14 October 2019
14 October 2019
ANNA BLIGH: Australia’s banks stand ready to assist the ACCC with this inquiry. Our banks are no strangers to public scrutiny and they look forward to providing information that will shed more light on the many complex factors that go into the determination of interest rates on Australian mortgages.
QUESTION: Why have you passed on so little of the 75 percentage points this year?
ANNA BLIGH: There are a number of factors that go into the determination of interest rates. Firstly, where does the money for lending into the Australian economy come from? Money comes from three different sources. Firstly, the deposits that Australian savers put with banks. Secondly, it comes from Australian funds; investment funds. Thirdly it comes from overseas investors. A number of those only have very small links with the RBA cash rate and the money that comes from overseas funds has no link whatsoever to the ABA cash rate. Sorry the RBA cash rate. It is…there are many factors that have to go into the mix when banks determine interest rates. Not all parts of the money that they lend to Australian home owners comes from sources that are tied to the RBA cash rate. Equally they take into account the interests of all their customers. Their savers and their borrowers. And many of those savers are retirees on limited incomes and as we get closer to potentially zero interest rates, that is something that is worrying those retirees.
QUESTION: That doesn’t explain why there is such a discrepancy between new borrowers and old loyal customers.
ANNA BLIGH: I think one of the things that this ACCC inquiry may help shed more light on is a great deal more accuracy of what Australians are actually paying for their mortgages. There is often a difference between a rate that is advertised and a rate that may be negotiated by customers with their bank. It is not the case that every customer is paying the standard rate. In fact very large numbers of them increasingly are talking to their banks, shopping around and getting a stronger deal.
QUESTION: …the government ignores savers and retires, that they’re ignoring the quiet Australians that put them into government. Do you think that’s a fair assessment?
ANNA BLIGH: I think that when Australian banks have to make determinations about interest rates it’s always complex, it always has a number of factors. As rates get lower and lower the issues for those people who are savers, whether they’re saving for their first home themselves or they’re retirees living off that income, those interests of those customer have to be just as important to banks as the interests of borrowers.
QUESTION: [inaudible] intervention and free market. Are the banks worried there will be some sort of regulatory response at the end of this or do you think this is [inaudible]?
ANNA BLIGH: I look forward to an inquiry that is genuinely and authentically focussed on casting more light for the public on the many factors that go into making up our interest rates. I don’t want to pre-empt the outcome of the inquiry but I do hope that at the end of it Australians will have a clearer understanding of the many factors that determine their interest rates.
QUESTION: Does it take an inquiry for the banks to pass on these interest rate cuts?
ANNA BLIGH: This inquiry is about how banks determine interest rates and that is something that has many factors associated with it. These are not easy, simple things to explain but if banks can provide the information to the ACCC I think that will help, maybe, people understand and have a better picture not only of what happens with interest rates but the interests of savers. Banks have to look after all of their customers, and those customers are borrowers and they are savers. Many of these 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.
QUESTON: Ms Bligh do you think there’s been unhelpful conflation between the issue that the ACCC wanted to look at, the bank back-book/front-book new customer/old customer and the passing on of RBA interest rate cuts, which frankly is a completely separate issue?
ANNA BLIGH: There are a number of features to this inquiry. Australian banks stand top assist with it, I think this is an opportunity, potentially, for their to be a greater understanding of what the factors are in determining interest rates. The inquiry will look at a number of other issues, some of which I have to say have been looked at in the not too distant past. Whether or not that will attract the same public interest or not is yet to be seen.
QUESTON: Ms Bligh when did you find out about the inquiry and who told you about it? Was it yesterday? And did you get a quiet heads up from the Government yesterday? Or was it this morning?
ANNA BLIGH: No, the Treasurer spoke to me yesterday, as he did with a number of people in the industry.
QUESTON: Ms Bligh a couple of weeks ago the Prime Minister urged the banks to keep lending and to increase their lending, does this inquiry have a detrimental impact on that? (inaudible) do you think it will scare banks off again?
ANNA BLIGH: Banks stand ready to assist this inquiry, but their first … banks are ready to assist this inquiry, but their first priority is to continue to assist Australian homeowners and Australian businesses to borrow the money they need to get ahead in life. Their other major priority is to ensure that the recommendations of the Royal Commission are implemented, implemented in full, implemented in letter and in spirit. Australian banks are no strangers to inquiries, they are well versed in how to manage the requirements of an inquiry, and ensure that get on with the business of putting money into the economy so businesses can thrive and families can get ahead.
QUESTION: So this won’t have an impact on lending?
ANNA BLIGH: I don’t expect it to.
QUESTON: Is there a risk that this will spook borrowers though?
ANNA BLIGH: I’m sorry?
QUESTON: Is there a risk that this could spook borrowers? Another inquiry into the banks – another potential for interest rates to be reviewed in the next few months?
ANNA BLIGH: I take the Government, I have to take the Government, and the banks take the Government at its word. This is a genuine, authentic attempt to ensure that the fixing of interest rates and the determination of those rates is better understood. We’ll see how the inquiry proceeds, but banks will do their best to ensure that it can succeed in those terms.
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