ABA CEO Simon Birmingham interview on ABC Radio National Hour with Fran Kelly

E&OE
Radio Interview
Interview on ABC Radio National Hour
30 September 2026

Topics: Interest rates; Competition in home loan market; End of card surcharging

Fran Kelly: In another ugly day for economic data, with headline inflation jumping to 4 per cent driven by surging petrol and building costs, while the other key figure, the trimmed mean inflation, remains steady at 3.6 per cent which is where it’s been stuck for three months now, and it’s all another challenge for the RBA, which, as we know, increased interest rates yesterday, and it’s also another headache for the federal government in its efforts to contain cost of living pressures. But the Prime Minister does have one card in his back pocket. It’s the end of those annoying credit card surcharges that you pay pretty much every time you buy something.

Anthony Albanese (grab): I think when people turn up and tap, be it at a coffee shop or a pub or buying a sandwich for lunch, they expect the price that they see to be the price that they pay.

Fran Kelly: Simon Birmingham is the CEO of the ABA. That’s the Australian Banking Association. Simon, welcome to the Radio National Hour.

Simon Birmingham: Hello, Fran. It’s great to be with you.

Fran Kelly: It’s great to talk to you again. It’s been a long time. Simon, from tomorrow, businesses will not be allowed to add that surcharge when people pay with their eftpos, Visa, or Mastercard. Is this long overdue?

Simon Birmingham: Well, it is long overdue in the sense that it really brings Australia into line with places like the European Union, the United Kingdom. They’ve had surcharge bans in this sort of nature in place for a very long time, if not effectively indefinitely. And Australia has been a bit of an outlier for much of the last 20 years. Now, most businesses have still chosen not to surcharge. The Reserve Bank estimates only one in every six Australian businesses have applied a card surcharge, but I think for many Australians, the end of that surcharge will be welcome. That they’re going to get the price certainty they want, the price that is quoted, that is on the shelf, that they expect is coming through is actually what gets charged to their card at the end, and that will be the end of a bugbear that I know irritates many, many people, and perhaps a little bit of a saving for some.

Fran Kelly: Let’s talk about that. Who’s been making the money from these surcharges? Is it the banks that control the you know that own the credit cards? Is it the credit card providers? Is it the merchants, the shops?

Simon Birmingham: So, there are a lot of individual little fees that that come together in terms of credit card fees, and it does make for a complicated landscape. The Reserve Bank in making the decision to move towards an end to surcharging in Australia, made the decision also to cut what are called interchange fees, and they are the fees that flow from the portion of a card payment to the customer’s bank, and so the Reserve Bank is cutting the cap on those so-called interchange fees-the the bit the bank gets-from 0.8 per cent down to 0.3 per cent, that’s a big cut. It is estimated by the Reserve Bank that it will take around $660 million out of payments that flow from card transactions into banks, and so banks, to be frank, didn’t much like that decision. Australia’s interchange rates were some of the lowest in the world already and now are well and truly amongst the lowest in the world, and they’re important because they pay for fraud prevention as well as investment in payments modernisation, a whole range of other factors. But in the end, the Reserve Bank has made that decision. What we would like to see them do is also look at some of the other parts of that stack of fees, so the card schemes themselves, Visa and Mastercard, they get some fees out of out of the system. Apple increasingly gets fees when people choose to tap and go using their phone, and then there are unregulated areas such as Amex and the like. And we’d like to see essentially regulatory equivalency there that banks’ components of fees are capped and that cap has been brought right down, that should be the case elsewhere, particularly as we’re concerned that having seen those cut to bank fees, the last thing we would wish to see is that other parts of the payments ecosystem go and take those savings from small business and chew them up in increased fees elsewhere.

Fran Kelly: Yeah, I bet you would. I’ll come back to that. I’ll come back to how it affects the banks generally. But just to say, with these the surcharge that that’s the money that you know gets added to your bill. It might not be all bills, but it seems to be a lot of them to me as I go through life day by day. It’s being sold by the government as a cost of living saving for Australians, but won’t businesses simply increase their prices to compensate for the lack of surcharging because they’re still going to be paying the interchange fees to the banks, for instance? So, they’re going to try and raise that money one way or another, aren’t they?

Simon Birmingham: Well, that will be a matter for individual small businesses. So, obviously some who have been surcharging may decide that they want to pass it on in relation to cost increases. Others who have not been surcharging, and many small businesses we know themselves-not just households, but small businesses-are under pressure present as well. They will, of course still also benefit from the cuts to interchange fees at $660 million that won’t be flowing through to banks as a result of these changes. So, it can be looked at a number of different ways, and ultimately that individual pricing decision is one for each business. We’ve long argued that all forms of payments come with some form of cost. Cash handling is a cost to business in terms of time and process and safety and security. They are individual business decisions. The reality is that the surcharging is ending.

Fran Kelly: Isn’t it misleading to suggest that customers won’t pay fees for using the card because according to the RBA, in their own words, payment service providers can still charge a fee for quote renting payment terminals or processing transactions. These are fees for services provided and are not considered surcharges. So, sneaky charges will still remain, won’t they? We just won’t see them. They won’t be added on as that extra 1.2% or whatever it is.

