ABC PM with Lyndal Curtis - 12/11/2010

12 November 2010

CURTIS: The acting Treasurer, Finance Minister Penny Wong, says the banks are refusing to listen to the Australian people.
WONG: Weve seen the banks letting their customers down. We dont believe that there is any justification for the banks moving above the Reserve Banks increase. And its very disappointing to see the way in which the banks have shown a disregard for their customers.
CURTIS: But the Prime Ministers made her anger at the banks clear, the Treasurer has called them arrogant. Hes called them, hes personally phoned them none of that has had any effect.
WONG: What we do see is a culture inside the banks where they clearly are disregarding what the Australian community is saying.
CURTIS: But also what the Government is saying.
WONG: And what the Australian community is saying. And what I say is this: banks do operate within a community; they do serve customers as well as their shareholders. And I think what the banks have done is demonstrate a complete disregard for what Australians are telling them. We have made clear our approach is to encourage competition. We have been doing that and we have already seen movement from the banks as a result with the removal of exit fees in direct response to the Governments crackdown on unfair mortgage exit fees. And the Treasurer has made clear we will put forward another set of reforms to further improve competition because that is the best way to ensure the banks offer the best products at the best prices.
CURTIS: What worth though are the words from the Prime Minister, from the Treasurer and from yourself, if the people they are directed at the banks arent going to pay any attention to them?
WONG: What is important is getting the right outcome and the right policy outcome. And unlike Joe Hockey, we are interested in outcomes, not headlines. We understand that competition remains the best way to ensure both a strong banking system and the best services to customers. Thats why weve invested $16 billion in residential mortgage-backed securities. Thats about supporting small lenders. Thats why were cracking down on unfair mortgage exit fees.
CURTIS: The banks have all raised their variable mortgage rates knowing presumably the anger they would face from the customers and the Government. Is there a chance that there is actually a rational, reasonable explanation for what the banks are doing?
WONG: I think we see what the Reserve Bank has said. And the Reserve Bank has spoken about the net interest margins for big banks being at the level they were prior to the Global Financial Crisis. We dont believe there is justification for the way in which the banks have approached this. And well keep staying focused on improving competition to try and ensure Australians have choice. We believe making sure Australians have the choice of who they borrow from is the best way to ensure banks do the right thing.
CURTIS: But if Australians take your advice and choose to move away from lenders who hike their variable mortgage rates higher than the Reserve Bank, does that mean a mass movement away of customers from the major four banks and is that good for the stability of the system?
WONG: I think what competition does is ensures that financial institutions offer good products at good prices. Thats what were talking about.