KING, Mr Peter Francis, Chief Executive Officer, Westpac Banking Corporation

VANCE, Mr Leslie Wilson (Les), Group Executive, Financial Crime, Compliance and Conduct, Westpac Group

CHAIR: I resume this hearing of the House of Representatives Standing Committee on Economics. We're not going to do the whole blurb again; we're just going to be as succinct as possible so that we have time to grill you! We have representatives from Westpac present for today's hearing. I remind you that, although the committee does not require you to give evidence under oath, the hearings are legal proceedings of the parliament and warrant the same respect as proceedings of the House of Representatives. The giving of false or misleading evidence is a serious matter and may be regarded as a contempt of parliament, and we don't want that. I now invite you to make an opening statement.

Mr King : Thank you, Chair. More than a year on from the start of COVID, Australia has done a very good job navigating both the health and economic challenges. When I speak with overseas based CEOs, Australia's relative success is well recognised. In looking at domestic economic performance, a key measure we track is the number of people employed. In the December quarter, it was back at pre-COVID levels. We know we may see this come back over the coming quarter, as we transition off JobKeeper, but overall we are positive about the outlook for the labour market. As the recovery proceeds, the eventual removal of physical distancing rules will be an important milestone because it will allow domestically based businesses to return to full activity. For the economy, we are forecasting GDP growth of 4.5 per cent this year, which is a solid result and will more than recover the lost GDP from 2020.

The better economic circumstances mean the vast majority of our customers are also much better positioned than we expected last year. Most customers with COVID loan deferrals have returned to making repayments. However, we know some will need more time and ongoing support. Our focus now is working with those customers needing tailored financial assistance plans, which are based on each customer's individual circumstances and needs. Options may include further repayment deferrals, loan term extensions, and interest rate reductions. As always, our message to customers needing help is: 'Please contact us as early as possible. Early notification gives us more time to support you.'

Recently, Australians in different parts of the country have also experienced floods and cyclones, and we've put in place emergency support measures for affected small-business and retail customers. We've offered grants for affected customers, and to date we have paid out nearly $8 million under these measures for flood affected customers. Thank you, and we'd be pleased to take your questions.

CHAIR: That was pretty fast. Do you have anything else to report on?

Mr King : I'm sure we're going to have lots of discussion.

CHAIR: That's true, even with our diminished number of committee members. We started today asking the CEO of the Commonwealth Bank of Australia, Matt Comyn, how he would describe, in one word, the state of the Australian economy. He started with 'very good'. We succinctly put it down to 'strong-plus'. Then he eventually got to the word 'miraculous'. How would you describe the state of the Australian economy in one word?

Mr King : Robust.

CHAIR: 'Sustainable' is, I think, what's probably sitting behind that. Do you want to give us a quick update on how the Hayne royal commission implementation is going? Obviously there are still things you're no doubt waiting for guidance on, from us and from regulators, but where are you getting to, so that we can fulfil the basic functions of this inquiry?

Mr King : The key point is that there are 47 recommendations that will apply to the bank. Fifteen have been implemented, another 19 are in progress, and we're waiting for guidance on 13. But, for example, the ones around the mortgage broker market and the ones around a banking code of practice are well underway.

CHAIR: What's the time frame for you to be able to give us a more comprehensive report on that?

Mr King : We actually published a progress report on our website. The April one is up, so we could—

CHAIR: Yes, flick that to us—take it on notice. Apologies, apparently you've provided one already.

Mr Vance : For all of those that have legally commenced, we've implemented them in full, and we're on track to implement in accordance with the timetable for those that are underway.

CHAIR: Right. You're feeling good about it?

Mr King : It's underway.

CHAIR: Let's just quickly go to the bank itself. Out of the big four, how would you rate Westpac's performance against your three major competitors?

Mr King : Performance can be looked at in different ways. If I look, firstly, at our capital strength and credit quality—the strength of the balance sheet—which is very important for a bank, I think, broadly, the system's pretty close. On that scale, on the safety, I think, we're doing very well. If we look at growth in mortgages or business lending, we're probably not as good. We've had some issues in our processing, so we have work to do there. If I look at credit quality, in terms of growth, you may have seen in our quarterly result that we had a large write back of credit provisions. I think that goes to the economic performance as well as the solid performance of customers during the COVID period.

If I think about COVID itself, we had about $55 billion in mortgage packages and $10 billion in small-business packages. We've come to the end of March, and the majority of those are pretty much finished. We've now moved from the phase of what I would describe as 'general help'—the same packages available to every customer—to tailored help or individual help. Help has not stopped post the general packages being available, and that's the phase we're in with COVID now.

CHAIR: We've been talking about help with loan deferrals. What was the maximum in loan deferrals that you had at the peak period?

Mr King : In dollars, $55 billion. That's about 148,000 customers.

CHAIR: What are you down to now?

Mr King : We're down to virtually zero. It would be a couple of billion, but it's virtually run off—

CHAIR: 'A couple of billion' and 'virtually zero' aren't quite the same thing.

Mr King : From $55 billion down to a couple of billion.

CHAIR: What about numerically in terms of the number of mortgages themselves?

Mr King : It's 4½ thousand.

CHAIR: How would that break down, because that's quite a lot higher—sorry, that's consistent with the CBA, but they have a much bigger loan book than you do, at least with mortgages, so I would have thought that 4½ thousand is quite a lot. How much in total mortgages do you have?

Mr King : It's $440 billion of mortgages. In the big scheme of things, the deferrals are very low, and they'll be run off. What we're looking at now—

CHAIR: But it's not low or small for those people whose houses—

Mr King : That's what I was going to get to. We're looking at who we're individually helping in the next phase, which is probably the thing we're more focused on now. Around three per cent of packages have asked for further assistance, which we call 'hardship'.

CHAIR: Of that 4½ thousand?

Mr King : Of the $55 billion.

CHAIR: Which is 4½ thousand mortgages—so, three per cent?

Mr King : Yes.

CHAIR: So it's a relatively small number.

Mr King : It's small in the context of the bank, but for individuals it's very important.

CHAIR: Sorry, does that mean the other 97 per cent are going off loan deferrals and just moving on?

Mr King : They're back to repayment.

CHAIR: So why are they included in the 4½ thousand?

Mr King : I beg your pardon?

CHAIR: There are 4½ thousand people who are still in the deferral state. Is that correct?

Mr King : There are 4½ thousand in hardship. We think about it as the second version of packages. They're the people that have come off—

CHAIR: They've moved from deferral onto hardship—4½ thousand onto hardship—hardship being that they can't necessarily go back and repay the unpaid interest and so it would have to accrue?

Mr King : No; they're not able to meet their previous repayments, for whatever reason.

CHAIR: Okay; so they've gone back to some form of payment. Is that from P&I to I?

Mr King : It's all that. It could be that they have gone to interest only. It could be that they need a bit more time until they get their job back. It could be any of those factors.

CHAIR: Still, it's not an insignificant number of people; it's a lot.

Mr King : Yes.

CHAIR: How many have trended towards disposal of their asset or their home?

Mr King : Not many at this point.

CHAIR: We heard from the CBA a small number but, nonetheless, that there were 300 to 400 families who were in a position where they've either had to off-load their investment property—which is a very different conversation from the principal place of residence, of course. Do you have similar numbers?

Mr King : Those conversations are ongoing at the moment. In terms of us agreeing to sell, there are not many of those. But it's ongoing. I think the point about this is we have an individual conversation with those customers at that point and we're working through what's best for them, including potentially a reduction of debt through sale—and, with the housing market the way it is, that's something that has to be considered.

CHAIR: So, taking from that, though, the preference surely of the bank is to aid and assist those people to get back onto a repayment schedule which enables them to maintain their ownership, at least in the case of principal place of residence—it's very different if it's an investment property—so that their lives and security aren't disrupted?

Mr King : We need to keep people in their houses as long as we can. That's what we need to do and give them the longest period of time we can to get them back on their feet.

CHAIR: What's the time frame when that would cease?

Mr King : It depends on the individual conversation. There's not a set time frame.

CHAIR: You guys collect data on consumer behaviour. What adjustment have you seen since the conclusion of JobKeeper?

Mr King : In fact, the last reading of, say, credit card spend over the Easter period is still above pre-COVID levels, if we take that as an example. If we look at the Westpac consumer sentiment survey, which was released yesterday, that's one of the highest readings in 15 years. It's up near 119 in terms of that index. That's why I used the word 'robust'. Everything that we're looking at at the moment for the averages of the outcomes has been pretty good. Again today the unemployment rate was down a little bit, to 5.6. Our economics team had forecast unemployment at 5.7 per cent at the end of the year. There's some chance that that could need to be lowered.

CHAIR: I was just going to say that we've just dropped from 5.8 per cent to 5.6 per cent—and now you're saying it's going to be 5.7 per cent. Does that suggest to me that you got it wrong, or does that suggest to me that you were being conservative in your estimates?

Mr King : Forecasting is an art, not a science, as I talk to our economics team. I think generally the outcomes in the last year have been a little bit better than what we thought.

CHAIR: Even those who were optimistic about the direction would have said that there was likely to be an uptick in unemployment as there's some degree of adjustment occurring at this time, and probably over the next coming months. What's the high you're looking at this year, if you're saying 5.7 per cent by the end of the year?

Mr King : That's probably the question that everyone's asking at the moment—about what happens in April and May as we come off JobKeeper. Some of the ranges of increase in unemployment I've seen are from 50,000 jobs to 150,000 jobs. So there's a pretty wide range.

CHAIR: Is that the range that you have within the bank?

Mr King : We're probably in the 50,000 to 100,000 jobs. That would be the range. That's why I say, if I put it together with where we're at today, it probably looks better than the forecast we had by the end of the year.

CHAIR: I asked the following question of the CBA this morning. House prices are obviously going up—you read it everywhere—apart from perhaps inner-city apartments, which are going through a difficult period at the moment. Are houses becoming more valuable or is money just being devalued?

Mr King : I think it's houses are becoming more valuable.

CHAIR: Don't you think they were worth more—when we have no immigration, no change to laws to incentivise investment in capital, while we have a devaluation of money?

Mr King : If I look at the dynamics in the housing market—and one of the metrics I look at closely is new listings to sales—we've still got new listings lower than sales or, to put it another way, we've got excess buyer demand versus stock in the market. Market prices clear by going up when that happens. Across Australia we're seeing that dynamic in terms of housing prices going up. As I get out into the regions—mostly in New South Wales at the moment—to the Riverina in New South Wales or the central part of New South Wales, everyone I talk to is saying (a) there's a bit of a shortage in employees and they can't get the employees that they need to get, and (b) there are also problems with accommodation. We're in a market where there's not a lot of turnover in the market—it's pretty tight—and, therefore, the stock that's coming up is well bid. There's probably a COVID impact in there as well. As you said before, the housing prices are a bit stronger than the apartment prices, and I put that down to people wanting to be in bigger houses.

CHAIR: What are you seeing in terms of data around first home buyers?

Mr King : They're very active. If you look at any of the stats—the stability report from the Reserve Bank is a good report, I think—you can see slightly higher usage of higher LVR, and that's normally a first home buyer. Generally, the market is being driven by owner-occupiers as opposed to investors. That's why I think we should be cautious and watch what's going on with the market, but it's people buying owner-occupied places that is really driving the market at the moment.

CHAIR: Particularly in regional areas. What percentage of new loans being approved at the moment are for first home buyers?

Mr King : It's broadly, 15 per cent, I think.

CHAIR: So the same as CBA. That was the number they gave this morning. One argument around house prices—and you may have seen discussion; in fact, I'm sure you have—is that there may have to be a tightening of prudential regulation to make sure that the market doesn't overheat and, of course, people don't overextend. One of the concerns that I have around tightening prudential regulation is you could end up in a situation where it favours capital interests or those who have existing capital and harm first home buyers, who need a greater share of their income to borrow. Is there a way that Westpac believes that prudential regulation can be tightened if required—and accepting that it may not be required at the moment—where it might stop what could be deemed to be of people upgrading their homes versus avoiding the risk that it becomes a barrier for first home buyers to get into the market?

Mr King : I think there are two issues in there. The first is: how do we help first home buyers get into the market? Is that an issue? I do think that is an issue. Getting people into the market is very important. I think the macroprudential issue is: what role is leverage playing in housing prices? If we look at things like high-LVR lending, the amount of interest-only lending and the amount of investor lending—they're three areas that are good indicators of leverage playing a role—those three areas are much lower than what we saw in the last peak of housing prices, and generally up a little bit but not too much in the last six to 12 months.

CHAIR: This raises a concern, including for myself, in that, with the devaluing of money, what we're actually in a situation of is a new normal for house prices. There are, of course, always differing views about when we reach peak, but my concern is that we've reached a new floor, where the likelihood of house prices staying around these levels, or greater, is likely to increase over time. Would that be your view?

