The Commonwealth Bank of Australia's half year report released today shows that interest expenses have increased but by substantially less than official interest rates, an analysis by The Australia Institute has found. This is in contrast to evidence the bank provided to the Senate Economics Committee in December that their interest expenses were increasing by more than the adjustments to the official interest rate.
Confirmation today that Treasury has considered a banking super profits tax is further evidence of the need to discuss such a proposal at the Tax Summit to be held later this year, according to The Australia Institute. Recent polling by the Institute found 81 per cent of Australians want the idea of a bank super profits tax to be on the Tax Summit's agenda. The Australia Institute's Executive Director Dr Richard Denniss said the Treasury documents show there is plenty more scope for the government to tackle the excessive profits of the banks, and in particular the big four.
On 28 October 2010 the Senate referred the topic of competition in the banking sector to the Senate Economics Committee for inquiry.
Terms of Reference
Competition within the Australian banking sector, including:
(a) the current level of competition between bank and non-bank providers;
(b) the products available and fees and charges payable on those products;
(c) how competition impacts on unfair terms that may be included in contracts;
(d) the likely drivers of future change and innovation in the banking and non-banking sectors;
(e) the ease of moving between providers of banking services;
Eighty-one per cent (81%) of Australians believe that the idea of a banking super profits tax should be discussed at next year's Tax Summit, according to a new opinion poll conducted by The Australia Institute.
The Government's announcement of its much anticipated banking reform package is only a small step on the long journey towards a better deal for the customers of Australia's banks, according to The Australia Institute.
A new network of community groups has been launched calling for all stakeholder voices to be heard when it comes to reforms to banking and finance. The Australian Financial Integrity Network (AusFIN) has launched the following Charter that they say should guide the Government and the industry in implementing changes to banking and finance that will make sure the industry delivers to consumers, workers and the broader community.
There is nothing more profitable for the banks than confusion about what they do. As long as they keep talking about acronyms no one has heard of and financial theories that no one understands, they can continue the enormously profitable business of borrowing money at low rates and lending it at high rates. This year alone the result of this strategy will generate after tax profits worth more than $22 billion, more than $1000 for every man woman and child in the country. The problem for the banks, however, is that they are finally being asked some hard questions about their simple strategy, and the answers haven't been pretty.
The Australia Institute today welcomed the admission by the Australian Bankers Association that our analysis of banks' funding costs and how they affect interest rates is accurate. An analysis by The Australia Institute of Australian Prudential Regulation Authority (APRA) data shows that despite claims from the banks that their funding costs have been rising faster than the official interest rates, the opposite appears to be true.
The latest round of interest rate rises beyond the Reserve Bank has added $1.2 billion to the big four banks' profits, according to analysis by The Australia Institute.
Australia's banks seem to have embraced the credo that if you are going to tell a lie, you might as well tell a big one. One of the biggest is that when the Reserve Bank lifts official interest rates, the banks have no choice but to pass on the rate rise in full to their home loan customers. This sounds credible on a first hearing, but it simply doesn't fit with the way banks operate nowadays.