Wayne Swan has made good on his pledge to confront banking reform, yesterday announcing a range of reforms include banning exit fees for new mortgage loans, giving lenders more funding options and providing consumers more information.
The announcements arrive after the fanfare eventually died down for ‘Hockeynomics,’ Joe Hockey’s call for banking reform via his much-trumpeted nine point plan.
Not to be rushed, Swam assured us his package was in the mail, and it arrived yesterday with the proclamation that it will “build up competition in our banking system, which will ensure that interest rates are lower over time.”
Banning exit fees is arguably the most important component of Swanny’s reforms, though it will only apply to new loans and will not cover small business loans.
Media consensus appears to be that the reform package is “mild but measured” but reception was nevertheless varied. Here’s a snapshot of what some of the pundits had to say:
The Australian
A populist package, but will it deliver on rates?
The real test of the banking measures announced yesterday is whether they deliver on the promise made by Wayne Swan himself — lower interest rates for Australians over time. The Treasurer says the package is about “helping customers, helping households and helping business”. Just as he did with the ill-fated Grocery Choice and Fuel Watch projects introduced in the early part of the Rudd government, Mr Swan seems intent on government intervention to fix what he terms market failure.
Jennifer Hewitt: Gulf between PR and reality
There are some modestly sensible measures, such as trying to limit the big banks’ reliance on offshore funding by allowing them to issue covered bonds to enable them to raise more money here, presumably from the superannuation funds.
But the impact of such changes will be minor and gradual. It hardly counts as either bank bashing or major reform.
National Times
Tim Colebatch: Treasurer’s sensible attempt to drive change
We might have to be patient. Most of these reforms are sensible and small-scale: giving consumers more information, giving lenders more funding options. But there are two things on Swan’s list that, in time, could make a difference.
The first is his plan to ban exit fees for new mortgage loans from July 1 next year. It will apply only to new loans. It won’t cover almost $1 trillion we owe already on existing mortgages. Nor will it apply to small business loans.
Peter Martin and Eric Johnston: Swan has no ‘silver bullet’ for banking reform
The ANZ Bank said it had not been consulted by Mr Swan and pointed to the ”difficulties a lack of consultation created in the mining industry”.
Other measures are wins for the big banks and their competitors. Treasury will encourage the development of ”covered bonds” where repackaged and onsold mortgages remain on the lender’s balance sheet.
Australian Financial Review
Andrew Cornell: More consumer power is way to go
The best thing about the Swan reforms is they won’t do too much damage; the worst is they won’t do too much good either.
The Daily Telegraph
Bankers furious at fee reform rebuff
The ANZ Bank has slammed the Federal Government’s lack of consultation on banking sector competition reforms, likening the apparent snub of the major banks to the mining tax debacle.
Money AU
Sharat: Wayne Swan Proposes Banking Reform To Increase Competition
Mr. Swan denied that that his plans for banking reforms were his attempt to play catch up with his opposition counterpart Joe Hockey’s nine point banking reform plan. He added that he will reveal most of his banking reform proposals next month.
The battle between the government and the Big Four Lenders has intensified, as the government threatens more stringent industry regulation.
I’ve heard the “be patient” line from Canberra econocrats before. Remember when they allowed merchants to charge the customer fees for using credit cards. Of course there was no regulation on the size of the fee as good old market forces would handle that. Guess what happened. Big companies where its virtually impossible to pay by ca$h–like airlines–started gouging customers.
Given the vast amount of time spent on desiging it the package is a dud. Results will be long in coming and if you blink you’ll miss it.Something that would hurt the bully banks, like a portable account number similar to a mobile number is to be “studied”.Sir Humphrey on YES MINISTER used the same trick to get rid of proposals.
He’s not called littleSwan for nothing.
So begins the Americanization of the Australian banking sector. And we can all see how well that worked out for the Americans.
Banks are crooks – as soon as the cartel is touched, they go straight for the poor. Arrest all four CEOs on some trumped up charges, and nationalise the whole system.
Suppose Swan does succeed in bringing down mortgage interest rates. Does anyone believe that will lead tomore affordable housing?
The average mortgage in Australia now drains more than 30 per cent of the household’s income. Can you imagine what that is doing to the economy? People look at the mining boom and ask, “Where is the money going?” Well that’s where it’s going. Into lending profits for the banks and the overseas lenders to the banks, and into the retirement funds of people who bought homes before the so-called “boom”. (It’s not really “boom”; booms arise from demand and production and demand, but the runaway house prices result from demand and lack of supply.)
The house price “boom” has pretty much soaked up the increases in real income that Australians have gained since the mid 1990s. It will soak up any reduction in mortgage costs in the unlikely event that Swan achieves any. The Reserve Bank has already indicated that it takes into account bank finance costs and likely bank behaviour when setting its own interest rates. Meanwhile business finance is still in a credit squeeze, which is expected to get worse next year when Basel III capital adequacy standards come in. (Just to be clear, business finance feeds the supply side of the economy, and household income is the demand side.)
Wayne Swan can dance around this issue, he can poke the miners in the eye, he can poke the banks in the eye, he can play misdirection games and declare war on interest rates and bank fees. He is lying through his teeth, he is selling out Australia’s future standard of living to a politically expedient economic delusion, which he knows perfectly well is bunk.
Sorry for poor editing, I meant to say: “booms arise from demand and supply, but the runaway house prices result from demand and lack of supply”