would love to pass through the full 25 basis points drop if that were to occur ... but we'll need to factor in all of those issues at that time."

Both ANZ Banking Group Ltd and Westpac Banking Corporation said today they can not guarantee they would pass on any interest rate cut made by the Reserve Bank of Australia.

Westpac Banking Corporation believes the next move in official interest rates will be down, but it would not guarantee that it would pass a cut onto its customers in full.

Earlier today, Westpac said it expected its cash earnings to grow by between six and eight per cent in the 12 months to September 30.

Last year, Westpac's cash earnings grew by 14 per cent to $3.5 billion.

On Tuesday, the Reserve Bank of Australia left the official cash rate steady at 7.25 per cent, citing inflationary pressures in the economy.