Simon Birmingham: Businesses accepting cards will still absolutely face the costs in terms of their terminals, but those fees, I said, the card scheme fees – we welcome the fact that last year the government amended the Payment Services Regulation Act, the PSRA, and they amended it to provide the Reserve Bank with greater scope to be able to regulate other parts of the payment system.

Fran Kelly: Speaking from a consumer point of view, though, is it the case? It seems there’s many ways for the banks, particularly, to keep benefiting, because I’m noticing that the banks are starting to cut back loyalty programs in terms of you know points and those sorts of things, and they’re already doing that. Is that because they’re going to lose this 660 million dollars of payments through the regulatory changes? So, it’s another way consumers dip out, right?

Simon Birmingham: It is in part because of those changes, Fran, and that was by design of the Reserve Bank. The RBA was pretty clear during the review they did that they didn’t like what they saw as a cross subsidisation for those who had more generous rewards programs on their cards that they were being funded essentially through these bank interchange fees, but people should always, when it comes to those types of rewards programs, look carefully about whether it is truly of value to them versus the costs that that may be attached to having those rewards programs on their cards. If it is, go your hardest, but otherwise make sure you’re shopping around for the type of card that best suits your circumstances.

Fran Kelly: Yeah, it does seem as though it’s a time when any cost of living relief for the voters comes with a cost. Perhaps I’m speaking with Simon Birmingham. He’s the CEO of the Australian Banking Association. We’re talking about the end of those pesky credit card surcharges. Let’s talk about interest rates. We’ve already had one rate rise this week. Today’s jump in inflation keeps pressure on the Reserve Bank to lift again, and that would make it even harder for first-time buyers to get a loan. If the banks cut the 3% buffer that’s required to get that loan from the bank in the first place, that would help them. Do the banks want to see that buffer reduced.

Simon Birmingham: The serviceability buffer, as it’s known, applies essentially 3% on top of the interest rate settings that somebody is looking for. It’s a debate, Fran, that that you certainly do hear, and you’re right that when it comes to the assessment that a bank does on how much debt an individual can service, it means that is a very conservative assessment at times like this, and that limits the amount that somebody can borrow and can make it harder for that. On the whole, banks haven’t asked for that to be reduced and in general that rationale has been because of a desire to make sure we keep a cautious and prudent approach to keep genuine hardship cases and particularly cases that could move towards default very very low, and our system does show enormous strength and resilience there. We are, as you acknowledged, in a period of significant change in the housing market right now. Government policy has intentionally sought to remove investor buyers from large parts of the housing market. That reduction in terms of their activity, has also I think alongside interest rate increases seen some first home buyers try to gauge, if you like, when the bottom of the market is and potentially sit it out at present, which has led to some of the declining activity across the market. Now, ultimately, people will make their own decisions there, but something like the interest rate increase this week will have a real impact. But that is partly the intent of the Reserve Bank in making that decision that it is it is seeking to contain the amount of free cash in the economy, and of course while overwhelmingly that impact is on existing borrowers and their ability to have extra discretionary spending, it does also have a flow through impact in terms of new borrowers and just how much they are able to borrow too.

Fran Kelly: And just finally, I mean, I guess you can hear that I’m in this interview hunting for some good news for consumers and in this case, for borrowers and for first home buyers in particular, when we look at the two and a half trillion dollar mortgage market, and you know, in the middle of a housing downturn, rates are rising, there’s a drop off in loan applications since the budget and with these interest rate rises, how competitive is it amongst the banks for new customers, and could first homeowners be hopeful that the banks, as they compete for some new lenders, will start offering better rates? Are we seeing that competitive spirit there within the banks, within your members?

Simon Birmingham: It is a highly competitive environment at present, Fran. What we have seen over recent years is tightening at times in what’s called the net interest margin. So, essentially, if in layman’s terms, people think about the gap in terms of what banks are paying for money versus what they are charging for money, and that tightening is a function of the fact that on both lending and deposits, it is very competitive out there.

Fran Kelly: And is that going to be some more good news for would be borrowers?

Simon Birmingham: That does flow through in terms of for borrowers. We saw last year around 670,000 I think it was mortgages refinanced across the country. That wasn’t people renegotiating with their bank at a point of distress. That was overwhelmingly people switching because they were getting a better deal, and shopping around and finding that and that switching is at record levels. The competition for new customers is quite fierce across the marketplace, and it is fierce, as I say, both for borrowers but also for your listeners who have deposits, it is it is also quite fierce there as well, and we’ve even seen some of the banks make a particular signal post this Reserve Bank announcement of highlighting the increase in their deposit interest rates because they are competing for that deposit market as well.

Fran Kelly: Okay, so note to borrowers go hunting for a bargain. Simon Birmingham, thank you very much for joining me.

Simon Birmingham: Always been a pleasure, Fran. Thank you.

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