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Tax

Banking group hits back at Hockey over interest rates

By Oliver Milman
Thursday, 21 October 2010

The Australian Bankers’ Association has hit back at shadow treasurer Joe Hockey’s insistence that the government should do more to force the banks to keep their interest rates down.

 

Hockey attacked treasurer Wayne Swan for not using “levers” at his disposal to ensure the banks didn’t raise rates above the Reserve Bank’s official rate.

 

Small business  lobbyists have previously attacked banks that raise rates above the official rate, with the United Retail Federation even recently calling for banks to be “named and shamed” over the issue.

 

However, Swan has hit back at Hockey, calling his attack “reckless” and ruling out any government interference in the setting of interest rates.

 

The ABA has now also looked to defend the banking industry, claiming that many would now be “under water” if they had kept to the official RBA interest rate.

 

The Deputy Governor noted that: “We estimate that if banks had not adjusted their lending interest rates to reflect their higher cost of funds over the past couple of years, they would now be incurring losses...”

 

Steven Münchenberg, chief executive of ABA, says: “Australian banks have made great efforts to improve customer satisfaction in recent years. And while surveys show bank customer satisfaction has improved markedly, individual banks and the wider industry continue to work to improve this performance.”

 

“The ABA also rejects any suggestions that taxpayers have bailed out the Australian banking system. Due to the GFC and actions by other overseas governments, the Australian government acted decisively by introducing deposit and wholesale guarantees to protect the stability of the Australian banking system and the economy.”

 

“Banks will pay taxpayers around $5.5 billion for the use of the wholesale guarantee and, last year, Australian banks paid $9 billion in taxes, in contrast to other countries where taxpayers had to bail out failing banks.”

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