E&OE - PROOF ONLY
JOURNALIST: Penny Wong, thanks for your time this morning.
WONG: Good morning.
JOURNALIST: The Treasurer Wayne Swan called the ANZ chief executive Mike Smith last week – as he did with the other bank executives – telling them, asking them, urging them very strongly not to raise interest rates above the 25 basis point increase approved by the RBA board. The ANZ bank has now done this. Why isn’t this, as Joe Hockey says, a case of the ANZ kicking sand in the Government’s face?
WONG: Well I don’t accept that. What I say has happened is this: we have seen the ANZ move when there is no justification to move above the Reserve Bank rate rise. We have seen the Commonwealth Bank move when there was no justification. And what this demonstrates is that the banks are not willing to listen to the Australian people and to their customers.
What the Government has done is to promote competition. We think that is the best way to push the banks to give the best deal to their customers and to reflect the standards that the community wants. We’ve seen some movement on that by the ANZ because they’ve been forced to, because the Government has cracked down on unfair mortgage exit fees. We want to ensure that people can walk out the door, go down the road and get a better deal if they’re not getting the deal they want from their banks. We’ve put in place a range of reforms and we will put in place more.
JOURNALIST: It’s also clearly a case of the ANZ and the Commonwealth Bank clearly not caring what the Government thinks. We have the Treasurer making that call, we had the Prime Minister last night describing the banks as arrogant. But clearly they’re going ahead as is very likely the NAB and Westpac will in the 24 to 48 hour period ahead.
WONG: Well Michael, I think the real problem here is that the banks don’t care what the Australian community thinks. That’s the real problem. They’re not listening to their customers. They’re not listening to the Australian community. But I will say this: the banks should not underestimate the Government’s determination to get the right outcome. They shouldn’t underestimate our calm determination to get the right outcome for Australian consumers.
As I said, we have put in place a range of reforms. We’ve seen some of those start to have some effect. And we will bring forward a further package which we will work through carefully to make sure it delivers the sort of outcome that Australians want.
JOURNALIST: Do you expect the other banks to follow the other banks to follow the ANZ move now and scrap their exit fees?
WONG: In terms of exit fees, it is a pity that the Government has had to legislate to ensure that the banks move. We are of the view that unfair mortgage exit fees are a fetter on competition. That’s why we put in place legislation and we are seeing movement in the market on that now. That’s a good thing. We want people to be able to go to other lenders; there are other lenders out there. The Government is very determined to support competition in this market.
JOURNALIST: How can the Government ensure the money foregone from these exit fees is simply not passed on by the banks to customers in other ways, through other fees and charges?
WONG: We have put in place a range of reforms which look to unfair terms in contracts, consumer credit law, which do give ASIC more power and the consumer more power so that we can ensure that we have better terms – particularly when it comes to exit fees but also in relation to other terms of contracts so that we have better competition.
Of course, this is just one aspect of the reforms that we have put in to date. We’ve also invested some $16 billion into residential mortgage-backed securities. That’s been a very important, very important, investment in competition in the market because, of course, the institutions who have benefited from that have been in general, smaller lenders.
JOURNALIST: One way many customers would see as a good way of hitting the banks where it really hurts is for the Government to adopt the Productivity Commission’s recommendation to give shareholders at annual general meetings the right to after a staged process, kick out boards that approve over the odds hefty executive salaries for bankers. Is the Government prepared to do that?
WONG: On executive remuneration, you’re right – there are a number of executives around the country who I think people look to and think, is anybody really worth that much? It’s certainly out of kilter with community expectations. The Government has already legislated some changes here. We do want to ensure that there’s pay for performance; that performance is being measured. And we want to empower shareholders.
The Treasurer and the former Minister for Financial Services released earlier this year a response to the Productivity Commission report which laid out our approach. I understand that some aspects of that, including the aspect that you’ve referred to, that is, the shareholder vote, is the subject currently of consultation through the Corporations and Markets Advisory Committee. So I think the principle is a sound one. What we need is to have shareholders having an appropriate say about the pay for CEOs and other executives.
JOURNALIST: While all this is going on Penny Wong, why are Julia Gillard and Wayne Swan at the G20 arguing for Australia’s four major banks to be exempt from the new global banking regulations to be agreed to at that summit?
WONG: The G20 is undertaking one of the most comprehensive reviews of the financial system that we’ve seen. And that’s appropriate because, of course, we know just a couple of years ago the world was facing a very big problem in our global financial system.
The position that the Treasurer has always put publicly is the right one. And that is, we have a sound banking system here. We are participating strongly and closely in the G20 review. We want to get the right outcome internationally but also for the Australian financial system. That’s the position he’ll be taking.
JOURNALIST: And that doesn’t include Australia’s banks being subject to the strict new rules on capital adequacy requirements and the like?
WONG: There are a range of technical issues about how the Basel requirements can be implemented in different economies. Obviously, security is very important, prudential requirements are very important. But as the Treasurer said, we want to make sure we have the right outcome for the Australian banking system as well as important reforms for the international financial system.
JOURNALIST: Finally, how can you ensure there is proper competition within the domestic banking scene? Because it can be read by this abolition of exit fees that the ANZ is being brave enough and confident enough to take this path knowing full well that its customers really – given the four major banks own 80 per cent of the mortgage market in Australia – have very little choices available to them?
WONG: There aren’t only four banks in Australia. There are more than four banks in Australia.
JOURNALIST: But they own the lion’s share of the mortgage market though.
WONG: There are more than four banks in Australia. And it is true that the Global Financial Crisis had an impact on competition. That’s why we invested $16 billion into residential mortgage-backed securities. But there are more than four banks in this country and consumers should consider whether or not there are better deals elsewhere. We want to help them do that. We want to help promote competition.
JOURNALIST: Finance Minister Penny Wong, thank you for your time this morning.
WONG: Good to speak with you.