Note: Where available, the PDF/Word icon below is provided to view the complete and fully formatted document
 Download Current HansardDownload Current Hansard    View Or Save XMLView/Save XML

Previous Fragment    Next Fragment
Thursday, 25 September 2008
Page: 5666


Senator FIELDING (Leader of the Family First Party) (2:47 PM) —My question is to the Minister representing the Minister for Competition Policy and Consumer Affairs, Senator Sherry. This week the Australian Prudential Regulation Authority released a report on bank performance which shows that banks are making $1 in profit for every $2 they charge customers in fees and interest. It was reported today that the profit margins for the big four banks was more than 35 per cent. That is at a time when banks are charging up to $50 a pop when customers make a single mistake like overdrawing by one dollar. Does the government think it is reasonable for banks to continue to charge such exorbitant fees?


Senator SHERRY (Minister for Superannuation and Corporate Law) —Thank you for the question. Given how profitable the banks remain, families have every right to expect them to pass on any fall in funding costs as quickly as they passed on the 10th consecutive rate rises we saw under the Liberal government. It is that simple. When banks’ funding costs come down, their interest rates should come down and there fees should also come down. As the RBA’s Financial stability review highlights, difficulties in global financial markets are constraining liquidity, which is impacting on competition in the banking sector.

In times of international volatility and uncertainty, everyone in the community has an interest in ensuring that we have a well-run, stable, viable banking sector. I am aware, for example, that in terms of new home loans, the big four banks have moved from approximately 80 per cent provision to approximately 90 per cent in the last six months. That is as a consequence of the decline of securitisation—its almost disappearance—and the gradual contraction and disappearance of non-bank, non-credit union, non-building lenders. So the banks’ competitive position has strengthened as a consequence of the US subprime crisis.

The government also believes the community will reward those banks that offer the best deal to their customers. There have been 10 consecutive rate rises, as I said, courtesy of the former Liberal government, plus unofficial rate rises by the banks that have put a lot of pressure on families, particularly in respect of mortgages, so it is vital we have as much competitive pressure on the banks as possible. This government, but the Treasurer in particular, in conjunction with the Assistant Treasurer, Mr Bowen, have been doing a great deal of work in respect of putting competitive pressure on banks. It is important to exert competitive pressure on the banks. Our bank-switching package is an example of this. It is important to ensure that individuals have the ability to—


Senator Coonan —What happened to that? It hasn’t started yet.


Senator Abetz interjecting—


Senator SHERRY —There is a raft of interjections but, through you, Mr President, I point out that the former Liberal government was not proactive with respect to ensuring that consumers could vote with their feet and switch from one bank provider to another. As I pointed out, the Treasurer, Mr Swan, and the Assistant Treasurer, Mr Bowen, have been very active in pressuring to ensure that we have effective bank-switching in this country so that individuals can move from one bank to another if they are not happy with a range of issues, from the rate they are charged to the fees and charges that apply. At the present time, in respect of bank switching, although there has been—


Senator Fielding —Mr President, I rise on a point of order clearly to do with relevance. I just want to draw the minister’s attention back to the question: does the government think it is reasonable for the banks to continue to charge such exorbitant fees?


The PRESIDENT —There is no point of order. Senator Sherry, you have 50 seconds remaining to answer the question.


Senator SHERRY —I am pointing out, in the context of bank funding costs, the changes in the market. The bank-switching package is related directly to fees. In fact, I did mention fees. Fees are used as cost recovery by banks. There are a variety of ways in which they are applied. We do know that many consumers, as Senator Fielding has reasonably pointed out, are very unhappy about the level and type of fees which apply to their particular accounts. As I was saying, the bank-switching package which, on behalf of this government, both the Treasurer and the Assistant Treasurer, I think it is fair to say, have— (Time expired)


Senator FIELDING —Mr President, I do have a supplementary question, although I do not think the primary one was really answered at all. It is also clear there is not effective competition in the market to stop banks charging outrageous bank penalty fees. Banks benefit from a high degree of regulation protecting their place in the market but they do not want regulation protecting families from exorbitant bank penalty fees that can be up to 92 times the cost of processing the transaction. What is the government going to do to protect families from this market failure?


Senator SHERRY (Minister for Superannuation and Corporate Law) —If you want to have effective, informed competition, which is necessary to force down the price of the product—in this case, the fees—you have to be able to ensure that individual consumers can switch easily from one provider to another. That is exactly the point of the switching package that the Treasurer and the Assistant Treasurer have been working on. As I understand, there has been some level of cooperation to date by the banks and through the Australian Bankers Association. There has been a relative level of cooperation in respect of bank switching to allow individuals to move. There are effective barriers at the present time in addition to consumer knowledge— (Time expired)