Treasurer Wayne Swan certainly talks a good fight. “I say to all banks, you will be judged very harshly if you try to take advantage of the US sub-prime crisis by lifting rates excessively”, he warned when mortgage rates were increased earlier this month without any rise in the Reserve Bank’s official rate. And then in a radio interview:

And I make the point that some of the rises in this country that flow from that crisis have been excessive. And I have made the point very loudly and very clearly that I want to see more competition in the banking market. And we have asked for a report from the Treasury about that. I will be going round talking to the banks and I will be putting forward a package to deal with those competitive issues.

Those comments were made by the Treasurer as Michael Cameron, St George Bank’s chief financial officer, was explaining that the cost of borrowing overseas the money to lend to home buyers in Australia had increased by 0.3 percentage points. A senior Westpac executive, Jeremy Dean, said: “Westpac has been absorbing increased funding costs on behalf of customers for several months, but it is now clear that the liquidity issues affecting the global financial markets are likely to persist for some time.”

The disruption in global financial markets might be continuing but for Mr Swan the time for action to replace talk has surely arrived. The action of the US Federal Reserve to lower interest rates by 0.75 percentage points has suddenly reduced the cost for Australian banks of borrowing in the US and the removal of the recent interest surcharge is appropriate.

Not that home buyers should get too excited. NAB is not rushing to be the first to reduce the rate that it was the first to increase. And Mr Swan has been strangely reluctant to chide them about it.

Perhaps the Treasurer is just waiting until the Australian Reserve Bank moves to increase its official rate – something which is expected in under a fortnight. Then his promised package to deal with competitive issues can ensure mortgage interest rates are increased by less than the Reserve Bank determines.

If the increase is passed on in full then Mr Swan will be seen as all talk and no action.