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Wednesday, 3 December 2003
Page: 23713


Mr HAWKER (10:45 AM) —I would like to continue my remarks on the report of the House of Representatives Standing Committee on Economics, Finance and Public Administration entitled Review of the Reserve Bank Annual Report 2002. Following on the comments by the member for Kingston, I also would like to start by talking about the fact that the Reserve Bank has increased interest rates by another quarter of a per cent today. One aspect of that does concern me considerably. As is pointed out in the statement by the governor:

While the exchange rate has appreciated, the stronger international climate, rising commodity prices and more favourable conditions in the farm sector indicate improving export prospects.

What concerns me is that the impact of this is also pushing the Australian dollar up. In fact, if you look at page 22 of the report you will see that there is a chart on the exchange rate that shows that for most of 2002 the exchange rate with the US dollar was around the 50c mark or in the low 50s. That was at a time when the farming sector was going through one of the worst droughts on record. There has been no suggestion that the farming sector has really recovered from that drought; it will take years. We now see the Australian dollar well over the 70c mark—it is probably 72c or 73c now—which, if you look at it, is a dramatic movement over a relatively short period of time. From the end of 2002 until the end of this year, we have seen the dollar go up by over 40 per cent.

By any measure that is going to have a major impact on exports. I fear that the recovery that the farm sector has been looking for is going to be very much blunted by this push up of the Australian dollar. Notwithstanding the points made by the member for Kingston, the fact is that our interest rates are still considerably higher than those of some of our trading partners, including the United States. The impact of the dollar going up is going to make it very difficult for a lot of exporters, particularly farmers, to recover, given the very tough times they have had in the previous year with the drought.

I quickly want to move on to a couple of other points. In our report—which I commend to all honourable members: it has some very good information not just on monetary policy but also on some of the other areas that the Reserve Bank has direct or indirect responsibility for—we talk about bank fees. This is an area on which the bank is going to have to do quite a considerable amount of work. In chapter 3, we talked about the growth in fees. We summarised the findings of a Reserve Bank survey. The last finding said:

the increase in banks' fee income has offset only a small part of the reduction in banks' interest rate margins over the past decade.

Notwithstanding that point, our report found:

... fees charged to households have increased from $1.2 billion in 1997 to $2.7 billion in 2002.

In other words, in five years they have more than doubled.

Householders are being hit with a fairly large amount of extra fees from the banks, though, as is pointed out, the usage of these services from the banks has increased quite a lot too. But one would think that, as the usage increases, the banks should be able to reduce those fees, because they are increasing their income anyway. As the committee pointed out in the report, analysis by BIS Shrapnel suggests that fee rises together with increases in loyalty points needed to redeem rewards have led to increases in the cost of holding a credit card of between 35 and 75 per cent. While the banks have offset what they see as their declining revenue from interest rate margins, the consumer who is using the credit card is filling that gap for the banks. I do believe that the Reserve and others are going to have to continue to look at that, and we will be raising that too.

It is timely that we tabled this report this week, because on Monday next week the committee has its next hearing with the Reserve Bank in Brisbane. Today's interest rate rise will cause considerable interest in that hearing, but to expand a little on the question of fees we also look at the whole question of interchange fees for BPay. We are concerned by the apparent high level of BPay interchange fees, and we are of the view that the Reserve should undertake an immediate review, with the objective of ensuring that BPay interchange fees are reduced to a reasonable level. We also look at the whole question of automatic teller machine interchange fees, and we will certainly be waiting to see what work the bank has done on that, because they were still working on that.

On the question of credit card reform, notwithstanding the reduction in interchange fees for some credit cards it is clear that others that are now being promoted because they can offer more generous loyalty rewards are in many cases doing so at the expense of merchants. What in fact is happening is that somebody using these credit cards may get additional loyalty points, but the merchant finds that the fee charged to the retailer—or whoever the merchant is—is higher. That is how these particular companies can offer higher loyalty rewards. The end result is that, if the merchant is going to be charged a higher fee for using that card, it is almost inevitable that the consumer is going to pick up the tab somehow. The questions we have been raising with the Reserve Bank on these issues over several hearings now I think have not been fully answered. If those loyalty rewards are going to one set of customers, someone else must be paying. The whole question is: are consumers generally paying for these rewards? So we do think that a proper inquiry into the whole payment system is probably overdue.

I conclude my remarks there and again just reinforce the point that I want to thank all members of the committee for the work that they have put into this. A considerable amount of time and effort goes into these hearings and reports. I believe we produce reports containing a lot of very good information. I would particularly like to thank the deputy chair, the member for Chisholm, and the secretariat, particularly Russell Chafer, the committee secretary, who has put a tremendous amount of work into it.