Mr King : I think the fundamental thing is supply and demand. Can prices go up forever? The answer to that is probably not.

CHAIR: Technically, yes, but unlikely.

Mr King : One of the things in the assessment process for lending is we put an interest rate floor into the assessment process. Broadly, that's at about five per cent.

CHAIR: Sorry; five per cent of the value—

Mr King : You have to pay a five per cent interest rate on the loan when we assess how much you can borrow. Obviously, the fixed rate is now below two per cent, as the best—

CHAIR: Apparently it's got a one in front of it if you go for five years on principal and interest.

Mr King : I think that's coming to a shorter maturity! But the point is: what role is leverage playing in the housing market? There are interest rate floors in the calculations that prevent the lower interest rates being capitalised into how much you can borrow, effectively. That's often something that is considered in a macroprudential sense as to where you want to set it. In the longer term, the asset value will move with financing costs. We've already seen interest rates increase at the longer end of the curve, to 10 years. With RBA policy, they're obviously not going to at the shorter end of the curve, out to three years. But that will be a driver of asset prices in the economy, including housing prices, in the longer term.

CHAIR: There have been reports of parents who have become concerned about their children not being able to purchase a home, including the concept of FOMO, fear of missing out—from parents more than their children—because they fear their children will miss out on purchasing a home, and have therefore been either gifting and/or going guarantor on first home mortgages. Have you seen an uptick in recent months?

Mr King : I don't think there's an uptick. I'd just say that the hard data is probably guarantees on first home buyers. I think it's about 15 per cent as well, actually. But you've got choices. Children can live in rental properties without paying rent, to build up their deposits. People can have half of houses gifted. They can also have guarantees. The 'So what?' of that is that it's hard to get an exact feel on all of those because we're in part of the chain, where we're lending and there are guarantors, but we're not in the whole chain.

CHAIR: But, when you say '15 per cent', you're only talking about going guarantor, right?

Mr King : Yes.

CHAIR: So you're saying that it's bigger than just the 15 per cent, either through direct financial gifts, which may or may not be declared to the bank—but, nonetheless, that's a possibility—or through inheritances and other vehicles where people might get access to capital or equity as well as going guarantor. So, it's not an inconsiderable part of many first home buyers being able to secure their own home.

Mr King : It's part. I come back to the point you made before, though. It is hard for first home buyers in some circumstances to get into the market, and therefore that wealth transfer from one generation to another is probably starting earlier.

CHAIR: That's fine if you've got parents in a position to do so. How do people from low socioeconomic backgrounds and new Australians get a chance?

Mr King : That's fair. I think that we as an economy, as a country, as policymakers really need to stare into that question.

CHAIR: Good. I'm glad we agree. To come to the broader issue, in your experience what's the biggest financial barrier for somebody getting into their first home?

Mr King : Building their savings—

CHAIR: For a deposit?

Mr King : I should say that, first, it is the job they're in. If you think about how we lend, we lend on cash flow—what's the job, how much are they paid, and then how do they save for a deposit? The job in particular is one of the key things that we think about when we lend money.

CHAIR: When it comes to the difference between the deposit and financing the debt that is lent by the bank, do you find that financing the debt is as big a problem as securing the deposit for most first home buyers?

Mr King : If I think about what we're lending against, or what we are looking for, we're looking for a savings history when we lend. That's really what we're looking for—demonstrated savings to build your deposit or to repay your loan down the track.

CHAIR: Sure. But do you get many defaults or people in distress who are first home buyers?

Mr King : Defaults tend to be loss of job, sickness or divorce, unfortunately. Often the default is because the future hasn't played out as we expected when we provided the loan.

CHAIR: I asked this question of Mr Comyn from CBA this morning, and he said that they were open to developing products around using superannuation as a contributor in some way, whether it's a form of security or some like financial product, to enable young Australians to be able to buy a home earlier and more cheaply. Would that be the sort of thing that Westpac could develop a product around?

Mr King : We'd have to have a look at it. The law—

CHAIR: It would also require legislative change; I do accept that.

Mr King : It would, because of: how do you think about savings? But, also, hopefully we can get to a situation where people not only own their home in retirement but have an income stream. So how we achieve—

CHAIR: Absolutely, but have you ever heard of somebody saving for a home in retirement?

Mr King : I beg your pardon?

CHAIR: What's more common—somebody saving for retirement after they buy a home, or saving for a home in retirement?

Mr King : I accept your point. The normal phases in your life are going to uni, probably borrowing to buy a car, getting married, buying a house and then thinking about your retirement.

CHAIR: People, including myself, buy a home before they get married all the time.

Mr King : Fair enough.

CHAIR: That's also because I couldn't get married, but let's leave that to one side! The real point, though, is that the benefits of homeownership transcend both your working life and your retirement, assuming you purchase during your working life, correct?

Mr King : Well, you continue to use the house.

CHAIR: Whereas the benefits of superannuation principally rest in retirement. Would that be fair?

Mr King : That's the idea of the super system.

CHAIR: Exactly. Somehow I think homeownership takes precedence, perhaps, in overall value, in terms of both quality of life in working life and retirement. Would that be fair?

Mr King : Most likely for most people.

CHAIR: That's not a definitive answer. I do accept there could be some bizarre scenario where that isn't the case, but I'll accept that point! What is Westpac doing and what trends are you experiencing in small business lending?

Mr King : Just over the last 12 months we've seen a big build-up in deposits in the business sector. That's meant less need for borrowing and that's why business lending in the economy has pretty much gone sideways. It hasn't grown a lot. But, as we look forward, we would expect businesses to spend some of those savings, and then, if they see growth opportunities, to borrow. We're certainly seeing more interest or higher borrowing intentions—we call it 'pipeline' within the bank—a higher pipeline of people who are looking to borrow.

CHAIR: Do you see a reticence at the moment from small businesses about wanting to take on more debt, being particularly mindful of the fact that many small businesses have gone through a difficult time—some are reluctant, or some may be reluctant, to take on more debt—and whether that's going to hamper their future expansion or growth?

Mr King : It really depends on the industry and the region. When I went out to some of these regional areas, there was very strong demand to grow their business. Where they had deposits they were using those, and some were borrowing to stock up. Where it's been a bit harder—CBDs, for example—I don't think people will be borrowing to expand their business.

CHAIR: To go back to that again—and I asked the same question of Mr Comyn this morning—what are you seeing in terms of the discrepancies between the Melbourne CBD and other CBDs, particularly those comparable to Sydney's CBD, in terms of the business activity of your customers who are based there?

Mr King : Both CBDs have been impacted. Melbourne has obviously had a longer period of low activity, which has been pretty devastating for a lot of people. It hasn't translated into large losses in the bank, if you think about it that way. But the question is: what's driving it? We're seeing two things: one is that social distancing requirements in buildings are still having an impact, so when we can reduce the social distancing requirements in the cities it will be good. A lot of our customers saw an immediate impact in hospitality in Sydney when people were able to stand up in their venues rather than sitting at a table. So, that's an example there. Transport is the other thing—just being confident on public transport about the virus. Both are different issues, in terms of the way you solve them. But, in the end, on the trajectory we're on and getting the vaccination program done, we're in a much better position than we thought we'd be 12 months ago, and we'll work through it. Then social distancing can be reduced, and confidence in public transport will, I think, improve as well.

CHAIR: To go more broadly to the challenges facing the economy, would you consider tax reform to be one of the biggest issues that is holding the country back?

Mr King : It depends where it is. If we're looking at getting international investment into the country then tax rates are something that investors look at when deciding between doing something in Australia versus somewhere else. So, that's an example where it does play a role.

CHAIR: Sure, but I could have told you that. The question is: is the failure to reform tax holding the country back?

Mr King : And other areas. Stamp duty in New South Wales is an example where you reduce the cost up-front for a house or building a house. That's an example that help.

CHAIR: That's true. What about broader taxes—discussions around capital gains tax and income tax?

Mr King : Again, it depends on the policy of the tax. If you look at what you are incentivising, homeownership—

CHAIR: It wouldn't mean paying more. It might be rebasing.

Mr King : It could be, but that is a policy decision for the parliament.

CHAIR: It is. How much money are you as a bank spending on cybersecurity now?

Mr King : Cybersecurity is in everything we do, so it's hard to put a specific figure on it.

CHAIR: But you must have a team.

Mr King : It's everything. One example is: who do we recruit? So we've got to do background checks to make sure that we're not getting the wrong people into the company. That's an example of recruitment. It is: how do we train our people? One of the big challenges is email phishing and people clicking on links. We run internal tests to see how well people have understood what they can and can't do and when they click that on that email when they shouldn't.

CHAIR: How many cyberattacks have you had in the past 12 months?

Mr King : Lots.

CHAIR: What does that mean?

Mr King : We get them every day.

CHAIR: Serious ones, then, rather than—

Mr King : Cyberattacks are—

CHAIR: Every one is serious, I understand, but some are very serious and require a reinvestment in your existing practices and/or in some extreme cases effectively require publicly listed companies to pay people to stop their activity. Have you had any examples of that?

Mr King : No, we haven't. In terms of attacks on the bank, they happen all the time. I don't want to go into specifics about what they are and how we respond, but I would say that we have processes, from people to technology. This is an area within the banking system that we share information on and work collaboratively on to make sure that the system can respond to these types of things.

CHAIR: Are you confident about the state of cybersecurity in the bank?

Mr King : I am, but we are up against pretty sophisticated businesses, some offshore, and so we've got to continue to build our defences.

CHAIR: Offshore—from entities associated with foreign governments or competitors or blackmailers?

Mr King : I don't want to get into who, what, why and how we deal with it. I would just say that there are businesses that look to get a financial return from cyber activities and there are other sophisticated players in this market that have other motives.

CHAIR: Elaborate on 'other motives'.

Mr King : They may want to impact the functioning of the system. What I would say is that it is a very important topic. The bank is very active across all facets of cybersecurity. It's one of the top risks for us, but it's also one that we like to not publish how we respond to it.

CHAIR: When we raised this topic this morning with Mr Comyn he said that the failure of the parliament to permanently pass capacity for e-signatures meant that the delay for approving business loans went from six days up to 24 days. What would be it be on average for Westpac?

Mr King : Actually, I don't know. We can have a look.

CHAIR: Would you say that's a fair assessment of the situation that Westpac faces? I'm not going to hold you to the number of days—in contempt of parliament.

Mr King : I would say at a guess 10 days.

CHAIR: It adds 10 days.

Mr King : Producing a document, either couriering it or mailing, handle times—

CHAIR: So what would it normally be?

Mr King : and then getting it back and, if there's any issue with it, the process starts again, versus an electronic process over email with digital acceptance. They're chalk and cheese processes.

CHAIR: Sure, but are you saying that it adds 10 days to the process, or it would be 10 days ordinarily plus another 10 days?

Mr King : I'm guessing 10 days ordinarily.

CHAIR: Is 10 days standard or it is what is added on?

Mr King : From producing the document to having it signed and getting it back. I am guessing, but—

CHAIR: So are you saying that it adds about 10 days?

Mr King : Yes.

CHAIR: Finally, I have a question on bitcoin. We've been asking about what's happening with bitcoin and particularly the demand. How does Westpac see bitcoin, apart from the fact that it's obviously a form of artificial currency? Do you see the drift towards people wanting to use bitcoin as a reflection of people's concerns associated with the credibility of traditional currency?

Mr King : No, I don't. Bitcoin is an asset, in my mind. It's not a great sort of store of value, if you think about the Australian dollar. The Australian dollar is pretty stable in its value, if you like. Bitcoin is very volatile. That's why I think of it as an asset. It's attractive for some people to use because of that volatility and the return that you can get. It's also risky because you can get a pretty big negative return. That why I think it's more in the asset class. From our perspective, it's a very opaque way to transfer value. You can't track it, and certainly we see in our frauds and scams department an increasing use of bitcoin as a way to pay for fraud and scams.

CHAIR: I'll hand over to the deputy chair for 30 minutes.

Dr LEIGH: Thank you, Chair, and thank you, Mr King, for appearing today. I want to start with the issue of branch closures. If I look at the numbers that you supplied me with last time around, from 2015 to 2020 Westpac's number of branches fell from 1,103 to 918—a loss of 185 branches—and your ATMs fell from 3,073 to 1,429, a loss of 1,644 ATMs, although I accept that 700 of those are the Westpac-Prosegur sale. How many branches and ATMs have you closed over the last year? What is your current number of branches and ATMs?

Mr King : We've got 879 branches. That's down about 40, I think. In terms of ATMs, we still include Prosegur, because they are Westpac branded ATMs. We've got 2,088.

