Banks to pass on more rate cuts as inquiry begins
AUSTRALIAN Competition and Consumer Commission chairman Rod Sims says banks will have to pass on more of the looming cuts to the cash rate "knowing we are there" conducting an inquiry into home-loan pricing.
Analysts who monitor big bank stocks agree, with one saying the majors will have no choice but to transmit reductions in full.
The four largest banks failed to do so in June, July and earlier this month, leading Treasurer Josh Frydenberg to yesterday order the Australian Competition and Consumer Commission to investigate the mortgage market, including how banks make pricing decisions after RBA cuts.
The pricing inquiry run until March 31. Futures markets put a further rate cut by the end of February as a 100 per cent certainty. Some economist believe there will be two cuts between now and then.
Mr Sims yesterday told The Daily Telegraph that banks would be likely to pass on more to customers now that the ACCC was on their case.
"Us watching does make a difference … knowing we are there," Mr Sims said.
For example, after the ACCC began an inquiry into the east-coast gas market and started publishing suppliers' key pricing measures, the prices fell.
A leading bank analyst told The Telegraph banks would be likely to pass on the entirety of the next RBA move because of the ACCC's inquiry.
"I suspect they would pass on in full even though it will hurt earnings," the analyst, who asked not to be named, said.
Another analyst, Bell Potter's TS Lim, said the ACCC inquiry was a "political witch hunt".
"They should just leave the banks to carry on the business of banking," Mr Lim said. "The politicians don't talk about the depositors."
This was borne out in Question Time yesterday, with Mr Frydenberg telling parliament the government was "focused on lowering borrowing costs".
The ACCC has also been told to examine barriers to switching providers and come back to the Treasurer by the end of September with ideas on how to reduce them.
Mr Sims said the new consumer data right, which takes effect from February, would "make it easier" to change to another lender. The right will let consumers safely transfer banking data to new providers.
The Productivity Commission recommended a consumer data right in 2017. Then last year it advocated for a "new home loan interest rate tool so borrowers can compare with actual rates paid by others".
Financial regulators and the ACCC are now developing that tool, which is most likely to end up on the well-regarded MoneySmart website run by the Australian Securities and Investments Commission some time next year.
That would allow existing customers to see the typical rate being offered to customers like them, thereby revealing whether they were paying the so-called "loyalty tax".
Mr Frydenberg had told the ACCC to further examine the loyalty tax.
Shadow Treasurer Jim Chalmers said the government had been "dragged kicking and screaming" into a mortgage-rate inquiry under pressure from the community, media and Labor.