MEET THE PRESS

31 OCTOBER 2010

HUGH RIMINTON: You're on 'Meet the Press'. The big bankers call it pure populism but the politicians are coming after them. Whether you like it or not, the banking landscape has changed, and the four major banks now have more power and more influence in the market than at any other time.

ANZ BANK CHIEF MICHAEL SMITH: Does there need to be another inquiry into banks? No, I don't think there does.

HUGH RIMINTON: Well, an inquiry is coming and one of the men behind it is Senator John Williams. Welcome to the program, Senator John Williams. What do you hope to achieve from your inquiry which has not come out of the previous six?

NATIONALS SENATOR JOHN WILLIAMS: It is to look back and see what was achieved in those previous inquiries, but also to look at the competition, to look at whether there are hurdles, to see what can be done, whether there is any legislation that may prevent other players in the market. One of the things I will be keen to see is the effect of underwriting of the government on investments. There are very wide terms of reference and in my job, I have had a lot of complaints about the banking industry and I look forward to finding some answers. The banks may have to raise their interest rates above the reserve bank rates and it will be interesting to see the cost of funds because they are lowering their long-term 3-year interest rates on deposits.

ELEANOR HALL: A lot of commentators reject the argument on the cost of funds. Is it possible this inquiry will recommend some kind of legislative action to prevent them from raising interest rates?

JOHN WILLIAMS: I cannot pre-empt the inquiry. We see the cost of funds going up, that is what the banks say. We can have confidential applications and submissions to the inquiry and we can look through those actual costs up for the funds, whether they be domestic or international. We are aware that a lot of money is borrowed from overseas by the big banks. We already see them lowering interest rates and that is in effect lifting their margin. I cannot pre-empt recommendations to the government but I believe the inquiry is justified.

JOHN STANLEY: Do you personally believe there is the possibility of legislation to cap the interest rates above the Reserve Bank movements?

JOHN WILLIAMS: I do not think you will see legislation. That is my personal opinion. I do not think you will see a cap on it and we want competition and the government has reduced competition by some of their actions. There is demand and supply and that competition is what the nation runs on, it is what keeps prices down and if we see restriction and a lack of competition, that is a concern to me.

JOHN STANLEY: How would you facilitate that competition? Some people see the Post Office growing into a bank. Is that a possibility?

JOHN WILLIAMS: In regional Australia, we still have post offices in most places but we have lost a lot of banks. Small country towns will support that. I have made it quite public over the last six months. The problem with competition is that we had exit fees. When you have a home loan, as I have with St George, if I want to walk away to go to another institution where I can get a better deal, I have to pay to get out of the home loan. That stifles competition. I'm talking about variable loans - if you have a fixed loan and you want to get out, you pay. But on variable loans, there should not be any exit fees. A Senate inquiry has recommended that banks waive exit fees by the end of the year so the banks cannot have you handcuffed to their door. We must have proper competition.

JOHN STANLEY: Joe Hockey has been copping quite a lot on his approach. He has been likened to Hugo Chavez from Venezuela. Do you think that he is on the right track?

JOHN WILLIAMS:  When he talks about government using the options available to it? Absolutely. I read his speech. The points he makes are very valid about competition, about the Reserve Bank giving a clear and constant report on the margins the banks are charging. A bank simply buys and sells money and Joe Hockey is right on the money. Some of the things that he has said have been taken out of context, but Joe Hockey has made some very good points in his recommendation. I think we should have a good close look at them.

JOHN STANLEY: He seemed to have some trouble bringing his leader along with him.

JOHN WILLIAMS:  That is the thing in politics. I was not there. I do not know if Tony was just on the spot.

HUGH RIMINTON: Thank you, Senator John Williams. Thanks also to our panel, John Stanley and Eleanor Hall. A transcript and a replay of this program will be on our website. Until next week, goodbye.

Video Link to watch Meet the Press

http://ten.com.au/video-player.htm?movideo_p=41949&movideo_m=77900