Dr LEIGH: So how many ATMs have you closed in that period?

Mr King : It would be in the order of 45.

Mr Vance : Most of them ATM closures have been associated with branch closures, Dr Leigh.

Mr King : How many branches are temporarily closed and, of those, how many do you expect will be permanently closed?

Mr King : From memory, around 80 temporarily closed, and I believe 50 of those have been reopened.

Dr LEIGH: Do you do any special modelling to ensure that vulnerable communities aren't hurt by branch and ATM closures?

Mr King : When we look at the regional areas we think about our overall capability—so our digital capability as well as our call centre capability. We think about our Australia Post relationship, because there are 3½ thousand points of presence under that relationship. We think about other things that we can do. During COVID, for many passbook holders, we also provided debit cards, which helped people when a lot of the branches were closed. Then for specialist teams, such as Indigenous, we have a specific Indigenous call centre in Adelaide which deals with the specific needs of those industries. We think about the service that we provide as well as the branch footprint.

Dr LEIGH: Of the branch and ATM closures you've mentioned, how many are predominantly in Indigenous communities?

Mr King : I don't think many would be, but I don't know specifically. The call centre that we have down in Adelaide has a number of people in it who can speak the different dialects of Aboriginal people. That's a way that we found is a good way to help the remote communities.

Dr LEIGH: Westpac has a Walk Out Working performance and reward framework. To what extent is that aimed at incentivising branches to stop their customers using branches? Put another way, to what extent is Walk Out Working aiming to ask branches to make themselves redundant?

Mr King : I think you can actually turn it around: customers would expect that if you can go into the branch and open up an account that you can walk out and the account's working. The name of that program is to meet customer need. When they open up an account, we want them to walk out of the branch with it working. Increasingly what we're seeing is that around 40 per cent of those types of transactions are being done digitally now, so we're getting fewer coming into the branches and more being done online. As I look to future trends, I think it will increasingly be the case that people will open up their banking facilities online because there's more ability to identify people digitally. In working with some of the new fintech providers, they certainly provide different capabilities for us in the way that we open up and identify people.

Dr LEIGH: So you don't think that the passage of Walk Out Working, which encourages branches to get customers to use smart ATMs, kiosks and become digitally active, is going to accelerate the rate of branch closures?

Mr King : The overall trend of digitisation in the economy is actually increasing. If I look at government services, more and more of them are going online. If I look at financial services, we're moving our business online. We're competing with new business models that are digital only. Then you've got other sectors of the economy that are also moving to digital. The trend is more digital, and the challenge for industry is how we help people move into the digital economy.

Dr LEIGH: In terms of acquisitions, you're one of Australia's biggest banks. Can you rule out acquiring Suncorp were it to come up for sale?

Mr King : Like you, I've seen those media articles that speculated. I'm not aware that that is going to happen. But, in terms of any future M&A activity, it wouldn't surprise you that I really can't make any comments on what we may or may not do in the future when we haven't even thought about it.

Dr LEIGH: You could rule it out on the basis that you're big enough already and that growth should come internally rather than from snapping up smaller competitors. That would be a reasonable, principled approach to take, I would have thought.

Mr King : Well—

Mr FALINSKI: Mr Chair, on a point of order: I normally wouldn't interject during the deputy chair's questions, but, in asking witnesses to reply to that, wouldn't that put them in breach of ASX listing rules and the Corporations Law?

CHAIR: Mr King is not obliged to answer any question that is put to him by a committee member. If he feels that way, he's entitled to give that exact answer.

Mr FALINSKI: Okay. Sorry.

Mr King : The only thing I would add to my answer is that there are clear competition rules in this country, and any future activities that the bank undertook would need to meet those clear competition requirements.

Dr LEIGH: Of course you'd always look to stay on the right side of the law, but there are also ethical questions as to how you might behave—

CHAIR: There's no such thing as an unethical merger of acquisition, is there, if it's done in a fair—

Dr LEIGH: But I'll move to another question. You set a new record last year for the largest ever corporate penalty—a $1.3 billion penalty—for 23 million breaches of the Anti-Money Laundering and Counter-Terrorism Financing Act. In a report at the start of December, APRA said that Westpac has 'an immature and reactive risk culture, unclear accountabilities, capability shortfalls and inadequate oversight.' What have you done to rectify that?

Mr King : The first thing is we accept that we didn't meet the requirements of AML/CTF. We've completely accepted that. There are a number of responses from the reviews that we've undertaken into what happened. The first is in relation to a new operating model, which we call 'lines of business'. We've changed the way that we are running the company so that there is more end-to-end management of our key businesses and processes. That was one of the key findings from our reviews as well as APRA's comments. We've also undertaken, as we said at the time, a multiyear program to uplift our financial crime capabilities. That is well underway, in terms of reviewing our processes, our controls and our reporting to AUSTRAC. The other large program of work that we have is what we call the CORE program. That program is looking at how we lift our governance processes, our risk management processes and our control processes across the company, and that program is well underway. That is the program that we have a court enforceable undertaking on, and we've now agreed the scope of that program with APRA.

Dr LEIGH: Potentially, these issues go beyond the AML/CTF realm and go to the way in which Westpac has traditionally been run, don't they? You could add your self-assessment report in 2018, which said:

• An organisational tendency to cultivate complexity—

And, also:

• A tendency to privilege upfront conceptual work over execution and implementation—

In other words, you were good at starting things, but they quickly became complex and the follow-through was lacking. Is that an issue that you feel has been addressed to your satisfaction?

Mr King : I probably didn't explain myself well enough. The Financial Crime Program is a specific program. The CORE program is a much broader program, as you just referred to. It looks at how we run the company across all its aspects of managing risk from the board and from the management in all aspects. It is looking at non-financial risk, it's looking at financial risk and it's multi-year in its assessment. The other move that we've made is to simplify our portfolio of businesses. We're in the process of exiting from the group our insurance businesses, both general and life insurance, auto finance, some of our international operations in the Pacific and in Asia, as well as superplatforms and investments. When we've finished those divestment programs, the group will be narrower in its scope—predominantly banking—and we feel that is another way that we can execute our priorities better.

Dr LEIGH: You've become a simpler bank and I think that's good, but certainly a number of market analysts suggest that the issues that were raised in the 2018 self-assessment review still remain. Let me turn to the impact of house prices on Westpac's bottom line. Matt Comyn said that, as a rough rule of thumb, a 10 per cent increase in house prices flowed through to about a five per cent increase in the size of the mortgage book and about a three per cent increase in profits. Would that hold broadly true for Westpac?

Mr King : On the relationship between housing prices and debt, we have a forecast of 10 per cent housing price increases for this year and next year and growth and mortgage outstandings in the country of five to six per cent. That ratio for the foreseeable future is not unfair. The research I've seen looks at nominal GDP to debt in the economy over time. I wouldn't use the next 12- to 24-month relationship as an ongoing relationship. In relation to what that means for the group's earnings, that's much more complicated because we have Consumer Business Bank, Institutional Bank, and our Specialist Business group which houses the businesses I spoke about before, and New Zealand. We haven't published any sensitivity to mortgage growth and the group's earnings and I wouldn't want to do that now.

Dr LEIGH: In terms of other acquisitions, could you rule out making fintech acquisitions that were motivated by squashing a competitor, as distinct from finding new synergies with fintech?

Mr King : I think we undertake our business in the right way. We talk about it. 'Can we do it? Should we do it?' is the test that we do internally, in terms of ruling out M&A activities. I can't do that, because that's a hypothetical and we have to look at everything on its merits against competition rules. Often fintechs actually come to us to partner. There are myriad ways that the fintechs think about their businesses. We have some very big success stories in this country. We can see some overseas, but often fintechs want to partner with banks, and certainly we get lots of requests to review investment opportunities.

Dr LEIGH: Sorry, Mr King, but I find that a pretty extraordinary answer. You're telling me you cannot rule out acquiring a fintech for the motivation of quashing a competitor?

Mr King : As I said, we run our business ethically. We are not in the business of quashing competitors, if you like, but from my perspective we will meet the criteria of the board.

CHAIR: Would it be fair to say, Mr King, if I understand what you're saying correctly, that you would not be afraid to acquire to enhance your market or competitive position?

Mr King : We'll always assess future opportunities—

CHAIR: I don't think it's hard to say yes to that.

Mr King : Yes; we will always look at opportunities.

Dr LEIGH: Chair, that's a different question to the one that I'm asking. There's a range of questions that I need to cover in the limited time. Let me move on to the challenge of first home buyers, which the chair has touched on already. The issue for first home buyers at the moment is entirely the opposite for Westpac, is it not? As prices rise, Westpac's bottom line gets better. As prices rise, it becomes tougher yet for first home buyers to break into the market. You've been quoted in the press as saying that it's important to increase housing supply. What particular proposals would you like to see governments adopt?

Mr King : I think one of the big drivers of housing prices is the fact that a lot of people are based in cities. If you think about Sydney, it's pretty landlocked in terms of the available land, if you think about the different features of Sydney. You can either go up or not. Density is an option. The other one is that maybe we can have people spread around the country a bit more—more in the regions. That will need good transport infrastructure as well as more dwellings to move in, and telecommunications. They're the two in the medium to longer term that have some opportunity.

Dr LEIGH: High-speed rail and a better NBN?

Mr King : They would be part of the solutions.

Dr LEIGH: In terms of mortgage approval times, the February 2021 Broker Pulse survey found that Westpac rated the worst of the reported banks. Your time to the initial credit decision was 20 days. There was some suggestion that this was to do with an offshore processing centre being shut down. Is that all that was going on or are there more systematic issues that lead to your approval times being so long?

Mr King : We have a job to do in improving our mortgage processing times and we're well underway. As that report referred to, we did have issues in our offshore processing areas, but we actually made the decision last year that we would bring 1,000 roles back to Australia and they include call centre roles and the critical mortgage processing roles. At the moment we're nearly at 500—476 roles—so we're nearly halfway in terms of bringing those roles back in, and that will make an improvement to our process. We also have looked at our processes to approve the mortgage—how can we improve the processes? We put in a lot of checks and balances for responsible lending. Probably on the verification side we had too many checkers, so we have opportunities to speed up the time through having one check, not multiple checks.

Dr LEIGH: You would appreciate that this is an extraordinarily long amount of time to be taking. The best performers were ING and Macquarie Bank. They were taking four days. You're more than two weeks behind them. Your approval times are five times as long as the best performers. That must really make you worry, mustn't it?

Mr King : It's a very big focus for me to improve. We're doing about 12 per cent of loans within two days. If someone says to us, 'I need an approval within two days,' we will have a fast-tracked process as well. But we're too long across the board.

Dr LEIGH: If distribution is symmetrical then, if you've got 12 per cent within two days, presumably you've also got 12 per cent that are taking more than 38 days?

Mr King : If it's taking a long time, they're very complex loans. Not every loan is the same. When you get into family trusts or complicated families, they can take a long time. Simple loans are much quicker, but we look at the distribution of those outcomes. But I should say that I want this improved, and it's a goal for the company to improve it.

Dr LEIGH: I'm less worried about customers who find that they're waiting too long and they go down the street and go to another lender. I'm more worried about those who are, perhaps, more vulnerable and who might miss out on getting the home that they want as a result of those approval delays. Do you look at the number of people that actually miss out on buying their first-choice property because of your delays?

Mr King : As I said, if a customer says to us that they need a quick turnaround then we respond to that. So, in terms of customer complaints on mortgages, I'd have to take that one on notice.

Dr LEIGH: So it's only if people complain? You don't track, systematically, the number of people who miss out on a home? It would seem to be something that a CEO would want to know.

Mr King : As you can see, we're tracking the bifurcation. I'm not sure that we would know every time someone misses out on a house. Often they're getting finance from multiple places.

Dr LEIGH: You don't follow-up with the customers in that situation?

Mr King : Sorry?

Dr LEIGH: You don't follow-up with customers in circumstances in which they choose not to take up finance?

Mr King : The team—the people that support the customers—would be looking at that, but it's not something that I look at. I look at the complaints when they come in.

Dr LEIGH: In terms of the state of the economy, we had the Treasurer saying last year that state government lockdowns would cost the economy $4 billion a week. The cost of Australia not being vaccinated surely isn't $4 billion a week, but it must be pretty considerable, mustn't it? Have you done any modelling on what the decision not to vaccinate the country by October will do to GDP growth?

Mr King : I don't believe our economics team has put out any research on that, but I can check. The way I would think about that is that, at the moment, the event that seems to have the biggest impact on domestic activity is local lockdowns. If we can manage the situation without having local lockdowns then that's a good path for us. If we look at things like the consumer confidence index, which was published yesterday by Westpac, confidence is pretty high. But I will check if we have put any research out on that particular question.

