Inertia over rates sparks calls for the govt to act
The Commonwealth Bank has become the latest lender to deny its customers this week's interest rate cut in full, sparking calls for more government moves to boost banking competition.
The country's biggest bank, CommBank, yesterday cut mortgage rates by 0.4 percentage points, to 7.01 per cent, while the biggest credit union, CUA, cut by 0.25 points, to 6.47 per cent.
With Westpac today expected to cut by less than the 0.5 point reduction in official rates, the opposition is calling for more to be done to help smaller banks compete with the majors.
ANZ Bank will be the last of the big banks to reveal its rate change when it makes a decision next Friday.
The Coalition's treasury spokesman, Joe Hockey, said the failure of large and small lenders alike to pass on the official cut in full was evidence of weak competition in the industry.
He also pointed to the majors' growing control over the market, a trend that took hold in the global financial crisis.
''Under Wayne Swan competition in the banking sector has decreased, with the big banks' share of housing loans increasing significantly from 75 per cent in December 2006 to its current level of 86 per cent,'' Mr Hockey said.
Mr Hockey repeated calls for the government to adopt the Coalition's nine-point plan on banking; some of which is similar to Labor's reforms of late 2010, but also included investigating whether Australia Post could provide bank branches.
The government responded by pointing to figures that showed the big banks' market share was in fact 77 per cent once lenders who did not take deposits were taken into account, not the 86 per cent stated by Mr Hockey.
It also seized on the decision by Unicredit-WA, a credit union, to pass on the full 0.5 point cut to its customers.
Assistant Treasurer David Bradbury defended the government's reforms that had made it easier to switch banks and accused Mr Hockey of ''covering up the truth''.
''Joe Hockey's been caught telling porkies in his attempts to prop up the profits of the banks by forcing mortgage holders away from the smaller, more competitive lenders,'' Mr Bradbury said.
''Mr Hockey seems intent on paying scant regard to smaller non-ADI [authorised deposit-taking institutions] lenders, who … provide some of the cheapest mortgage rates in the market.''
After the banks announced a run of record profits this week, their reluctance to pass on the full official rate cut has put the political spotlight back on bank competition.
A Senate committee inquiry into post-GFC banking is planning to question big bank bosses over the issue in the coming months.
The chairman of the inquiry, Liberal senator David Bushby, said the behaviour of the banks suggested there was a need for further competition changes, including those recommended by a Coalition-dominated inquiry last year.
He said he was hopeful the banks would send their chief executives to answer questions on funding costs - which have been blamed for this week's decisions on interest rates - to hearings later this year.