DEB KNIGHT:
Good morning to you, Treasurer.
JOSH FRYDENBERG:
Good morning, Deb.
DEB KNIGHT:
The Banking Royal Commission was meant to bring the banks into line for putting profits before customers. Is that what's happening here?
JOSH FRYDENBERG:
Well, what the Banking Royal Commission did was shine a light on the misconduct in the banking sector. What this inquiry by the ACCC is something different and will better understand why the banks are not passing on the RBA rate cuts in full. You see, the Australian people are sick and tired of this merry dance where the Reserve Bank reduces interest rates, politicians and the Bank itself call on the big four to pass on the rate cuts and the big four ignore the RBA and don't do that.
DEB KNIGHT:
And I understand you've spoken directly to the bosses of the big banks. What did you tell them?
JOSH FRYDENBERG:
I said that this could actually be a circuit breaker and this was an opportunity for them to better explain why they haven't passed on the rate cuts on in full, how they balance the needs of their stakeholders, particularly their shareholders, their depositors as well as their borrowers…
DEB KNIGHT:
And why aren't they? What's the reason they give? Why aren't they passing on the rate cuts in full and how much is it costing the average homeowner and the economy?
JOSH FRYDENBERG:
Well, ultimately, it's costing someone with a $400,000 mortgage around $500 in higher interest payments than they otherwise should have to pay if these last three rate cuts were passed on in full. But it's not just these last three rate cuts where the banks have failed to pass them on, it's actually what's happened previously. Under the Labor Government, there were fourteen different rate cuts and only five of them were passed on in full. So, clearly, there's a structural challenge here. There is a pattern of behavior by the banks and the Australian people are fed up.
DEB KNIGHT:
There are no laws forcing the banks to do it, nothing to really dictate to them that they have to pass on rate cuts in full; no penalties if they choose not to. Will that change?
JOSH FRYDENBERG:
Well, the best way forward is more competition. What we have said is we're not looking to increase the bank levy because the idea of higher levies or taxes are not the answer to every question. What we need is to empower customers to move more freely between banks to secure a better deal and we're doing that with important legislation that has already just passed the Parliament called the Consumer Data Right…
DEB KNIGHT:
The reality is that if you want to switch banks, it is meant to be easy but the reality is so different. It is hard. Why would the banks actually act on this if there is absolutely no impetus for them to?
JOSH FRYDENBERG:
And this is where this new Consumer Data Right will be a game changer, Deb, because what you will be able to do is transfer securely details about the number of accounts you have, the balances in those accounts, your transaction history to another provider to get the offer of a better deal without the paperwork that you currently encounter. But we also need to better understand why do banks charge their existing customers higher rates than they do to attract new customers. That's called the difference between the back book and the front book. Essentially, there is a loyalty tax on customers who have shown that they are prepared to stick with the same bank where as new customers will get a better deal.
DEB KNIGHT:
Treasurer, do we really need another review, though? The Government has backed seventy-two reviews in to different issues in the past year alone. It's clear what needs to be done here, isn't it?
JOSH FRYDENBERG:
In this case, we do need to get more information about what is happening inside the banks and the ACCC has particular powers to compel documentation that is not available to other organisations. When they get that information, they will provide the Government with a better picture of the costs of funds that the banks are encountering and the reasons why they haven't been passing on these rate cuts on in full. And the ACCC, Deb, will work closely with the Reserve Bank of Australia, as well as the other regulators to ensure that the Australian people have the clearest possible picture of the banks behavior.
DEB KNIGHT:
In the wake of the Banking Royal Commission, we've seen no criminal charges laid against any individuals. If we aren't going to see any punishment for bad behavior metered out, why would anything change within the finance sector?
JOSH FRYDENBERG:
Well, on that particular point, the particular regulators – ASIC and APRA – are working through a number of very sensitive cases and I'll let that play out in the court processes…
DEB KNIGHT:
Do we expect criminal charges to be laid against individuals?
JOSH FRYDENBERG:
Well, I don't want to preempt what the regulators will actually do in the period ahead. But I do know they are in possession of important information, sensitive information, involving some of the misconduct which was identified by the Royal Commission and that process takes time. Rest assured, that our regulators are very conscious of the need to hold our financial institutions to account because they are responsible for the public's money and that is a very high responsibility indeed.
DEB KNIGHT:
Alright, Treasurer, we thank you for your time this morning.
JOSH FRYDENBERG:
Good to be with you.