Dr LEIGH: It seems strange. So you're saying that what really matters is local lockdowns, not the lockdown of the entire economy?

Mr King : Sorry, no, you're fair: the closure of the borders, the international borders, is important—that is right—but I was thinking of domestic activity.

Dr LEIGH: Sure. But surely delaying the reopening the borders has a direct impact on the resumption of economic activity, doesn't it?

Mr King : I wasn't aware that there was a target for opening the borders.

Dr LEIGH: Well, we need Australia to be vaccinated before we can open the borders, so delaying the vaccine delays the opening of the international borders. Surely that's self-evident?

Mr King : That's fair. But, from my perspective in running the company, I'd assumed the borders would stay closed for the majority of the year.

Dr LEIGH: The majority of the year, I think, is settled. The question is whether we're reopening in October, December or March next year, and all of those have significant consequences for economic activity. There was a story last year about a review of short-term bonuses within Westpac. Could you update me on whether any decisions have been made on that.

Mr King : What are you referring to, sorry?

Dr LEIGH: There was a story in The Age in December last year suggesting that there would be some review of remuneration procedures at Westpac, dealing particularly with the issue of short-term bonuses. Has there been any change on that score?

Mr King : No, there hasn't been any change on that score. One of the recommendations from the royal commission was on remuneration reviews. APRA's been active in developing some policies and putting out proposals, but that's yet to be finalised. Most likely we'll wait for that to be finalised before we review the executive short-term bonuses.

Dr LEIGH: The government's moving to water down responsible lending laws. Have you been lobbying in favour of that?

Mr King : Certainly we've been providing feedback on responsible lending to both sides of parliament. That's what we would normally do in terms of different laws.

Dr LEIGH: Tell me more about that feedback.

Mr King : We highlighted that there are often two regulators involved for the banks, APRA and ASIC, and the rules are not always consistent; we highlighted that when people are borrowing for personal houses and businesses—what are called mixed loans—they can get confusing; and we highlighted the speed of approval times and the impact on that from some of the processes that we were asked to do.

Dr LEIGH: Have you highlighted any of the risks to customers if responsible lending laws are watered down?

Mr King : Yes. One of the other areas that I think the country needs is a comprehensive credit bureau and a truly comprehensive credit bureau. If I think about the process to lend, we do a lot of due diligence on income, on expenses and on the amount of debt, and often we're trying to find out whether people have forgotten to tell us their full financial picture. Having a truly comprehensive credit bureau that captured all commitments would be good for the country. Likewise, in income, the ATO now has the Single Touch Payroll System. If, with customers' consent, we could have access to that information—and for a lot of businesses, one of the first questions we ask is for their tax returns. Again, it's about how we can digitise and how we can get a single source of truth for the economy. I think that would be a more complete system and deal with the intent of the responsible lending requirements in an industrialised way.

Dr LEIGH: It was a recommendation of the Hayne royal commission that responsible lending laws not be watered down. Aren't you concerned that there might be blowback against the way in which Australians see the major banks if you're seen to be lobbying against the first recommendation of the Hayne royal commission, recommendation 1.1?

Mr King : For us, the way we need to think about it is that we want to lend to people that can pay us back. We have people giving us their deposits and we lend to them, so we want to lend to people that can pay us back. As we started off previously in the committee, often the reasons for not getting paid back are unemployment, sickness and divorce—they are the big things—when the future doesn't play out as we expected. But in relation to the royal commission recommendation, Les?

Mr Vance : In relation to the royal commission recommendation, it was recommended there be no change to the current law. That recommendation had three components that underpinned it. The first was around inquiries and the expectation that we would make reasonable inquiries and take reasonable steps to verify. To the points that Peter just raised, we support the idea of verification, particularly around income and liabilities, and we are supportive of any processes that make it more convenient and more robust to get that verification. We support the principle that underpinned the Hayne commentary in that respect. Our view has consistently been: can we simplify the process of particularly those two key elements?

The second element that Hayne touched on was around 'suitable' versus 'not unsuitable'. He recommended maintaining the standards for the bank and the balance between banker and customer. In terms of the third, around unsolicited credit card offers, we absolutely support retaining that restriction.

Dr LEIGH: It seems pretty dangerous to pick and choose among the Hayne royal commission recommendations. You would be aware, wouldn't you, Mr King, that consumer groups opposed the watering down responsible lending laws?

Mr King : I've certainly met with those groups, and, yes, for people that aren't as financially literate in the economy, we do need to do proper assessments of their capacity.

Dr LEIGH: I'm happy to leave it there and return if there is time at the end.

Mr SIMMONDS: Mr King, thanks for your time and your candour. I want to ask you about your bankers service agreement that you've gone into with Afterpay. Could you explain to the committee a little bit about how you envisage that working. Essentially, are your products, as offered to other bank customers, going to be pushed to Afterpay's customers now?

Mr King : What we can see in terms of trends in banking around the world are partnerships developing between licensed banks and other providers of service in economies, and there are a number of examples around the world of that. We are investing in a banking-as-a-service platform. You're right: we have a couple of providers that we have signed up to it. At this stage, it is transaction accounts—deposits—that will be provided through that platform. That's where we're at.

Mr SIMMONDS: So an Afterpay customer who is making a deposit will essentially be depositing into a Westpac account?

Mr King : For the deposit account, it's a Westpac product provided by the licensed bank.

Mr SIMMONDS: In relation to the terms and fee structure, is it offered on the same basis to the Afterpay customers as it is to those walking into a bank?

Mr King : It may not be. The banking-as-a-service platform is set up separately to the main bank's technology platform. That's the other thing. The technology platform that it runs on is a new cloud-developed technology that has been developed specifically for the cloud. It has the potential for use in the bank more broadly, if it proves up.

Mr SIMMONDS: Would customers accessing your products via a buy-now pay-later provider expect to pay more or fewer fees than if they walked into a branch?

Mr King : It's a deposit account, so that's more about the specific product features. Generally transaction accounts are for everyday activity, so it's about how you access them through the digital channels.

Mr SIMMONDS: Will they undergo any credit checks or anything of that nature? Will the bank be undertaking a credit check or anything like that?

Mr King : It's a deposit product, so it doesn't need a credit check for that particular product. But, in relation to what we do need to do, there's the requirement to know your customer. We have to verify customers and identify them, so that will be part of opening an account in that platform.

Mr SIMMONDS: What is the bank doing in relation to technology-facilitated abuse, and what steps have you taken since the last hearing in order to look at the prevalence of it on your own platforms?

Mr Vance : In response to that, we have looked at this through two lenses. The first is our customers sending abusive messages. Unfortunately, we became aware of this in looking at some of the messages that were being sent, and it's unfortunate that people had found a way to take something that was intended to be useful and misused it. We have put in a facility to detect and block payments from being sent to other people from our customers that have abusive messages in them. Those transactions are caught and rejected. We contact the customer to tell them that the payment has been rejected on the basis of abusive language. Since we introduced that blocking on scale in January, we have blocked approximately 4,700 transactions from about 3½ thousand customers. The second aspect, because that stopping of payments is something we can only do for our customers making payments, is that we've provided a facility. If a customer gets a payment they consider abusive or concerning from a customer of another bank, they have the ability to report that. We will then respond by taking action, advising the other bank and authorities around those sorts of complaints. We allow the customer to report that online to us. We will contact the customer and then take action accordingly.

Mr SIMMONDS: How many payments have you blocked? Was it 4,000?

Mr Vance : About 4,800 transactions from about 3,500 customers.

Mr SIMMONDS: That's significantly less than the Commonwealth Bank reported earlier today. How narrow are your search terms? Do you think that your customers are just doing it less than the other banks? I find that hard to believe.

Mr Vance : I'm not aware of CBA's numbers or the other banks' numbers. We have a fairly broad filter on these payments. I can't comment on relativities.

Mr SIMMONDS: Who's advised you on the terms to search for and block as part of the filter? Is it the eSafety Commissioner or Banking Association?

Mr Vance : No. It is internal. We have been consulting with the ABA as well through this exercise because it is an industry issue.

Mr SIMMONDS: Of the customers that have had payments rejected because of abuse, how many have then tried to do it again, or how many have you taken action on under your terms and conditions to exit them from the bank?

Mr Vance : In the context of the first number, of the 4,800 transactions, they belong to 3,500 customers. That gives a feel for it. There's not a heavy instance of repeat behaviour, but, still, 1,300 that have come from a person who's done it before is way too many. I would have to come back with numbers, in terms of both customer exits and the numbers that we've reported to authorities, but we have done both.

Mr King : We've reported around 10 customers to authorities, so it's not a big portion but it's still a lot of people.

Mr SIMMONDS: Sure. I would appreciate you taking those numbers on notice. I would also be interested in the numbers of people you have exited from your own institution because of that behaviour. Do you have people continuously monitoring it?

Mr Vance : Yes. We have a team that monitors this, frauds and scams. It's done in the same sort of area that's looking for the detection and the refinement of algorithms in that space.

Mr SIMMONDS: How actively are they monitoring the payments that are blocked? Are they doing it in real time or are they reviewing it several weeks—

Mr Vance : Yes.

Mr SIMMONDS: They're doing it in real time?

Mr Vance : There is a real-time screening on the payment. All of these payments come through the new payments platform, which is a real-time platform. For us to be able to intercept the payment before it leaves the bank does require real-time intervention and real-time review.

Mr SIMMONDS: Sure, but is it real-time review by a person? That is what I'm getting at.

Mr Vance : It's a real-time—

Mr SIMMONDS: The reason for the question is that the previous institution indicated that it was difficult to ascertain whether the payments that they were blocking were in relation to abuse of a mischievous nature or ongoing abuse related to DV or coercive control, and the difficulty in deciding that was the fact that there weren't actually people looking directly at it. I'm trying to ascertain from you whether you have people looking at what the abuse is that is being blocked and trying to ascertain whether it's of an ongoing and personal nature or a threatening nature.

Mr Vance : Yes, we do have that review, but, as I said, that one isn't done in real time. The real time is done in the moment to block the payment, but then it is reviewed by people.

Mr SIMMONDS: Okay.

Mr Vance : There is still an element of supposition that you have to make, in terms of the behaviour patterns and where it goes, but I think most of the payments, once there has been a block, haven't been repeated, which does give you an element of feel that those people are probably being stupid, but this is a behavioural pattern that must stop.

Mr SIMMONDS: Obviously, if you're referring people to the police, you're obviously establishing that some of them are malicious and that further action needs to be taken, and you're actively doing that. Do you know how many referrals you are getting from people receiving—did you say receiving it from other financial institutions?

Mr Vance : Yes. We've had 10 notifications of people and all of those are obviously sufficiently serious that the recipient is concerned about those. While I would have to confirm it was all, certainly the vast majority of those would have been passed on.

Mr SIMMONDS: Are you able to break down for me which institutions those 10 are from so that I can understand which institutions are not proactively monitoring this enough?

Mr King : On that question, we know as an industry that this needs to improve, so we will be engaging with each other to make sure everyone's getting to the standard. We will check whether we can provide it, but, certainly from an industry perspective, we all want to get this right.

Mr SIMMONDS: That's great. Any information you could provide in that regard is greatly appreciated. You mentioned earlier, in broad terms, the loans that were in financial distress during COVID and how much of that has come back. Are you aware of how many people were seeking financial assistance for their loan because they were on JobKeeper?

Mr King : Not specifically in the way that you ask. Often it's because the payments look like salary when they come through into the person's account, because the company is receiving the money, if you like. The way that we track it is through our hardship processes, where customers call us, and, if people miss payments, then we'll contact them.

Mr SIMMONDS: So, if a customer moved from JobKeeper to JobSeeker but then, because of the strong labour market, found another job, and if that happened in a period of time that didn't require hardship, that wouldn't necessarily be available to the bank's knowledge?

Mr King : No, assuming they've met their repayments. We encourage the customer to come and talk to us early because we think that's the best way to help them through, but, if they prefer not to and they meet their repayments and they've got a new job, then that's good and they continue to meet their repayments.

Mr SIMMONDS: It's early days following the removal of JobKeeper, but do you forecast that the labour market is still likely to be strong? We've seen the figures today.

Mr King : We touched on this in the introduction. The economics team had an unemployment forecast for the end of the year of 5.7. We're probably in the period when the roll-off of JobKeeper is going to have the maximum bit, but, then, we're creating lots of jobs. That's why I said that the outlook is robust.

Mr SIMMONDS: Thank you, Chair. I am out of questions. I'm happy to leave it there.

CHAIR: I will hand to Dr Mulino.

