Staff writers adelaidenow October 03, 2012
NO one denies the right of the banks or any corporate entity in Australia to make a profits.
However, there is an increasing disconnect between the banks' laments that providing home loans is a competitive and hard-fought business - and their seemingly ever-growing profits.
It is very easy to take a stick to the banks but the complaint against them is not simply self-interested carping.
The Bank of International Settlements this year found that Australia's banks were the most profitable in the world.
This is a great result for the banks and their shareholders. However, there is a social compact which is implicit in the privilege to hold a banking licence in Australia.
This is that market power should not be wielded to the disadvantage of the community.
It could be argued that our banks, which to a degree have their market dominance enshrined in legislation, are testing this compact.
Dissatisfaction with the banks is growing, as evidenced by an increasing number of people electing to switch their home-loan providers.
The value of mortgage refinancing in Australia has increased nearly 27 per cent since federal banking reforms were announced in December 2010, with almost $50 billion of home-loan refinancing occurring in the past financial year.
The banks' reluctance to pass on in full the Reserve Bank's interest rate reductions, and their timing when they do, feeds the animosity against them.
Banks, like the rest of us, know full well when the Reserve Bank holds its meetings.
But now, unlike a couple of years ago when banks would announce their interest-rate decisions almost immediately, they need to ponder it for days, even weeks, all the time charging interest at higher rates before they announce a change.
It will be instructive to see whether this practice of long deliberation is maintained when next rates begin to rise.
Australia's robust banking sector is one of the reasons our economy is relatively strong compared with the rest of the world, and we should be grateful for that.
But that gratitude should not extend to a licence to print money and take advantage of an uncompetitive sector of the economy.