ACCC to investigate banks for not passing on rate cuts
Australia's big four banks are back in the hot seat, this time for their failure to pass on central bank rate cuts to consumers.
Treasurer Josh Frydenberg today ramped up the government's campaign against the banking sector, giving the go ahead for the Australian Competition and Consumer Commission (ACCC) to investigate mortgage pricing after the big four all refused to match the Reserve Bank of Australia's record-low official cash rate of 0.75%.
While the RBA has cut rates three times over the past year to the tune of 75 basis points, the major banks have only passed on an average of 57 basis points, drawing accusations of price gouging.
The move comes after the ACCC sought Treasury approval to investigate mortgage switching following a string of complaints from consumers.
On October 11, Frydenberg said the "banks should never be increasing their profits at the expense of their customers. And by not passing on these rate cuts in full, that is effectively what is happening."
"If you're an Australian family with a $400,000 mortgage, this is the equivalent to a savings of a bit more than $1500 a year in lower interest payments."
However, speaking to ABC Television on October 14, Frydenberg watered down concerns the inquiry will diminish confidence in a banking sector still reeling from the royal commission.
"I actually did call the CEOs of the big four banks yesterday and told them that this could help clear the air ... but at the same time, you know, they're defending their patch and will continue to do so."
It may be a while yet before we see the banks dance to the beat of the RBA drum.
According to consumer advocate Christopher Zinn of Determined Consumer, "The risk of yet another inquiry is whatever the high expectations there may be; it may not be either enough or speedy enough to keep consumers happy.
"For years the banks have claimed their costs of funding do not change in tandem with any RBA cash rate decisions."
The ACCC is due to release a preliminary report by March 30, ahead of the government's 2020 budget.
Meanwhile, the Standing Committee on Economics will turn up the heat on Australia's smaller banks at a hearing on November 29.
It will be the first appearance by the smaller banks, set to include Macquarie, Bendigo and Adelaide banks, Bank of Queensland, Suncorp, Citi, and the Australian Banking Association.
"The committee's scrutiny will include examining the banks' progress in implementing the recommendations of the royal commission into misconduct in the banking, superannuation and financial services industry," says committee chair Tim Wilson MP.
"Given widespread misconduct in banking and financial services identified by the Hayne royal commission, it is important that the smaller banks and the Australian Banking Association are held accountable, to ensure that they are making the crucial improvements needed to restore trust in the sector."