Peter Martin and Eric Johnston
An inquiry to be headed by former Reserve Bank chief Bernie Fraser heads a package of measures aimed at taking on the big four banks, already derided by one of their competitors as ”not a silver bullet, not even a copper bullet”.
Treasurer Wayne Swan has promised to outlaw mortgage exit fees, but not until next July, and only for mortgages issued from that time on.
”There is absolutely no justification whatsoever for exit fees of up to $7000,” he said.
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”If people are unhappy with their institution and want to walk, at that price they will never afford to.”
But the Treasurer baulked at abolishing such fees, saying he had received legal advice that altering existing contracts without compensation would be unconstitutional.
He also resisted requiring banks to offer ”tracker mortgages” that moved in line with indicator rates, limiting the extent to which banks could move rates independently of the Reserve Bank. Nor did he empower Australia Post to act as a bank, or impose a super profits tax on excess bank earnings.
Instead, arguing there was ”no silver bullet”, he has placed his faith in measures that will make it easier for customers to switch institutions, asking former Reserve Bank governor Bernie Fraser to inquire into full account number portability.
”We are going to give this a go. Account number portability does not exist anywhere else in the world at this point in time. It took 15 years to get mobile phone number portability in Australia in what was a new and young and dynamic market,” he said.
Portable bank account numbers would mean that payroll deposits and automatic payments need not change when someone switches institutions.
Labelling transferability ”the Holy Grail of bank reforms” independent Senator Nick Xenophon said if it worked, it could make changing banks as easy as changing power companies.
He rejected claims by some banks that it could take a decade, saying it ”only took eight years to put a man on the moon”.
Mr Swan also held out the prospect of more than doubling the number of Australian banks, saying he would quickly approve applications by credit unions and building societies to rebadge themselves banks and that there were about 25 that already qualified.
Almost all deposits will now be protected in perpetuity. Mr Swan said the existing scheme, which protects deposits of up to $1 million, would be made ongoing, although there was a possibility the threshold could be altered.
David Liddy, chief executive of the Bank of Queensland, an intended beneficiary, said the changes did little for small lenders and could ”put this idea of a fifth pillar back about 15 years”.
”Not only is there no silver bullet but he hasn’t even given us a copper bullet,” he said.
Mr Swan will direct Treasury to spend an extra $4 billion buying mortgage-backed securities, taking its total holdings to $20 billion. Mr Liddy said he was hoping for more – the market remained stalled.
The ANZ Bank said it had not been consulted by Mr Swan and pointed to the ”difficulties a lack of consultation created in the mining industry”.
Other measures are wins for the big banks and their competitors. Treasury will encourage the development of ”covered bonds” where repackaged and onsold mortgages remain on the lender’s balance sheet.
Shadow treasurer Joe Hockey gave Mr Swan ”three out of 10”, saying he had stolen three ideas from him and had shied away from others such as banning mortgage exit fees outright.
www.smh.com.au
