ANZ Banking Group Ltd's chief of Australian operations Brian Hartzer says the bank intends on pass on as much of an expected official rate cut as it can, given the current level of wholesale funding costs. "We intend to pass on what we can," he said. The Reserve Bank of Australia is next Tuesday expected to lower the official seven per cent cash rate, perhaps by up to half a percentage point. Mr Hartzer said that the cost of funding for banks had escalated last week to 100 basis points above the 90-day bank bill and on Thursday was standing at 70 basis points over. "Banks have lost so much faith in each that the interest rate spread banks are seeking to lend to each other is at a near all-time high," he told an American Chamber of Commerce in Australia function in Melbourne. Mr Hartzer said there was "unbelievable fear in offshore markets" related to credit, which had made it difficult for the bank to source short term funding. If the difficulties continued, it would flow on to credit lending in Australia. Mr Hartzer said the Australian economy was in good shape. However, due to the nation's large current account deficit - which stood at $12.774 billion in the June quarter - Australian banks have to borrow significant amounts of funds offshore.