Dr MULINO: Thank you, Mr King and Mr Vance, for attending today and providing evidence. I want to revisit one of the issues that the deputy chair raised which was the work that you've done since the AML breaches were identified. I want to drill down on a couple of aspects of risk management more generally. There was an Ernst & Young report in, I think, 2017. I will just talk about a couple of specific episodes, if you will, over the last couple of years. That talked about the fact that there was less involvement from Westpac's board compared to peer institutions in relation to model approvals, and that might have been in relation to some of the liquidity modelling. It also made reference to the fact that data from the bank's commercial property portfolio was drawn from annual spreadsheets and paper based files. That obviously is more time consuming, but it also raises risks of inaccuracy. I'm wondering when those practices ended, if they have fully ended.

Mr King : Sorry—I don't have it in front of me. In relation to modelling of liquidity, that's a piece that's specifically covered in our CORE program. We've obviously improved it over time, but it is specifically covered in our CORE program. On commercial property, the portfolio historically has actually performed very well. It's not very stressed, so the outcome in that area has been as expected, in terms of the credit quality. But, as I said, a lot of the information was with the bankers, in their physical files, so we're in the process of digitising that information so we also have a digital record. That will help us with modelling of overall outcomes.

Dr MULINO: It's good that the overall results are good, but that obviously doesn't necessarily mean that risks don't remain. You're saying you're basically still transitioning from some of the practices that they identified as problematic?

Mr King : I haven't got the report in front of me, but we're still working on the digitisation of data in our business bank and that would include commercial property.

Dr MULINO: If you wouldn't mind providing an update on notice, that would be great.

Mr Vance : Could I clarify: is that Ernst & Young report the independent review of our risk management practices for the purposes of Prudential Standard 220, so we know what to look for?

Dr MULINO: Yes.

Mr Vance : Thank you.

Dr MULINO: You've already touched briefly on this, but I just want to drill down a little bit into some of the comments that APRA had made. The deputy chair talked about the comment around some of the risk systems being immature and reactive, and there is obviously a range of other comments. That was what led to the work of Promontory. They undertook a review of board committee papers and executive committee papers. Is that correct?

Mr King : Are you referring to the Promentory review of the AUSTRAC matter?

Dr MULINO: Yes.

Mr King : Yes, they did do a review.

Dr MULINO: How far back did they review paperwork?

Mr King : I would probably need to take that on notice, but it was for the period of the AUSTRAC issues, so it would have gone back into the early 2000s.

Dr MULINO: Again, it would be great if you could provide specifics on that.

Mr Vance : Apologies, but could I clarify because we've had two major exercises involving Promontory which would have covered this territory. Is that specific to AUSTRAC or the broader review that they're doing in conjunction with our non-financial risk management?

Dr MULINO: There was a report which was referred to, on 21 January, which involved reviewing board papers and board committee papers. Did they both undertake that desktop analysis?

Mr Vance : Both would have covered that, but 21 January, I expect, would have to have been—

Dr MULINO: It was a 22 January meeting between yourselves, APRA and Promontory.

Mr King : We might follow up with you offline and take it on notice.

Dr MULINO: Yes. It might be specifically in relation to AUSTRAC, but there is reference in some media coverage of a meeting that occurred on 22 January 2021 between Westpac, APRA and Promontory. I'm interested as to whether AUSTRAC was at that meeting.

Mr King : I will take that on notice.

Dr MULINO: Thanks. In the process of working through with Promontory and APRA, specifically in relation to your AML processes, how was AUSTRAC involved?

Mr Vance : I think we've conflated two processes, both of which involve Promontory. Promontory did a review for us looking at our AML practices as historical, as an investigation, but haven't been looking specifically at the remediation of those practices. We have Deloittes providing assurance over our program to rectify those practices, given independence considerations with Promontory. Promontory more recently—and this is where the ongoing independence issue would arise—has been looking at our broader risk management practices. They have been the assurer of our CORE program since that was established mid-last year and have continued as the independent assurer for the purpose of the enforceable undertaking. That's looking at our broader risk management practices and risk management frameworks. It's not specific to AML.

Mr King : That is the CORE program I referred to before.

Mr Vance : That's correct.

Mr King : Mr Mulino, what I would say on AML/CTF matters is the team definitely deals with AUSTRAC, given they're the primary regulator for AML/CTF.

Dr MULINO: I'm sure they do deal with them. It is that latter process, the broader process, that I'm interested in. I suspect it's that process which the 22 January meeting relates to.

Mr Vance : That would be correct.

Dr MULINO: I am interested in whether AUSTRAC was present. Promontory has been working with you across risk management broadly, but obviously AML is one of the key elements of that, given that it involves such significant amounts of money when systemic breaches occur. I'm interested in the way in which AUSTRAC was involved. Obviously APRA was involved in a lot of that work. They instigated it and, in a sense, vetted it or approved it. I'm interested in specifically how AUSTRAC was involved, given that they have a lot of very specific expertise on that particular important risk.

Mr Vance : I can confirm, upon the basis of that, the meeting on 22 January would have been solely between ourselves, Promontory and APRA, not AUSTRAC, given that it would have been focused very much on the finalisation of the integrated plan that we needed to prepare under the enforceable undertaking. It was focused on the APRA response. In terms of those two processes, we have been keeping AUSTRAC informed of our AML program and our progress on the AML program. That is a much narrower piece than APRA is interested in. They are interested in our broader risk management practices. The two have not conflated, but obviously our progress on AML and our continuation—Dr Leigh referred earlier to staying the course and executing on things like that—is an aspect that will be relevant to us satisfying APRA and ourselves that we have made the necessary substantive changes that we needed to make, and Promontory will be involved in that part of the process.

Dr MULINO: Great. Thank you. In relation to that broader piece of work, my understanding is that five additional streams have been added: credit risk, financial risk, liquidity risk, technology risk and data risk. How are you approaching this in a way as to avoid silos and ensure that you're reflecting the interdependency of a lot of these risks?

Mr Vance : That's a fantastic observation, because that is actually the key to executing this well. We have a program that sits across the top. Each of those areas has dedicated onus and there is a series of governance mechanisms designed to assess the design and make sure that's coherent and then make sure the interdependences in implementation are being actively managed. That program assurance level is also one where Promontory is providing oversight into the process, but that is the critical element—that this is executed holistically and produces sustainable change for the organisation. That is not an area which we have structures in place to manage that, but it is one where we're going to need ongoing focus on. That's probably the key issue for the program itself.

Dr MULINO: There have been some suggestions, and I think this might have even come from your organisation, that some of these issues take years to fix, and that, in a sense, is a realistic reflection of the complexity of some of these issues, but how does that leave the organisation potentially exposed on some fronts? How do you juggle the need for urgent action and the need to do it well?

Mr King : The first thing we'd want to do is add additional manual controls so we get some of the residual risk ratings down. Then you want to follow it up on sustainable controls and sustainable processes with technology. But, yes, they'll take years, but we want to see some progress early on implementing controls to reduce the risk. We don't back-end everything; we want to see progress along the way to reduce risk.

Dr MULINO: Going back to AML specifically, there was the significant breach which we've already referred to. You talked with Dr Leigh about it. You're not alone in having experienced breaches in this space. I'm interested in your observations about our regulatory settings in Australia and whether we have the balance right in terms of the regulator relying too much on the major actors—in this context, the four banks—indicating to the regulator when breaches have occurred versus it being more proactive and reaching out and becoming aware itself. What's your understanding of international regulatory arrangements? Where do we sit? Do we have the balance right?

Mr King : That's obviously a complex question because you have different regulatory regimes. Probably the best way I could summarise it would be to say that, in some regimes, you're required to report suspicious activity, so the focus of the institution is going to suspicious activity. In other regimes, such as in Australia, you do a lot more reporting on transactions as well as suspicious matters. If you think about some of the information that's used for the reporting here in Australia, there is suspicious activity and lots of transactions, so it's a little bit more complicated. The other point I would make, though, is that regulators often want access to transactions, so it would be good if we could do it once. Regulators are increasingly looking at getting the individual transactions so they can run their analytics over the top of them. If we had a coordinated way to provide data once which all the agencies could use, that would be useful for both this organisation and the regulators.

Dr MULINO: This will be my last question on this before we go on to another topic. I don't want to get too much into the weeds, but my sense is that this is a rapidly changing area and all four big banks are investing ever larger amounts in this area, and that's on top of significant existing investments. It seems to me that one aspect of that balance between a regulator that receives, say, reports of suspicious activity versus one that is arguably a bit more proactive, if that's the right term, is perhaps a regulator that gets more data and then does more analysis at its end versus one that relies on your analysis to identify where activity might be suspicious. That analysis can be quite complicated and could rely on finding patterns where they're not necessarily obvious. Is that part of the challenge—that it comes down to the capacity of the regulator and whether they're able to, in fact, undertake some of the work that you're currently having to do?

Mr King : Maybe if we look at things like 'know your customer', where a company banks at different banks—they'll often have multiple banking relationships—all the banks are doing the same things to 'know your customer'. We're probably not talking about the regulator but the whole economy. If there's a way that we can have an identity process for individuals and for companies, that would be more efficient for the economy. That would be an example. Some of the reporting that we do is based on data, but some of it's based on observation—people saying, 'That doesn't feel right' or 'I'm not getting the right explanation.' That couldn't be done by the regulator. Where the regulator does add value is when it's looking at patterns across organisations. We can't see inside competitor banks, but the regulator can. They can come to us and say, 'Gee, have you noticed that this is happening in the system and that it's part of your bank?' and that does happen.

Mr Vance : In terms of AUSTRAC, that is an area where we are finding that they are engaging well with industry—taking their amalgam of data and then working with us and the other major banks, through the Fintel Alliance, to try and improve the scenarios and the detection by providing us all with some requests for information and then using that data to help refine the scenario. It is certainly a role. If I look at AUSTRAC and I look at APRA, you certainly see them looking at how they play that role as the collector and having the ability to look across the system.

Dr MULINO: Great. That's useful. Yes, it would be great to get a sense of the extent to which AUSTRAC was involved in that broader commentary piece.

Mr Vance : I can confirm they have not been involved. AUSTRAC has not been involved in that discussion. Now that we've sorted out which one we're talking about, I can confirm that for you.

Dr MULINO: I want to go to some of Westpac's MySuper products. There was a story—I think it was in the AFR on 19 November 2020—that looked at the performance of quite a number of funds right across the sector. This is based on APRA data. Westpac Group Plan MySuper, Retirement Wrap and BT Super MySuper were underperforming by more than a percentage point. Are you aware of that story, and do you accept those figures?

Mr King : Yes, we are. Up-front, I talked about us simplifying the portfolio. One of the businesses that we have decided that we don't want to be in, because we think it needs a bigger scale than we have, is super investments and platforms. From our perspective, it's not a big business and it's one that we won't be in, in the future. But I'll let Les comment on the performance.

Mr Vance : That's coming from the APRA superannuation heatmaps. I believe that's the story you're referring to.

Dr MULINO: Yes.

Mr Vance : Yes, we are aware of those.

Dr MULINO: I have a couple of questions here, and they are the same questions I asked the Commonwealth Bank earlier today. Firstly, I'm interested in any guidance you can give on the way in which the returns on the investments are being distributed to members, on the one hand, and to the corporate entity which owns the trustee, or indeed back to Westpac, on the other. I'm interested in the way those returns end up being divided.

Mr Vance : I think I understand. If I'm going in the wrong territory, please steer me back.

Dr MULINO: Please fix my terminology, if need be.

Mr Vance : Whether it's us or another corporate supplier or an industry fund, we are only authorised to take certain costs out of the fund. We charge fees into the fund to cover administration investment, and there are certain costs that we are entitled to recover directly from the fund. Those are all fixed. They're not dependent upon investment returns. All of those are prescribed and have to be consistent with the superannuation regulations. They're not entitled to be based on fund performance, in that sense.

Mr King : So, the returns not the costs go to the members.

Mr Vance : The returns on the fund are all going to members.

Dr MULINO: What about dividends going back to Westpac?

Mr Vance : Our superannuation trustee, BT Funds Management, charges an administration fee and recovers certain costs. The fees that it charges are fixed in amount, so they're a specified amount per member or for the total value of the fund. It takes those, and, yes, those fees do provide dividends up to Westpac Banking Corporation, but the actual returns on the funds all belong to members.

Dr MULINO: Okay. I think there's an issue of getting the right terminology—

Mr Vance : Sorry, I just wanted to make sure we're level set and talking about the same thing.

Dr MULINO: For those funds that were identified in that report—there are only three of them—it would be great to get a breakdown of the different fees you're talking about.

Mr Vance : APRA also publishes, in that sense, a guide on fees and a heatmap on fees for those. It breaks those down by administration fees, which is only one component, but it also then publishes a table on the total fees, which covers investment fees, administration fees and cost recoveries from the fund. From our point of view, it is the most meaningful way to look at the cost to members of running the fund, because they look at what the all-up amount is that's coming out from their investment returns, essentially.

