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Transcript of interview with Annelise Nielsen: Sky News AM Agenda: 14 October 2019: banking inquiry announcement; mortgage brokers; interest rates

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SUBJECTS: Banking inquiry announcement; mortgage brokers; interest


ANNELISE NIELSEN: Welcome back. We're joined live by Shadow Assistant

Treasurer Stephen Jones. Thank you for your time Stephen. A big banking inquiry

has been announced today. There was a bit of scepticism, in particular from the

banks, we're getting the sense that they're not too happy about this because the

pressure is on to be passing on interest rate cuts, but they've got to worry about

deposit holders as well.


low interest rate environment that the pressure is on the banks and all deposit

holders ensuring that they can pay a decent rate of return to the savers, as well as

the borrowers has. My concern about Josh Frydenberg’s announcement this

morning is it comes too late. 12 months ago, in fact in June last year, they received

a report from the Productivity Commission looking at competition within the

banking and finance industry. They have been sitting on it for 12 months. The

problems are clear and yet the Government is doing nothing, spooked into action

because Labor is putting a bit of pressure on them. It's really a case of too little too


NIELSEN: The Government's argument is that were plenty of rate cuts that weren't

passed on while Labor was in government as well. That's the prerogative of the

banks, they’re private companies. Why should the banks be justifying to anyone

why they're not passing on the interest rate cuts, but their own customers?

JONES: Our banks and particularly our big banks enjoy an enormous privilege. In

fact, if you look at competition in the market and look at the big advantage the big

banks have over their smaller competitors one of the advantages they have is that

implicit guarantee: too big to fail, which enables the big banks to lend on national

and international markets at a lower rate than their competitors. There's a number

of other regulatory advantages that the big banks hold as well. Here's one thing

that was highlighted in the Productivity Commission report that helps to level

competition within the banking and the lending sector and that is the role of

mortgage brokers. 66% of all home mortgages and now being written by a

mortgage broker. They have the capacity to be a real honest broker within the

system. One of the things that the Productivity Commission and then the Royal

Commission recommended doing is ensuring that there is more independence

from the mortgage brokers to ensure they genuinely are acting in the best interest

of consumers. Legislate a best interest duty and ensure that mortgage brokers are

acting in the best interest of the people who pay their wages.

NIELSEN: If we break that down though, legislative best interest duties, we've

seen time and time again, they're basically the wet fish of regulation. It's what do

you do? It's a slap on the wrist trying to enforce it. And then you look at those

practical measures, they have not been implemented, things like putting the

brokers’ feedback on to the customer because it makes them less competitive,

banks can wear that cost smaller mortgage brokers can't.

JONES: There's a couple of things that need to be done here. If you go back but

12 months ago the government received a report on competition. They've done

nothing with it. Let's beef up the role of mortgage brokers, ensure that there are

acting in the best interest of customers, ensuring that they are clearly disclosing

where for example, there are mortgage broker that is owned by a bank and a

number of them are, let's ensure that there is more transparency in that area. But

there are other roles that the Productivity Commission has recommended the

Government jump into as well. One of the reasons that customers don't move from

one bank to another is that it's difficult. A lot of their personal details are tied up.

But also the rates that are being provided by banks are very opaque. It's very

difficult for a customer to compare one to the other.

NIELSEN: I know they've done studies where once you have more than three

products with the bank, which is can be mortgage, a debit card and something

else you're done. It's just physically impossible, very hard I should say, to kind of

compare actually what you're getting out of it at the end of the day we're again

putting this back on the customers. Isn't this the right thing for the Government to

say to the banks “look you've got your logic, you've got your reasoning put it out

there”. We've got the ANZ Bank saying that they think there's misinformation out

there now and it should be up to the public that there is this open discussion. So

what's wrong with that?

JONES: I think the Government has a role. I don't think the Government could just

say look we've had a Royal Commission, job done. We've won an election, job

done. They actually have a role. They can implement the recommendations the

Royal commission. Only six so far out of 76 recommendations only six have the

Government implemented so far and we're nearly at Christmas. Importantly, they

haven't implemented the recommendation on mortgage brokers, which is critical in

this area.

NIELSEN: They’ve said it will reduce competition which is actually a worse

outcome for consumers.

