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The federal government will ensure ‘competitive pressure’ is placed on the nation’s big four banks after three of the four decided to raise rates by more than the Reserve Bank.
In a weekly economic note issued in Canberra yesterday, federal treasurer Wayne Swan said the government would do all it could in order to keep the big four honest.
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“The Rudd Government understands the need to keep competitive pressure on the big banks,” he said.
“The need to help smaller lenders is what led the government to purchase $8 billion of their mortgage backed securities bonds.”
The government has been buying residential mortgage backed securities since November to bolster competition in the home lending market, according to information on its website.
“This will ensure they [smaller lenders] have a flow of funds to help keep them lending and competing with the big banks and will help put downward pressure on mortgage rates over time,” Mr Swan said.
The Australian Competition and Consumer Commission chairman Graeme Samuel told the ABC’s Inside Business that competition in the banking sector has been waning for some time and hard measures would have to be taken.
He said any merger between a big four bank and a regional lender would be more difficult to approve than ever before because the banking industry has changed.
“We’ve got a whole different banking and finance market in this country to what we had before,” he told the ABC.
“There is less competition, there are less competitors. Because of this we will examine [any deals] very critically in the context of both competition in the banking market today, but more importantly, the likely prognosis for competition into the foreseeable future.”
"While we have made a commercial decision to pass on some of these additional funding costs, we're also conscious that it's in everyone's interest that the economic recovery consolidates and mindful of our customers' expectation that we will absorb some of these additional costs," ANZ's Australia chief executive Phil Chronican said in a statement.
