The big four Australian banks have had it sweet for so long, but have copped a serve from Prime Minister Kevin Rudd in recent weeks, as struggling mortgagor homeowners haven’t been getting all the interest rate cuts from the RBA passed on to them.
Obviously the banks are used to having their names dragged through the mud as its becoming an Australian pastime to bag the banks behaviour by Jill and Joe Public. So the Prime Minister has good right to feel that joining in with a quick flurry of words on behalf of Mr and Ms Mortgage can’t harm him in the polls. But it is not going to change the Banks’ motives or behaviour. After all, they have to work in the best interest of their Shareholders, and on that basis you would have to say they are going a great job, if you compare their performance and results against banks in the US or the UK.
But the big four Banks have a privileged position, and banking is a mainstream public service as well as a business, so Mr Rudd needs to deliver effective competition within the Australian Mortgage Industry to create a level playing field. In my view this will mean legislating for an effective mortgage and credit card marketplace, and one with real competition.
Regional Banks and building societies and credit unions, as well as non bank securitised mortgage lenders need some legislation that might be called positive discrimination to level that playing field.
The big four Australian banks [CBA, NAB, Westpac and ANZ] are, obscenely profitable. For example and raked in $9.5 billion in profit in just six months. And this is while there is a global recession? Australia’s banks are among the world’s most stable and profitable and have been for some time.
The Finance Sector Union (FSU)has urged that banks make their lending practises more responsible by suggesting that Australians’ ever-increasing credit card debt is unsustainable; and that linking salaries to peddling high-debt products like mortgages does not serve customers well, especially when it’s to buy shonky and highly geared investment products such as the two tier real estate market in Queensland in the 1990’s and the recent Storm Financial collapse.
Its time for action Mr Rudd, not another verbal bashing. A viable mortgage alternative to the banks is required by all homeowners and home buyers. The current system means that second tier lenders get the customers that the big four don’t want, and this will only increase the gap in profitability between Australia’s big and small mortgage lenders.
Rick Adlam is Mr Mortgage