Dr MULINO: I think that's right. I think those total admin fees are critical. On a separate point, that's why a number of people have been saying they should be included in benchmarks, which is part of the debate around the current bill. It might be that this could be backed out of information already in the public realm, but it would be interesting to see a breakdown of how much is going back to Westpac, for example, versus other types of fees.

Mr Vance : We can provide that and also the benchmark data. As I said, if you look at it in a relative sense, we've done a lot of work on this, trying to make ourselves more efficient for members. We were very pleased with the December results, which showed, for an average-size member, we are now in what APRA calls the 'white zone', which is the lowest rate of total fees for a member of $50,000, which is comparable to an average-size member.

Dr MULINO: You've already had a discussion with the deputy chair around the vaccine and its impact on the macroeconomy. You've indicated a forecast for end of year of 5.7 per cent for unemployment, although I imagine that might be subject to a bit of change—I fully understand the science and the art of forecasting. What's your GDP forecast for the calendar year?

Mr King : It's 4½ per cent.

Dr MULINO: Another aspect that I think is a material matter, which I imagine is a tricky one to model—and I'm curious about the extent to which you can comment on this, and, if not, feel free to take it on notice. Obviously we're at a bit of a fork in the road now, where we're seeing JobKeeper end and JobSeeker settling in at a lower level than it was when it included the supplement. There was quite a period where the economy benefited from very high consumption by people with a high marginal propensity to consume out of these income supplements, and that had a very positive impact on the economy when it was needed. We're now going into a period where a number of commentators have said that there are a lot of savings on household balance sheets. Some people have estimated it at 150 and some at 120. It's significant, and I think everybody agrees with that. I'm curious as to your thoughts on what some of the challenges are in estimating people's likelihood to spend out of that over the next six, 12 or 24 months, because that's going to be one of the big macroeconomic uncertainties, I would have thought. If anything, I would have thought it's more difficult to model people's consumption out of an income supplement.

Mr King : If we look back at the GFC, we saw a big increase in the savings rate, which is one of the key metrics that I watch. It took a little while to unwind, but I think that was because it was related to debt and liquidity, in terms of the outcome of the GFC. If we roll forward to COVID, we've also seen a very big increase in the savings rate, and that generated the savings you referred to. In part, the liquidity and the systems also increased, because of Reserve Bank activity, and that's boosted deposits as well. But I think that people can see a path out of this because of the vaccine. We can debate times, but generally the direction of travel is clear. A lot of people think that the vaccine will get rolled out. Yes, it mightn't be as fast as what we want, but there's some ability to see that conditions will get better, social distancing will disappear and eventually international borders will open up. So the confidence we should have that some of these savings will be spent should, I think, be a little bit higher than what we saw in the GFC.

The other important impact will be employment. If people are employed, if they're doing more hours, if they can do more hours, then that will be good for the outlook as well. I see both the savings rate and the unemployment piece as being important. Then, if you look at the sentiment surveys, both business and consumer sentiment have been pretty positive.

Dr MULINO: My last question goes more generally to the way you model GDP. Do you undertake sensitivity analysis around your central case forecast, or do you undertake scenario analyses? How do you think through the uncertainty that we're facing at the minute?

Mr King : When we're thinking about the bank, we do what's called a stress test, which I would describe as 'deep recession'. We're probably not scenario testing, but we're stress testing. That's the big one. We need to do that when we're thinking about our provisioning and our capital levels in the bank. Scenarios about what I would say are smaller changes in the outlook are not something we tend to publish, but we do from time to time have a look at them.

Dr MULINO: If there is anything you can provide on that, that would be interesting—

Mr King : I think we got a question on notice about whether we have done any economic modelling on the different scenarios from COVID, so we will have a look.

CHAIR: Dr Mulino, we are now going to take a break, and when we resume the hearing, Mr Falinski, you're going to be first up.

Proceedings suspended from 15:01 to 15:17

CHAIR: The committee will resume. Mr Falinksi?

Mr FALINSKI: Mr King, how often have you appeared before this committee?

Mr King : A few times as CEO and previously assisting the CEO.

CHAIR: I would have thought it was twice.

Mr King : One via video and one in person.

Mr FALINSKI: Mr King, so you've appeared roughly about eight times before this committee?

Mr King : It sounds like you have done the numbers, Mr Falinski.

Mr FALINSKI: I try to as best I can. In that time, what has been the purpose of your appearance before this committee?

Mr King : It's because we've been requested to come and report to the parliament.

Mr FALINSKI: Is it that you just have nothing else to do that you keep turning up?

Mr King : No; we've been asked to turn up so we will.

Mr FALINSKI: Fair enough. Does this parliament require people to use your bank?

Mr King : No.

Mr FALINSKI: Does this parliament require people to deposit 9.5 per cent of their wages and salaries with your bank?

Mr King : No.

Mr FALINSKI: Are you in the habit of paying journalists?

Mr King : No.

Mr FALINSKI: Are you currently paying, sponsoring or otherwise remunerating a journalist on a television network at the moment?

Mr King : No.

Mr FALINSKI: Does your bank own and run a newspaper, whether it be online or otherwise?

Mr King : No, that is not part of our business.

Mr FALINSKI: Oh, really—it's not part of your business? That's interesting. That doesn't stop other financial institutions from doing it. If you were in the habit of paying financial journalists who appear on a publicly funded broadcaster and in the habit of hiring journalists and running your own newspaper—which puts out highly bias and factually incorrect information—and if you were as an organisation the beneficiary of the laws of this country that compel Australians to deposit at least 9.5 per cent of their salary with you, would you complain if we asked you to come before this committee?

Mr King : I can only comment on our situation. I will leave it to you to draw conclusions as others. As I said, we're required to attend so we do.

Mr FALINSKI: Do you think it's appropriate that financial institutions fund, pay or otherwise remunerate journalists who report on financial matters on a television network?

Mr King : I don't know the specifics. So I would not want to comment on their reasons.

Mr FALINSKI: Fair enough. I understand. Can we talk about responsible lending for a minute?

CHAIR: Yes.

Mr FALINSKI: Mr King, the parliament is currently considering removing responsible lending obligations on financial institutions such as yourself. What impact do you think that will have on consumers and potential customers and potential customers that your bank services?

Mr King : Broadly, we would see that there would be limited impact on borrowing capacity, because the rules between APRA and ASIC are fairly aligned. We do see that there is an opportunity to simplify our processes, and we hope that that would see turnaround times improve. From our perspective, we probably have too many controls in our responsible lending piece—and we were after those in any case. But having one regulator that we're dealing with rather than two, we think can improve the process.

Mr FALINSKI: This is really your fault, isn't it, that we're doing this—because Westpac got involved in a case that became known as the wagyu and shiraz case?

Mr King : Certainly the regulator ran a test case on an area of responsible lending called expenses and, yes. it has become known as that court case. It is an important area and one that has given judicial clarification on how to assess borrowing capacity.

Mr FALINSKI: In that particular case, you initially wanted to settle it, didn't you?

Mr King : We had different conversations with the regulator along the way and, yes, we did want to settle.

Mr FALINSKI: And you were willing to pay a fine of $25 million to settle that case?

Mr King : It was commercial in confidence, so I can't talk about the specifics.

Mr FALINSKI: Pardon me. I take it back. But it was more than a dollar, wasn't it?

Mr King : It was a significant amount of money.

Mr FALINSKI: And, in the end, Justice Perram said that he didn't believe that you had broken the law. Is that right?

Mr King : That was the conclusion.

Mr FALINSKI: As part of that case, Westpac was asked by the court to offer up some lending data, both before and after the introduction of responsible lending obligations. Is that correct?

Mr King : We did tender evidence such as lending data.

Mr FALINSKI: And that data showed that, in fact, responsible lending obligations had had the impact of making credit worthiness or credit defaults worse, not better?

Mr King : I'd come back to—

Mr FALINSKI: Actually, that is an unfair question. I should it was a correlation rather than a causation.

Mr King : That's right. The data produced wasn't conclusive—is probably the best way. Stepping away from the court case, it's still the case that people losing their job, getting sick, getting divorced or having a big change in personal circumstances are often the drivers of what happens when people can't repay their loans.

Mr FALINSKI: Indeed. In the history of banking, has anyone failed to be able to repay their loan because you didn't ask for their Uber receipts?

Mr King : That's a very specific and broad question. I go back to my—

CHAIR: How can it be specific and broad?

Mr King : Uber has been around only for a little while, but the broad question is, for specific categories of expenses, have they ever not been able to meet their loan repayments—

CHAIR: Because of an Uber receipt?

Mr King : The fourth category I would put is people getting overcommitted because they haven't declared all their debt or their commitments, and that's what we try to find through our assessment processes.

Mr FALINSKI: Indeed, because you don't want to lend money to people who can't repay it. Has that become good banking practice in Australia in the 21st century?

Mr King : I think that is good practice in banking full stop.

Mr FALINSKI: Fair enough. Has someone getting their hair coloured ever been an indicator of whether they'll be able to repay their loan?

Mr King : I wouldn't think so in an individual expense case.

Mr FALINSKI: What in the responsible lending laws requires you, as a bank, to ask someone if they're going to get divorced, if they're going to get sick or if they're going to lose their job? They are the three big reasons why people default, aren't they?

Mr King : In a sense, that is right, in terms of the three big reasons. We do that assessment on the type of employment that people have, the nature of their income, whether they are more permanent or less permanent, and the predictability of that income over time is what we do. That can be wrapped up in the thinking of requirements and objectives, but it's definitely part of our process. The other thing I'd say on responsible lending is that there's the need to do due diligence, thinking about the requirements and objectives, but also to check income expenses and commitments. I made this point before: we can actually get income for salaried people electronically now through ATO data and commitments. We need a comprehensive credit bureau in the country that is comprehensive and captures all debt. They are two important things that would help in our assessment processes.

Mr FALINSKI: Let me ask you this particular question. Recently, when people have been trying to get their home loan from an institution such as yours, they've had to provide, where they can, a tax return and the last three payslips, and now their bank account showing the money going into that bank account. Why is that? Is that due to responsible lending? What is the purpose of that requirement?

Mr King : That's part of our verification process. When people say they earn an amount of money, we want to see the documentation of the payslips. That's an example where, for a lot of people in the country, there is the payroll data that the ATO has. We'd be able to automate that. In relation to the bank statements, that's so that we can also do our due diligence on both the income going in and the expenses.

Mr FALINSKI: So, in fact, some of that is completely unnecessary?

Mr King : We've always verified payslips, but we're certainly looking at more information as we work with regulators on what the minimum standards are.

Mr FALINSKI: But do you really need to look at their bank account as well as their payslip and their tax return?

Mr King : In some cases, yes, because, if you take bank statements, it helps us understand if they've forgotten to give us debt that we don't know about or—

Mr FALINSKI: That's fair enough. Why not just ask for their bank statement? Why are you also asking for their payslips and their tax return? You may want to take that on notice rather than—

Mr King : I think any lending process will require you get access to income and therefore payslips, and tax returns are particularly important when you've got a business, because often that's what we look at, and there are opportunities for the country to automate some of these processes so we can get access to the digital records rather than sending the paper records around the country.

Mr FALINSKI: Great. That gets us onto digital signatures. During COVID-19, we gave financial institutions and indeed other corporations relief from requiring paper based documents. Do you think the Corporations Law should be changed to recognise a record as being electronic as well as physical?

Mr King : Yes, we would support that because, increasingly, we are becoming a digital economy and we need to move our contract system to be digital as well.

Mr FALINSKI: Would that include state government-run land registries that still require wet signatures?

Mr King : Certainly—I think wherever we can. If you think about the home lending process, security and the movement of security and the registration of security is very important. We've already got settlement processes that are electronic, so, if we can get security processes that are electronic, that will be a benefit for the country, I think.

Mr FALINSKI: Can we go to house prices for a moment?

CHAIR: Just do it.

Mr FALINSKI: Alright. Are you worried about the acceleration in the cost of buying a home?

Mr King : The acceleration in the cost of building a home or buying a home?

Mr FALINSKI: Definitely, in terms of the discussions we've had in the committee today, the cost of getting people into their own home, where they choose to, is getting hard for some parts of the community. If we can bring down the cost of building and the costs that relate to buying a house or spread them over time, then that would be useful.

Mr FALINSKI: But that is not really the issue, is it? The cost of borrowing has declined substantially.

Mr King : The cost of borrowing has declined substantially, but, when we assess loans, we've got a floor interest rate in the loan at five per cent, so we assume people can afford five per cent effectively in assessing the loan. The other way of saying it is we haven't capitalised lower interest rates below five per cent into the borrowing capacity.

Mr FALINSKI: But you see the situation where the demand for housing has increased over the last nine months. What's happened to building approvals in New South Wales?

