Australia’s banks under intense scrutiny over interest rates

Australia’s banking sector is under the microscope with the big four bank bosses and the Reserve Bank governor to be hauled before several Federal Government committees to be quizzed about rising interest rates.

The heads of Commonwealth Bank, ANZ, NAB and Westpac have been ordered to face a parliamentary economics committee to be questioned about whether customers are getting a fair deal as interest rates skyrocket. 

The annual grillings, which were at risk of being cancelled, were requested by Federal Treasurer Jim Chalmers and will continue. 

Daniel Mulino, chair of the economics committee, confirmed the hearings with the Herald Sun on Sunday.

“With monetary policy front and centre, it’s important that the banks attend these hearings,” he said.

“The Financial Services Royal Commission showed that far too often the banks did not live up to the trust that Australians placed in them.”

The big four banks’ profits were significant in 2022, with CBA making $9.6 billion, NAB almost $7 billion, ANZ $6.5 billion and Westpac $5.7 billion. 

Another inquiry will examine whether there’s enough competition in the Australian banking market.

The committee is demanding the banks explain how they are adapting to new technologies, such as mobile phone banking, and whether they are passing on any savings to customers. 

Mr Mulino said the committee would examine whether customers were getting the best value from the current system, as well as investigating the market power of the big four banks, especially in the area of mortgages, retail deposits, and loans to small and medium enterprises, and whether more can be done to encourage competition.

The scrutiny follows nine straight interest rate hikes from the Reserve Bank, which started lifting rates from a historic low of 0.1 per cent in May last year, to the current cash rate of 3.35 per cent.

More rate rises are also expected.

The rate hikes have added more than $200 a week in repayments to a $500,000 mortgage and the country is now at risk of recession, with the delayed impact of rises tipped to hit hard later in 2023.

Reserve Bank Governor Philip Lowe will also be grilled by government and opposition MPs over the central bank’s plans for future interest rate rises.

Dr Lowe will appear before Senate estimates over two days, starting on Wednesday, and will be questioned about the impact of the rate hikes on households. 

Liberal senator Dean Smith told The Sydney Morning Herald he had asked for a state-by-state and month-by-month breakdown of the 800,000 home loans that will roll off fixed rates to a higher variable loan this year.

While Labor backbencher Jerome Laxale said he would focus on the impact of rate rises on renters and would also call for Dr Lowe to answer questions on reports he had a private lunch with traders from the big four banks that coincided with a jump in bond yields.

There is growing speculation that Dr Lowe will not have his term as Reserve Bank governor extended after coming under increased fire after he admitted last year that the central bank’s guidance that interest rates would not rise until 2024 was an “embarrassing” mistake.

On Sunday night, ABC’s Insiders asked Federal Treasurer Jim Chalmers about Dr Lowe’s performance, but he declined to second-guess the independent central bank governor.

“He’s got a hard job to do…I’m not going to second guess the Reserve Bank governor.”

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Kylie Dulhunty

Kylie Dulhunty is the Editor at Elite Agent.

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