BOCKING:
David Bradbury is the Parliamentary Secretary to the Treasurer, and I'm pleased to say he is on the line. David Bradbury good morning.
BRADBURY:
Good morning Stuart, how are you.
BOCKING:
I'm well, thank you. For those who will say these measures don't go far enough, we've been promised X, we've been given Y, what do you say to that?
BRADBURY:
Well look, as the Treasurer said yesterday, and we've been saying all along, and it is a cliché but it's true, that there are no silver bullets when it comes to injecting more competition into the banking sector.
BOCKING:
Well some are saying that it's not even a copper bullet. I mean, that's one of the claims doing the rounds this morning, some business groups saying never mind a silver bullet, this isn't even a copper bullet.
BRADBURY:
Well look, our package is designed to do three things. Firstly to empower consumers so that they can go and get a better deal.
Secondly to support the smaller lenders so that they can compete against the big banks.
And thirdly, and equally importantly, it's about making sure we secure the long-term safety and sustainability of our financial system.
Now, there will be people who will say, 'What does this do for me tomorrow?', and if you are looking for benefits that flow from this package that you'll be able to see tomorrow, then you will be disappointed on that front.
The reality is that what this package is about is trying to secure a more competitive banking sector into the future. It's important that we do take that longer-term view. I know that there are a lot of families out there under some pressure at the moment, but we have to be honest about the limits of what governments can do in this area. What we say is that, in the same way as some of the reforms that were introduced in the early '80s that led to some of the best competition we saw in the banking sector in the decade that followed, these changes will take some time. But what's important is that we try and develop a framework where there is genuine competition occurring.
BOCKING:
I know exit fees will be banned from July of next year, but some of those banks, NAB most notably, have already scrapped those exit fees anyway. I know we're only talking about new mortgages but why, if some of the banks have already done it based on a threat, why can't you introduce that measure earlier, say, by the end of this year?
BRADBURY:
The short answer to that is we need to introduce legislation, and Parliament is no longer sitting this year. That's the short answer to the question. But I think we need to just step back and have a look. This is actually a two-staged approach to what we've been doing on exit fees. We introduced legislation that introduced this notion of unfair contract terms, and under that legislation it gave consumers the right to take up matters where they believed that terms in a contract were unfair. And we saw recently that ASIC released some guidelines on what were fair and what were unfair exit fees in relation to mortgages, and it was actually under threat of the publication of those guidelines that some of the banks then decided to try and differentiate themselves from their other competitors, that they would drop their exit fees.
So that's the first step, and I should say that that legislation continues to exist and to apply in relation to any mortgage that's already in place at the moment.
What we've said is we want to go one step further. We actually want to ban these fees, and the reason we want to ban them is we see these fees as being inherently anti-competitive. They are anti-competitive by their nature, because what they do is, when a person is entering into a mortgage they're off in the never-never, they're off in the distance, these fees, so they're not front and centre when people are making a decision to go with an institution. But then, later on down the track, these become the fees that lock people into a particular product or a particular institution.
BOCKING:
The difficulty is, though, that some people are saying it's one thing to scrap those fees but the banks will come up with other sorts of fees that will compensate from the loss of those, given that they are only a contingency anyway. They are only triggered when someone wants to get out of that loan. The banks will simply find some other way to charge.
BRADBURY:
There are some institutions that are charging people up to $7,000 –or sometimes even more - $7,000 to exercise what is the most fundamental right that a consumer has, and that is to pick up their business and to go down the street and bank with someone else.
BOCKING:
So did you have a look at being able to scrap them right across the board, for both new and existing loans?
BRADBURY:
Look, there are issues there, and I think we've got to acknowledge that there are potentially some constitutional issues around that in the first place but –
BOCKING:
Is it constitutional, or is it simply contractual? I've seen this term constitutional bandied around, I'm not quite sure how there can be constitutional issues?
BRADBURY:
There are potentially constitutional issues but putting all that to one side, you don't need to go to the High Court to realise that for Government to step in and to rewrite a contract that has already been entered into by consenting parties is a pretty heavy-handed or serious thing for a government –
BOCKING:
Yeah, I understand that, I just wanted to know if you'd had a look at it or not. There is this story on the front page of the Telegraph today – more than six families losing their homes every working day in New South Wales, the claimed victims of super-sized rate rises. You are the Member for Lindsay, based in and around Penrith, what do you hear from your electorate, people who voted for you at the last election? What are they telling you about how difficult this mortgage pressure is?
BRADBURY:
Well look, there are a range of cost of living pressures that people are facing at the moment, and one of them is housing costs, whether it be the pressures of rental accommodation or meeting mortgage repayments. I simply make the observation that interest rates are still lower today than when we came to office, but that, obviously, is not a lot of comfort if you're under the gun and you're facing the prospect of losing your home.
BOCKING:
Well also as well, when you consider the Rudd Government did ride to victory back in 2007 on the back of a number of cost of living proposals, such as the Grocery Watch and Fuel Watch and all of those things they tapped into, and yet seemingly have been unable to do very little about. How is it that anyone can be certain that what you've announced yesterday in terms of banking competition is going to do anything on that front? Could this not just be another Grocery Watch, another Fuel Watch?
BRADBURY:
It's always open for people to make those sorts of criticisms –
BOCKING:
But the record's not that great on cost of living pressures, David, is it?
BRADBURY:
And I don't think there's ever been a government in history that has been applauded for having reduced cost of living pressures. These are difficult issues, but what we say is that through the package that we announced yesterday that we will give consumers a fighting chance. Now, can we guarantee that interest rates are going to go down? Of course we can't. The only other government that I can remember that did that was the Howard Government, which guaranteed that interest rates would stay at record lows –
BOCKING:
Well they're gone so we don't need to worry about them, they're gone.
BRADBURY:
Well I understand that. What I'm saying is, we're not going to make promises like that. What we say is that there are a range of really practical measures in this package that not only support the smaller lenders, who we need to be active in order to provide alternatives to the big banks, but provide consumers both with the means of switching, but also with more information. I've just got to underline this point, Stuart, that one of the most powerful considerations in whether or not we have a more competitive banking sector is the willingness of consumers, of all of us, to exercise the power we have to take our business with us, walk down the road and to bank with a new institution. And that's really one of the centrepieces of this package, to try and put front and centre this issue of financial literacy and consumer sovereignty. If we take our business, if we go out and find better deals, and there are some better deals to be found – and we're particularly saying have a look at your credit union, your building society because they may well provide genuine alternatives – but have a look at the range of offers, and if you see a better deal, then you actually have to do what's required to take your business to that other institution, because by doing that you're actually doing about as much as anyone can do to drive even greater competition in the banking sector.
BOCKING:
No, quite right. Appreciate your time, thank you.
BRADBURY:
Thank you.