Mr King : I think building approvals got soft, but they've come back.

Mr FALINSKI: Would it surprise you to hear that they have declined by 36 per cent?

Mr King : Possibly over a certain period, but I think, more recently, they're coming back.

Mr FALINSKI: Do you know of any other market where, when demand increases, supply decreases?

Mr King : In the housing market, you've got a lag. If someone can look to build, there are approvals and then they have to get construction going and whatnot. It's not like supply will respond instantaneously to extra demand.

Mr FALINSKI: I absolutely understand that, but building approvals don't require a supply chain, do they, or a pipeline?

Mr King : To get the approval itself, yes, but some people may not have progressed with approvals.

Mr FALINSKI: When you're seeing councils and state government planning systems decreasing the number approvals at the very moment that they should be increasing them, isn't that what is driving the cost of housing through the roof in this country?

Mr King : There are a lot of factors in a housing market. Right at the moment, we've got less supply than demand, so I think the dynamics of markets will drive that price up. Where you want to buy is important. If you're trying to buy close to the city, certainly that's an area that is well bid and therefore prices go up, but, more generally, we have a trend post COVID of people with families wanting to live in detached houses as opposed to apartments. It's complex, Mr Falinski, and—

Mr FALINSKI: It's not really, Mr King. Markets throughout the ages have operated on supply and demand. That fundamental principle of economics hasn't changed recently, has it?

Mr King : No, it hasn't, but we haven't got unlimited supply close to the city or in the eastern suburbs of Sydney or the North Shore—it's well built.

Mr FALINSKI: I love how whenever you talk to someone in Sydney about real estate, it always turns to the eastern suburbs and the Lower North Shore. There are other people. You know those places you fly over on the way to Singapore? There are people down there too! But I will ask my question. We live on the least densely populated continent in the world, unless you want to include the South Pole, and yet we have housing prices that have more in common with the most densely populated city states of Singapore and Hong Kong. That clearly is a market failure, isn't it?

Mr King : I think that is the opportunity. How do we get people to have the ability to work outside of the major cities in the regional towns or up and down the different parts of the different coasts? That will require transport, telecommunications and the ability to work remotely.

Mr FALINSKI: But, isn't it just a matter of local councils and state governments allowing people to build more houses when the demand for those things happen?

Mr King : You also need developers wanting to develop, and they'll look at all those factors as well.

Mr FALINSKI: So the problem is not the lack of people being able to get approval; the problem is builders don't want to build?

Mr King : No, I'm not saying that. I'm not a complete expert in the planning cycle and there are certainly other industries that will be better placed to give you that information, but it is a fair question to be asking.

Mr FALINSKI: Westpac has, for quite some period of time, had a really robust and effective what is now called ESG. Ever since the mid-90s, Westpac has been very good on environmental issues and sustainable governance issues. Is inequality one of the principles that your organisation is worried about?

Mr King : Certainly, we focus on what we call the material sustainability issues, and one of those is cost-effective access to housing.

Mr FALINSKI: Great.

Mr King : We do have a focus on financing, where we can, low-cost housing.

Mr FALINSKI: Do you think that young Australians should have better opportunities to buy their own home than we did when we were their age or that their opportunities should be less than ours?

Mr King : It's a different economic period. I think it's hard at the moment for some young Australians, and we have to look to see what we can do to help them get into a house. I don't think we can compare it to ourselves, because it was a very different situation and the economies have changed very rapidly. But I agree with the point you make, which is that it is tilted against some people getting into the house, because of where the housing stock is, how it transfers between the different age groups and then how we can bring down the cost of housing.

Mr FALINSKI: Has your bank taken a view on land tax versus stamp duty?

Mr King : In the sense of do we think it's a good change?

Mr FALINSKI: Yes.

Mr King : We think it makes sense to look at the New South Wales developments, to transition away from it all being upfront and look towards a more gradual payment over time.

Mr FALINSKI: So you support the replacement of stamp duties with a broad-based land tax?

Mr King : We think it is definitely worth looking at. The ACT have gone that way, and it seems to work—

Mr FALINSKI: I can you as someone who owns a property in the ACT that they haven't gone that way; they've simply introduced a land tax and kept the stamp duty where it is.

CHAIR: But that doesn't take us anywhere, Mr Falinski. You need to ask a question.

Mr FALINSKI: My point is this: you are a very important part of the housing affordability question. Would you agree with that?

Mr King : We're a very important part of financing housing. That's our job.

Mr FALINSKI: You've said that part of your corporate mission is to ensure—was it material equality?

Mr King : No, we look at material ESG risks, and one of those is access to housing.

Mr FALINSKI: Access to housing?

Mr King : We're part of the process. The price of housing—the policy—is not something that the bank undertakes.

Mr FALINSKI: What I am trying to say is that you constantly wear the program of increasing prices of housing; however, there are a lot of people who come to this equation. For example, recently, the Victorian government announced a $9.5 billion program to build 11,000 social houses. How many houses could be built if they rolled out a $9.5 billion land release? Is it 43,000 or 44,000 dwellings?

Mr King : Sorry?

Mr FALINSKI: My point is: where are the banks on the fact that planning reform and local government intransigence is what is causing the problem of us not being able to increase the supply of housing for everyone?

Mr King : I think the quicker we can make planning processes and release land and get people going, the better.

Mr FALINSKI: The Economist ran a lead article about 12 months ago on planning reform in Japan that showed that, when the Tokyo government reformed their planning laws, they were able to reduce homelessness in Tokyo over a decade by 10 years. Do you think that planning reform could actually do a lot to drive a reduction in not only the affordability of housing but also the supply of housing that would allow a lot of people who currently find themselves in dangerous situations to then go and actually find a home—that is, not be homeless?

Mr King : I'm not around that Japanese report. I will have a look at that. But I think the point you're making is that, if we can get more houses built cost-effectively, that is good, and I agree with that.

Mr FALINSKI: It would be good if Westpac and other banks, who are so critical to the housing equation in Australia, could maybe have some suggestions for the federal parliament that didn't just involve marginal tinkering with the tax system but rather the fundamental reform that can drive lower prices in terms of housing and dwellings.

Mr King : I think that's a statement.

Mr FALINSKI: Can we talk about cryptocurrency for a moment?

CHAIR: Go ahead.

Mr FALINSKI: Can you actually use cryptocurrency for anything useful, besides buying a Tesla?

Mr King : Cryptocurrency is accepted by some organisations but not a lot.

Mr FALINSKI: Does your bank accept cryptocurrency?

Mr King : No.

Mr FALINSKI: Are you intending to accept cryptocurrency?

Mr King : It's a volatile way of transferring value, so we think of it more as an asset than a way of transferring value.

Mr FALINSKI: Rather than as a supply of money, as such?

Mr King : Yes.

Mr FALINSKI: Would you allow people to deposit that 'asset'—in inverted commas—with your bank?

Mr King : We don't offer that capability. We don't offer an exchange in cryptocurrency.

Mr FALINSKI: Is it something that you think the federal parliament should be looking at, in terms of creating frameworks that would allow Westpac to easily accept and store cryptocurrencies?

Mr King : Over time, I think. But, as I said, we think about it as an asset. It's got a price that's quite volatile, so it needs to be for people who are sophisticated enough and understand the risks both ways—the up and the down. The other thing with cryptocurrency is it is actually hard to understand the transaction, the parties and what it's being used for.

Mr FALINSKI: Is that something that we should potentially look at coming up with frameworks for so that an organisation such as yours could do that more—

Mr King : It's going to be increasingly important. It will be an alternative channel to traditional ways of transferring value. So I think at some point the regulators should have a look at it.

Mr FALINSKI: You might prefer to take this on notice. What are some of the elements that we, as a parliament, need to look at in terms of creating a regulatory framework to enable organisations like you to make these assets available—or more easily stored, at least?

Mr King : The key thing, from our perspective, is we're not always clear on each side of the transaction and whether we can meet our reporting requirements under things like the AML/CTF Act.

Mr FALINSKI: So that would need to be something that we would need to have a look at?

Mr King : Yes.

Mr FALINSKI: But that's even with the blockchain technology that allows you to track the ownership of the currency?

Mr King : It won't always be clear for us how we see the value move.

Mr FALINSKI: In terms of merchant fees, credit cards and other credit products that are offered by retail outlets, at the moment they're allowed to pass on the cost. What has been your experience over the 10 or so years that they've been allowed to do that in terms of the cost of those payment systems?

Mr King : Generally, interchange on credit cards has reduced, so it's now around 50 basis points on average. It's come down materially. It's general practice now for most merchants to add on a cost for the different types of payments channels, whether that be credit cards, debit cards or EFTPOS, with the latter two being nominally free.

Mr FALINSKI: So your evidence would be that the price discovery mechanism has created a transparent market in which people have sought to reduce the cost of the use of those payment systems?

Mr King : That, and also, I think, for people who use the more expensive payments mechanism, it's reflected in their cost as opposed to being spread over the whole customer base.

Mr FALINSKI: So it's also fairer as well?

Mr King : It's also fairer.

Mr FALINSKI: Do you think that we should also apply that to all kinds of payment methods, such as buy-now pay-later providers?

Mr King : I think the Reserve Bank is looking at that at the moment. At a certain point, you want to incent competition, but there will be a tipping point where people will become large enough such that they should be treated in the same way.

Mr FALINSKI: So if, for example, someone's using a Westpac credit card versus Zip, which I know is the most expensive method of payment, in the case of your credit card, if it is a Mastercard, they are aware of the cost of using that Mastercard, whereas at the moment the cost of using Zip is in fact spread across everyone using credit cards, buy-now pay-later or, indeed, cash.

Mr King : That's right, for the merchants. If you've got a payment mechanism—I won't focus on any particular company—where there is a charge to the merchant, but there's no ability to pass that on to the end user, then that gets averaged into their costs and spread into their business.

Mr FALINSKI: So, it's unfair.

Mr King : I think the Reserve Bank talks about needing to incent competition, and that's right: competition's good for the market in the long run. But there comes a point when you've got to treat people consistently, and I understand that is what the Reserve Bank is looking at in their latest payments review.

Mr FALINSKI: That process—the review that the Reserve Bank is looking at—is something that you'll be involved in?

Mr King : We have been, yes.

Mr FALINSKI: APG 223 is issued by APRA. If the responsible lending laws are removed, would you expect to see APRA change some of its prudential guidance?

Mr King : I'm not aware that that is the case, but, certainly, if we believe there are parts of that particular standard that could be improved, we would provide that feedback to APRA.

Mr FALINSKI: Okay. When you've done that in the past, have they been responsive to that feedback?

Mr King : Sometimes yes. Generally on changes to any standard, they consult, take feedback and take some of it on and not others. But they are very transparent. They normally release a report that says, 'This is what we've done with the feedback.'

Mr FALINSKI: Mr King, what do you think are the biggest issues facing global banking at the moment?

Mr King : Obviously the recovery from COVID for the financial system globally. Countries are in a different position, so how that is navigated is very important. Cyber risk—and I think we touched on this earlier today—is definitely a risk for the system. Probably the third one—not in the near term but at some point—is that, as interest rates go up, that will be something that the banking system will have to focus on as well.

Mr FALINSKI: What about us winding back some of the extraordinary stimulus that has been provided to organisations such as yourselves through the Reserve Bank loan facility?

Mr King : Broadly, our institution hasn't raised a lot of wholesale money in wholesale markets because of the availability of the TFF. I think the benefit of the TFF has actually been in reducing interest rates for the whole economy, and that's brought down lending rates. I'm pretty confident about the ability to manage through refinancing of the TFF, because we actually haven't raised a lot of money recently and there's still good demand for Australian bank paper.

Mr FALINSKI: The problem, though, is that we've seen some gyrations in the bond market recently. As the TFF gets pulled back and you have to go back into the bond market, are you not worried about the volatility that is currently being experienced in that market?

Mr King : I see that more as an interest rate risk, actually. I think we'll be able to borrow money. The cost of the money will be the question. Depending on your view of how strong the recovery is in the global economy, interest rates is the one I think we've got to watch and particularly what happens in the US market.

Mr FALINSKI: What happens if the global bond market decide that you broadly loan a lot of money to the most indebted household sector in the world and they start pricing that risk more heavily than in a more risk-averse capital market?

Mr King : If the cost of funds for the country goes up, that means, all things being equal, the cost of loans, the interest rate on loans, would go up.

Mr FALINSKI: Given that you are lending so much money to the household sector for owner-occupier loans at the moment, and therefore that interest rate increases, doesn't that put an extraordinary stress on our household sector?

Mr King : That's why I said before that the floor interest rate in serviceability calculations at five per cent is a quite important setting. It is considered when we do new loans. I think the point to make, though, is that we think that interest rates will stay low for a little while, but they can go up over time. So people should be thinking about that in time when they're budgeting.

