The signs of the “big four” Australian banks, National Australia Bank, Westpac, ANZ and Commonwealth Bank.
Camera IconThe signs of the “big four” Australian banks, National Australia Bank, Westpac, ANZ and Commonwealth Bank. Credit: Supplied/AFP/Getty Images

Watchdog unleashed on big banks’ rates

AAPWestern Suburbs Weekly

THE big banks will explain to the competition watchdog why they’re not passing on interest rate cuts, as customers are urged to shop around instead of staying with their lenders.

The banks have raked in billions of dollars over the past eight years because they’ve refused to pass on the full impact of interest rate cuts from the Reserve Bank.

So Treasurer Josh Frydenberg has asked the Australian Competition and Consumer Commission to investigate the pricing practices of Australia’s banks.

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Treasurer Josh Frydenberg. Tracey Nearmy/Getty Images
Camera IconTreasurer Josh Frydenberg. Tracey Nearmy/Getty Images Credit: Supplied/Getty Images

“We need information about the cost of the funds of the banks and … why they’re not passing on these rate cuts in full,” Mr Frydenberg told ABC News on Monday.

The treasurer says the banks need to explain how they balance the competing needs of shareholders and customers.

ACCC chairman Rod Sims said the days of doing a “set and forget” mortgage were over, because banks weren’t passing on cuts.

“I think you’re better off being an active player in this market if you’re a consumer,” he told reporters in Sydney.

But he acknowledged it’s in banks’ interests to make it complicated for customers to leave.

“We will be looking at what barriers customers face to switching,” Mr Sims said.

“We’ll be looking at how banks make their decisions in ways that could be seen to make it hard for consumers to switch.”

Australian Banking Association chief executive Anna Bligh said banks were ready to work with the ACCC inquiry, but she said interest rates also affected people who save with banks, not just borrowers.

“Many of those savers are retirees who have worked hard, who are living off the income from these sorts of deposits, and those interests have to be protected as well,” she told reporters in Canberra.

Stock image.
Camera IconStock image. Credit: Supplied/Supplied

Labor argues the government is being pressured into the move.

“It was only little more than a week ago when Labor was calling for the ACCC to play a bigger role that the government dismissed it as a distraction,” shadow treasurer Jim Chalmers told reporters.

The official cash rate is at a record low of 0.75 per cent after the Reserve Bank of Australia cut interest rates three times this year.

But the big four banks on average passed on only 75 per cent of the total reductions to customers., prompting allegations of price gouging.

The inquiry, which will also include smaller institutions and cover the period from January this year, comes after an earlier royal commission into misconduct in the banking sector.

The ACCC’s preliminary report is due by March 30 next year, six months before the final report.

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