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New Treasury measures announced

June 22, 2024

Earlier this week as part of her commentary about the decision to keep the cash rate on hold, RBA Governor Michele Bullock revealed that they considered raising interest rates in June, while a rate cut was not discussed. Although not explicitly stated in the official announcement following the cash rate decision, Bullock confirmed that rate hikes were still a possibility this month.

She acknowledged the uneven impact of higher interest rates across different sectors of the economy, emphasising the RBA’s awareness of the challenges faced by certain groups. Whilst not being any more explicit than that, it is presumed she was referring to those people who are struggling to make mortgage repayments.

While she could not specify when the board might lower interest rates, Bullock reiterated the RBA’s commitment to tackling inflation, stating it remains their primary focus. “Interest rates are part of the issue, but inflation is the real burden,” she noted, highlighting the ongoing efforts to stabilise the economy. This inflation problem just won’t seem to go away.

In this week’s newsletter, we take a look at the governments recent announcement regarding changes to the banking system to help customers get a better deal from lenders.

The Albanese Labor Government is rolling out a series of measures aimed at helping Australians secure better rates on mortgages and savings accounts.

The initiatives announced earlier in the week are designed to enhance customer experience by offering more choices, lower prices, and improved services, ultimately fostering a more dynamic, diverse, and resilient banking sector.

Key Measures:

  • Interest Rate Transparency: Banks will now be required to inform customers when interest rates on their transaction or savings accounts change and improve disclosure requirements for basic deposit products.
  • Comparison Website Regulations: Financial product comparison websites must better disclose how products are ranked and any financial relationships with recommended providers.
  • Loan Switching Facilitation: Customers will have easier access to the necessary forms to switch mortgages, simplifying the loan transition process.
  • Notification Improvements: Banks will work on improving how they notify customers about bonus interest rate offers and the end of introductory lower interest rate periods, potentially through new industry standards.
  • Behavioral Economics in Banking: Treasury will investigate how behavioral economics and prompts can be used to encourage consumers to switch to more cost-effective home loans and banking products.

These changes stem from the findings of two Australian Competition and Consumer Commission (ACCC) inquiries into retail deposit products and home loan pricing, responding to the 2023 and 2020 reports respectively.

Additional Review:

The government is also launching a review led by the Council of Financial Regulators (CFR) in consultation with the ACCC, focusing on the challenges faced by small and medium-sized banks. This review will:

  • Evaluate the role of these banks in promoting competition.
  • Assess regulatory and market trends impacting them.
  • Propose regulatory improvements to balance competition, innovation, and stability.
  • Examine how smaller banks source funding and consider the role of covered bonds.
  • Consider regulatory arrangements for new market entrants to support additional competition.

What all this means in practical terms remains to be seen.

Variable

The rates below are based on a $500,000 loan, with the borrower making principle and interest payments with a loan term of 30 years. The rates quoted may vary depending on the borrowers LVR.

1 Year Fixed

The rates below are based on a $500,000 loan, with the borrower making principle and interest payments with a loan term of 30 years. The rates quoted may vary depending on the borrowers LVR. At the end of the three year fixed period, the borrowers interest rate will revert to a standard variable rate for the life of the loan.

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