Mr FALINSKI: Is that your floor or is that APRA's?

Mr King : The five per cent floor is our floor.

Mr FALINSKI: Are other financial institutions using similar floors?

Mr King : I believe they're all around that level.

Mr FALINSKI: Are there any other lenders in the market not using a floor of that nature that you're aware of?

Mr King : I don't know. I wouldn't think so, but I don't know.

Mr FALINSKI: So you're pretty confident about the stability of the Australian economy moving forward because the major financial institutions have set that margin for error into their lending practices?

Mr King : Yes, and the historical performance of the household sector has been very solid in Australia. We look at how people are paying down their debt. We're looking at LVR settings. So we do take a lot of measures in thinking about the risk in that portfolio.

Mr FALINSKI: Chair, I think that's my time.

CHAIR: We will go to the deputy chair for 10 minutes.

Dr LEIGH: Mr King, do you advertise financial products on your personal banking apps and, if so, which product do you advertise.

Mr King : Do we advertise? We certainly have available the products that Westpac or St George make available.

Dr LEIGH: Does that include your BT Super product?

Mr King : Super is the product that we would make available through the app.

Dr LEIGH: Do you advertise it on the app?

Mr King : What do you mean by 'advertise'?

Dr LEIGH: Promote it and have little pop-ups there telling people about it.

Mr King : Certainly the super product is available through the app.

Dr LEIGH: If someone logs into the live chat function, do you use that to promote BT Super?

Mr King : I actually don't know. Do you know, Mr Vance?

Mr Vance : They would have to ask and be referred off. That's not a chat that's done through our standard banking channels. That can only be done through BT.

Dr LEIGH: What do you mean by 'be referred off'? They're on the Westpac banking app and they ask a question about super and they say, for example, 'What should I do with my super?' what happens then?

Mr Vance : We would generally have to have someone call them back. We would not deal with that sort of advice question through the app.

Dr LEIGH: So there's no promotion of BT Super through the app?

Mr King : Well, it's available, so you could call that promotion. But ,generally, given the specialist nature of it, they would be referred off to someone to speak to.

Dr LEIGH: So they wouldn't engage in a conversation using the live chat function in which BT Super would be promoted?

Mr King : Not that I'm aware of, but I'm happy to check that.

Dr LEIGH: I would be grateful if you could check that and get back to me. Are you looking at the rise of live chat as a potential challenge in ensuring that you're not falling foul of regulations around hawking and responsible banking?

Mr King : Yes. In relation to super, as I started with today, one of our portfolio simplification initiatives is that super platforms and investments won't be a business that we'll be in. That will be a business that we will have someone else exit.

Dr LEIGH: Staying on BT Super, Anthony Klan had an article on his Klaxon website about BT Super's performance over the past decade, suggesting that, from 2010 to 2017, the return to shareholders had been some 600 per cent—about 10 times the ASX return and significantly more than a BT Super customer would have received over that time. Are the claims made in that article broadly accurate?

Mr King : We've responded to Mr Klan several times, and we don't agree with his analysis.

CHAIR: Is that a no?

Mr King : No.

CHAIR: Just before you proceed, Deputy Chair: I asked was that a no, as in do you agree. And you said no/ Does that mean that you do not agree or you do agree—

Mr King : We don't agree with his analysis.

CHAIR: Okay; thank you.

Dr LEIGH: So you don't agree with the 600 per cent return for BT investment management?

Mr King : We didn't agree with his analysis and we did provide him feedback.

Dr LEIGH: Yes, but let's break it down. So we've got the return to BT investment management. Was that or was that not about a 600 per cent return from 2007 to 2017?

Mr King : I haven't got the specific details with me right now on that particular response. But I can say that we did respond on the article and we didn't agree with the analysis. If I need to respond to specific questions, I'll have to do that on notice.

CHAIR: Just for clarity—because I know some people are ridiculously obsessed with this—could you provide on notice a response to the committee about your response to the allegations?

Mr King : Okay.

CHAIR: Thank you.

Dr LEIGH: Mr King, I would like to extend on the chair. I'm keen to know for a relevant period—ideally 2007 to 2017, but you may want to take it from 2007 to the present—what the return was for BT Investment Management and what the return was for the typical BT Super customer. It seems that those numbers should be straightforward to obtain and would be important for customers in knowing whether they were better off investing in BT Super or having them manage the money.

Mr King : Okay.

Dr LEIGH: It's a reasonable question for someone to ask about a for-profit fund, isn't it?

Mr King : The analysis is quite detailed when you get into super, so we will see what we can do.

Dr LEIGH: Would you think it inappropriate if the profits of a super fund were rising more rapidly than the balances of the typical member of that fund?

Mr King : In what way?

Dr LEIGH: If the profits of the manager of a fund were growing faster than the balances of those who entrusted their savings to the fund, that would be a problem, wouldn't it?

Mr King : I would need to get underneath it, but it would be hard for that to happen.

Dr LEIGH: It's one thing to click the ticket; it's another thing to earn such large returns that the management company is doing better than the superannuation investors. Wouldn't you agree?

Mr King : It's a very complex area. I will take that on notice and have a look at it. I need to do the analysis.

Dr LEIGH: BT Super hasn't been a stand-out performer in superannuation funds over the last decade. You'd agree with that, surely?

Mr King : Mr Vance answered that question before. While the funds have broadly hit the targets that were in the offer to investors from a heat map perspective, no, we've been not at the top.

Dr LEIGH: More to the bottom, one might say. You were one of 25 funds about which it was suggested that they would be likely to fail the new performance tests, according to a piece by Jessica Sier in Investment Magazine last October.

Mr King : Part of that is that we run a lifestyle-stage approach to funds as opposed to a balanced stage, and a lot of those heat maps are really on a balance basis, so it's difficult to compare them.

Dr LEIGH: But it's also difficult to imagine that the typical Westpac customer would be best off having their super with BT Super, isn't it?

Mr King : Under a lifestyle approach, those who are lower risk and therefore want to protect capital typically get a lower return, so they're not investing in a balanced portfolio; they have a different skew. So it does depend on the proportions that you have in your life stages.

Dr LEIGH: You're saying that they might choose to have a lower return, but that tends to admit they would get a lower return.

Mr Vance : I think the key is we balance return and volatility targets in that and that may give different outcomes compared to different funds, but we do not try and accelerate the returns. We value and tailor our funds with a target of limited negative returns.

Dr LEIGH: If your goal is not to accelerate the returns, I guess you've succeeded in that. I have a final question on net interest margins. When I look at a graph of the major four banks' net interest margins, I can see ANZ net interest margins dropping quite considerably and NAB's have dropped a little, but Westpac, in the first half of 2020, had the highest net interest margins of the majors—higher than over the average from 2013 to 2015. Why are the net interest margins so high?

Mr King : In terms of revenue, you have the net interest margin and fees. In terms of net interest margins, it's mainly because of the book mix that we have.

Dr LEIGH: What is it about your book mix which sees other banks cutting the net interest margin at the moment and Westpac increasing them, compared to 2013 to 2015?

Mr King : We don't have as much institutional business as some of the other banks which typically have a different margin.

Dr LEIGH: So you have legacy customers whom you're able to hold onto and charge higher interest rates because they don't put the energy into switching?

Mr King : No. As an example, trade finance is an institutional product. That's typically a shorter maturity product, and therefore the margin on it is a little bit lower. We don't have as much of that as other banks.

Dr LEIGH: We've had massive central bank rate cuts. We've got interest rates as low as they've ever been. It seems strange to me that the RBA can have the cash rate substantially lower than it was in 2013 to 2015, yet Westpac's net interest margin hasn't fallen.

Mr King : There are lots of things that go into margins other than cash rates. We disclose a lot of that in our results and we will very shortly as well. I would also point out that fees haven't grown as fast as the industry on the other side of the revenue equation.

Dr LEIGH: That's good to hear. Thank you, Chair.

CHAIR: Thank you, Deputy Chair. In the final moments left, there is a question I asked one of your competitors this morning in the context of time to yes for approvals for mortgage products. I was given the answer, which I contested spectacularly, that it was two days on average to yes. To me, it seemed pretty surprising. What is it for Westpac?

Mr King : We do approximately 12 per cent within two days. Customers that need fast approvals can ask for them, and within—

CHAIR: Faster than two days?

Mr King : Yes. And, within 10 days, we do 50 per cent.

CHAIR: That's quite a big discrepancy, though, between two days and 10 days.

Mr King : It depends on what customers want and the types of deals. As I think I said before to the committee, more complex deals take longer. When you get into trusts or complex family situations, they will take a bit longer. We want to improve this, as I said before.

Dr LEIGH: Is there a discrepancy in time to yes if I go directly to the bank versus the alternative of going via a mortgage broker?

Mr King : There will be differences because it's a different process.

CHAIR: Sure. I understand that, if I go to a mortgage broker, then I suddenly become dependent on the application through the mortgage broker. Let's discard that time. If I make the application direct versus a mortgage broker providing it for me and we both—myself and the mortgage broker—time stamp it at the start when the application goes in, would they deliver the same result in the same time frame?

Mr King : No. We have different processes for each—for people applying through, say, our Westpac brand or applying through the mortgage broker.

CHAIR: Which one's faster?

Mr King : At the moment, applying to the bank.

CHAIR: Directly.

Mr King : Yes.

CHAIR: What's the discrepancy between the two?

Mr King : Volume. There have been different volumes and different processes. There are volumes that go through the channels and they're slightly different processes that we have.

CHAIR: Yes, but is there an inherent bias in favour of people going directly to the bank versus the mortgage broker?

Mr King : No. We'd ideally like both to be fast.

CHAIR: If you said you do 12 per cent by two days and 50 per cent by 10 days, going direct, what is it if I go via a mortgage broker as an alternative?

Mr King : I haven't got the first part—

CHAIR: Could you get that data for us? From the basis of the evidence presented this morning about the idea of two days, you just need to look at Commbank's own averages—you'll probably enjoy this because it's about your competitor—which they publish, based on their various products. It suggests it takes substantially longer than two days. Obviously there are some that never get approved, but what would be deemed to be the maximum time frame for approval for a product through Westpac, either directly or through a mortgage broker?

Mr King : We'll aim to do it as fast as we can. As an example, when you're dealing with complex loans, often there's time back and forth to get information and lead times.

CHAIR: Yes, but I'm talking about a relatively standard product. I realise there's complexity. People have different incomes, existing assets and all those sorts of things. I'm saying that, for someone who's got a, politely, boring job like mine and who wants to purchase a single asset, assuming they have no pre-existing assets, surely there must be some sort of ceiling or cap or point at which internally alarm bells ring, where people say, 'This is taking too long'?

Mr King : For a more simple loan like that, which is a straightforward, PAYG, we want to do it quickly—under two days.

CHAIR: Right. But that's not the same as having point at which alarm bells ring, or don't you have alarm bells?

Mr King : We look at our service levels every day, and the operations teams look at resourcing in those areas.

CHAIR: You've been passed a note.

Mr King : I have.

CHAIR: You can read it.

Mr Vance : Sixteen days is the longest at the moment in the queue.

CHAIR: Okay. Thank you. So it takes a little over two weeks for you to get to 'yes'. That's what you say is the worst case scenario, unless it's particularly fidgety, yes?

Mr Vance : That's at the moment, yes, although that time does vary.

CHAIR: Have you seen an increase in the overall time it's taken over, for example, the past decade?

Mr Vance : Yes.

Mr King : We would have, post some of the changes on verification in responsible lending. I think it has gone up.

CHAIR: How much by?

Mr King : It goes up and down with volume. It would be a few days.

CHAIR: When you think about the volume of the products that you would sell to customers, times by a few days, that can add a significant amount of time to the growth of the economy, if there are delays.

Mr King : To come back to a couple of points I made before, a comprehensive credit bureau and access to ATO data, including pay slips, would be helpful in digitising the mortgage process.

CHAIR: But it raises questions—and the deputy chair has politely reminded me that this is not exactly an area of strength for your bank. But I think, in light of the time and the fact that we're all slightly exhausted, we will close the hearing at this point and thank you for your attendance and participation today. There may be committee members who have further questions on notice that they wish to submit, in addition to the ones we've already asked you for. We look forward to them being responded to thoroughly, comprehensively and swiftly, if possible, but I understand if you have other obligations as well. I'd like to thank you for your attendance here today. The committee secretariat will be in touch with you in relation to any matters arising out of today's hearing. You will be sent a copy of the transcript of your evidence, to which you can make corrections of grammar and fact. I declare this public hearing closed, and we look forward to ANZ and NAB tomorrow.

Resolved that these proceedings be published.

Committee adjourned at 16:12