Treasurer orders ACCC to investigate banks over rate cuts

Since the beginning of the year, the Reserve Bank has cut interest rates three times to a record low 0.75 per cent, however the big four banks have failed to pass them on in full.

Treasurer John Frydenberg said on Monday morning that “the Australian people are sick of the merry dance where the RBA reduces the cash rate, political leaders and the RBA call on the banks to pass them on in full and that advice is ignored”.

In a statement issued on the Treasurer’s website, Mr Frydenberg ordered the Australian Competition and Consumer Commission (ACCC) to undertake an inquiry into the pricing of residential mortgage products.

“This ACCC inquiry will give us a better explanation as to why the banks aren’t passing on these cuts,” Mr Frydenberg said.

The inquiry is set to investigate the prices charged for residential mortgages across the entire market and how banks make pricing decisions. It will also look into the differences in the prices paid by new and existing customers and the barriers that may prevent consumers from switching lenders.

The government has provided the ACCC with $13.2 million of dedicated funding to undertake regular inquiries into specific competition issues within the financial system.

According to Mr Frydenberg, the ACCC will deliver a preliminary report by 30 March 2020 and a final report by 30 September 2020.

He, however, told media that no matter the findings of the inquiry, the government will not introduce legislation that forces the banks to pass on the rate cuts in full.

Labor supports the announcement ‘in principle’

Shadow Treasurer Jim Chalmers announced on Twitter that Labor welcomed today’s announcement in principle, but will work through the detail.

“It was only little more than a week ago when Labor called for a bigger role for the ACCC the government said that would be a distraction – so we know their heart’s not really in this,” Mr Chalmers said.

“The big banks are still very profitable by international standards so they shouldn’t be doing the wrong thing by borrowers.

“We need the banking system to be more competitive so people can get better deals with other banks and financial institutions if they want to shop around.”