MELBOURNE, Oct 14 (Reuters) - The Australian government has ordered the competition watchdog to investigate why banks failed to pass on the central bank’s three rate cuts this year in full, less than a year after a public inquiry exposed the industry for cheating customers.
The Australian Competition and Consumer Commission has been asked to investigate prices charged for residential mortgages by all banks and non-bank lenders and how they make pricing decisions, including passing on changes in the official cash rate.
The inquiry will also look at differences in prices paid by new and existing customers and barriers that may deter customers from switching lenders.
The watchdog is due to deliver a preliminary report by March 30 and a final report by Sept. 30, 2020.
Treasurer Josh Frydenberg said the government needs information on the banks’ funding costs to understand why they are not passing on rate cuts in full, after the Reserve Bank of Australia (RBA) said those funding costs have dropped.
The RBA has cut the official cash rate three times so far this year to a record low of 0.75% in a bid to stimulate consumption and investment in a slowing economy.
“The Government and the RBA itself have called on the banks to pass them on and the banks have just ignored that advice and that call,” Frydenberg said in an interview on Australian Broadcasting Corp television.
Frydenberg said he had spoken to bank chief executives about the inquiry and told them this was an opportunity for them to “clear the air” to explain why they haven’t passed on rate cuts in full and how they balance the needs of customers and shareholders.
“They’re defending their patch and will continue to do. We’ll continue to get the best possible deal for the consumer,” Frydenberg said.
However he said the government would not resort to levying a tax on banks if they refuse to pass on rate cuts in full and has previously ruled out legislating for the banks to pass on rate cuts in full.
“What would concentrate the banks’ mind is a competitive and fairer marketplace and that’s why we want to empower consumers with more transparency in the bank reporting, more information,” Frydenberg said. (Reporting by Sonali Paul; Editing by Daniel Wallis)