LISA WILKINSON: This week's interest rate hike is filtering through to the banks, with the big names opting to pass on the rise to home-loan customers. And the Government is today setting the wheels in motion for a plan to increase competition and make it easier to switch between banks.
With more, we're joined by Finance Minister Lindsay Tanner. Good morning to you, Mr Tanner; thanks for your time.
LINDSAY TANNER: Good morning.
LISA WILKINSON: Now, Mr Tanner, inflation is up, petrol is at an all-time high, interest rates are up for the 11th consecutive time and we're told that there are more increases in store. Working families, the very Australians who have just voted you into office, are doing it very tough. What are you going to do about it?
LINDSAY TANNER: Well, the first thing we're doing is to cut government spending. We've been left with an inflation fire burning and one of the factors that's been contributing to that is increasing government spending. John Howard had a bit of a pre-election surge over the past year or so that added to previous spending and we've got to get that back under control.
That means pain; it means difficult decisions; but we are committed to doing that because the big issue here is ensuring that ordinary working people in this country aren't facing an inflation problem, they aren't facing ever-increasing interest rates. So we're prepared for those difficult decisions.
LISA WILKINSON: You had some very angry words to the media on Tuesday after the Commonwealth Bank lifted their variable rate beyond the Reserve Bank's. You said that you wanted them to explain themselves. Have you spoken to anyone at the Commonwealth Bank, yourself?
LINDSAY TANNER: Look, I haven't myself, because it's Wayne Swan's territory and I'm sure he has - Wayne is the person responsible. But we are concerned about the bank's action of adding five points to the 25 points that came from the Reserve Bank increase.
The timing really is questionable. It does look a bit like the bank has tried to hide it or to tack it onto the Reserve Bank increase, which everybody accepts will have to be passed on by banks.
So we did again indicate to people that they should think very carefully about their choices of bank - that's up to individual customers, to consumers - and that we are going to ensure that people have got the maximum ability to exercise choice, and in particular, to minimise the extent to which they face exit fees, that they have barriers to being able to move their loan from one bank to another.
LISA WILKINSON: Is eliminating those exit fees really possible, given that these institutions are not under government control?
LINDSAY TANNER: It certainly is possible for the banks to do it. They distribute their costs on establishment fees, exit fees; there's a whole different way of doing it. And of course, they vary quite a bit; some are quite high, some are relatively modest. There are different things we can do. I'm obviously not in a position to announce anything at the moment, and that's Wayne Swan's prerogative.
But I would hope that the banks themselves had a good look at this; there's no reason why they can't offer products that are exit-fee free, or have very low exit fees. That's ultimately a commercial thing that they can decide, because the way the fees, their costs are distributed is a matter that they can choose. They could offer different products. So I'd hope they'd have a look at it to.
LISA WILKINSON: But what pressure can you bring to bear on them to make those exit fees go away?
LINDSAY TANNER: Well, apart from a very public pressure that we're already putting out there - which I hope would have an effect - ultimately, government, APRA, ASIC, the Reserve Bank are all involved in the regulatory processes that do affect the banks; they have licences, as they should. So there are a range of possible tools that government can use in these issues.
Obviously, we don't want to be heavy-handed about it - we would hope that the banks get the message - but there is a clear issue here that if people are to be able to exercise genuine choice and they can respond to what they may see as bad behaviour by their bank, then the ability to move their loan without a very heavy penalty is obviously an important part of that.
LISA WILKINSON: So when will it happen? Or shouldn't we hold our breath?
LINDSAY TANNER: Well, I'm not in a position to say other than that Wayne Swan's advised me that he's expecting to announce something pretty soon. So I - holding your breath may not be the best idea, but I would expect it to be very soon.
LISA WILKINSON: Okay, Lindsay Tanner, thanks very much for your time this morning.
LINDSAY TANNER: Thank you very much.
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