JONES: Actually, on this that won't. Implementing the recommendations on the

mortgage brokers will improve competition by legislating a best interest duty,

ensuring that mortgage brokers, who wrote 66 per cent of the mortgage business,

are absolutely operating in the best interest of the customer.

NIELSEN: This is the solution Labor put forward for financial advisors. You said

we've legislated a best interests duty and then it's the worst misconduct we've

seen out of the Banking Royal Commission.

JONES: No, actually the misconduct would have been a lot worse. And in fact a lot

of the misconduct that we saw out of the Banking Royal Commission was actually

a breach of the law.

NIELSEN: And if it's not being enforced, which it wasn’t under Labor.

JONES: Can I get back to the important role of legislating a best interest duty for

mortgage brokers. That way they have the information. They're experts within the

mortgage market. If they see that one of their customers can be getting a better

rate at a competitor bank, they have a duty, they have an obligation to be ringing

up that customer and saying, you know what I can get you a better deal over here.

I know I've just put you into this one, but I can get you a better deal. If the customer

is doing better off overall than they're facilitating competition within the market. A

role for the government, a role for the banks, a role for the intermediaries is simply

not good enough for the Government to be sitting on its hands and saying job


NIELSEN: This summit that was proposed by the CEO of ANZ he said he wants

the banks, the RBA and the Government to sit down together to talk about what

they’re going to do if we have more rate cuts. We’ve predicted about three more.

We're getting very close to zero. the Government said that it's inappropriate to

have the bank sitting down with the RBA and the Government, that there needs to

be that delineation. Do you agree?

JONES: The Government is wrong. You know low interest rate environment the

Reserve Bank board or the board through the Governor, signalling that we could

go into unconventional monetary policy. The reason that they're going to have to

do this is because the Government will not implement a fiscal strategy and a fiscal

stimulus strategy which is absolutely necessary. We do need to get all the levers

working together. Absolutely makes a lot of sense for the Government to be sitting

down together with business, with the community sector, with the regulators to say,

how can we get all arms of economic policy working together because at the

moment, I think my colleague Andrew Leigh use the analogy this morning with you,

it's a bit like a person swim swimming with one arm. Yeah, you can do it, but you

won't get there nearly as fast as if you've got two arms working and we don't. We

need monetary policy and fiscal policy working together.

NIELSEN: When it comes to the banks’ response. There is that very cynical

perception that they are just trying to make more money. This modelling does

show that they've made $500 million on not passing on these interest rate cuts. At

the end of the day, they're there for their shareholders. They're there for the mums

and dads who have deposits. So what's wrong with them making that money?

JONES: Banks have got an obligation to pass on a return to their shareholders,

but they've also got an obligation to their customers. Let's be frank about it.

They've also got an obligation to the people who loyally do business with them

who, transact business, put their savings with them, take out a mortgage or a

business loan with them. They have an obligation to them to provide the best deal

possible. I think we need more competition within the market to ensure that there's

a nudge, if you like, to the banks to do the right thing and I've seen some of the

comments from the banks this morning and frankly, they are confusing marketing

and advertising with competition. Putting out a glossy brochure saying that ANZ is

better than NAB, or Commonwealth is better than Westpac. That's not competition.

That's marketing.

NIELSEN: Isn't that exactly what competition is though?

JONES: If the information is just obfuscating the fact that we're all offering the

same rates and the same services, that's not competition. That's tricky advertising.

Competition is driving prices down.

NIELSEN: The flip side is failure, banks would fail. This is the issue.

JONES: An important point. Yes, it is important that we have stability but there has

been a lot of analysis of the four pillars policy, learned analysis. The Productivity

Commission and others have said well, yes, it's important. Moving through the

global financial crisis I think the pendulum has swung a long way towards financial

system stability, but we also need competition and they can actually be working

together. That's why the ACCC has a role. I think all the findings have showed that

APRA does a great role in establishing stability within the banking sector, but there

has to be a role for competition as well and that's why the ACCC needs to be given

a mandate.

NIELSEN: I lost track but I think this might be the 31st inquiry into the bank since

the 80s.

JONES: No shortage of inquiries about time for some legislation into the


NIELSEN: I’ll leave that one with you. Stephen Jones, thank you.