2. Economic conditions and the experience of account holders
   1. The Australian economy is emerging from an extremely difficult period. As summarised by CBA in August 2024:

Households and businesses have experienced extreme shocks in recent years—lockdowns, a demand surge, inflation and rapid interest rate rises.[1]

2.2As COVID lockdowns were finally lifted, a global energy price shock due to Russia’s invasion of Ukraine in early 2022 coincided with resurgent consumer demand—with Australians able to resume a relatively normal lifestyle for the first time in years, supported by extremely high levels of pandemic-era savings. Ongoing labour and materials shortages—particularly in construction—added to inflationary pressures. Like many other OECD countries, Australian inflation reached levels not seen in decades. Facing inflation at such dangerously high levels, the Reserve Bank of Australia (RBA) was forced to abandon its pandemic-era forward guidance that interest rates would stay low for many years to come.

2.3The sequence of interest rate increases by the RBA—explored in the Committee’s Review of the Reserve Bank of Australia Annual Reports 2022 and 2023[2]—has contributed to slower economic growth. Gross domestic product (GDP) growth is at low levels. Private sector growth is negligible, and Australia is in a per-capita recession.[3] However, public spending has kept Australia out of a headline recession, unemployment remains low, and inflation is being progressively tamed, consistent with the RBA’s ‘narrow path’ strategy of a gradual return to its target band of 2–3percent in 2025 without widespread job losses.

2.4The Committee explored the ramifications of these challenging economic conditions with the major banks throughout this inquiry. Committee members sought the banks’ insights into the experiences of account holders, and mortgagors in particular, as pandemic-era ultra-low fixed-rate mortgages rolled over onto unexpectedly high standard variable rates. Throughout the inquiry, the banks’ evidence pointed to remarkable resilience among households in aggregate, though they acknowledged that this picture masked areas of extreme hardship. The Committee scrutinised the banks closely on steps they were taking to support customers through this transition.

2.5The Committee also explored banking sector evidence on business conditions, identifying a marked divergence between the experiences of small businesses and large businesses, and across different sectors of the economy.

2.6This chapter first presents the banks’ evidence on the broad economic conditions in Australia, followed by the experience of retail customers—including evidence on account holders’ spare cash flows, signs of stress in credit card and unsecured loan repayments, home equity withdrawals, the experience of mortgagors (especially first home buyers) and the experience of renters. The chapter then examines the experience of businesses, including the adequacy of credit lines to smaller firms and start-ups. It concludes with a discussion of the banks’ hardship policies for both retail and small business customers.

Banks’ views on the economy in aggregate: resilience in the face of challenging conditions

Economic growth, interest rates and employment

2.7Evidence from the major banks suggests that the Australian economy has remained remarkably resilient, in aggregate, despite major economic headwinds. This is notwithstanding the economic pain experienced by many Australians, and very low consumer confidence, reaching levels seen in the pandemic and Global Financial Crisis (GFC).

State of the economy

2.8In July 2023, Australia’s largest retail lender, CBA, told the Committee:

With a strong labour market, immigration returning, and a robust export sector, Australia is relatively well placed to deal with the current economic environment. Despite these positive indicators, we are acutely aware that many Australians are finding it difficult. Household confidence is now as low as it was during both the GFC and COVID. Inflation peaked in December but remains uncomfortably high. Those with mortgages are bearing the brunt of monetary policy, but renters are also facing sharp increases.[4]

2.9In August 2024, comments by Australia’s largest business lender, the National Australia Bank (NAB), also stressed that economic pain was being inflicted very unevenly across the economy:

…there are two Australias and a two-speed economy operating at present. Customers in certain sectors and certain geographies are doing well and are ambitious to grow. These include mining and resource businesses and consumers living and working in parts of Western Australia, the NT and Queensland. In other sectors and geographies customers are doing it tougher. These include retail and parts of the construction industry. Victoria and New South Wales are under more pressure than other states. Our data shows people are having to make tough decisions about where they spend their money. They are getting by, but it is tough.[5]

2.10Nonetheless, both banks remained optimistic. NAB reported that although economic growth was weak, it was still positive, while labour markets were holding up well and business conditions, in aggregate, were ‘only slightly below the long-term average’.[6] CBA likewise advised that ‘Australia’s economy is fundamentally sound’.[7]

2.11All banks reported ongoing resilience across their loan books. Westpac observed that in its loan book, ‘credit quality remains sound and the level of stressed assets is at historical lows’.[8] The Australia and New Zealand Banking Group (ANZ) similarly reported that its customers had been ‘holding up well’ in aggregate.[9]

Bank forecasts

2.12Economic forecasting is a highly uncertain discipline—as discussed extensively by the RBA over the same timeframe as this inquiry.[10] Nonetheless, the Committee sought updates from the banks on their forecasts for the future trajectory of the economy generally, and for GDP growth, interest rates and employment specifically.

2.13In July 2023, the banks predicted very modest economic growth. For example, Westpac predicted:

Our outlook for growth is around that one per cent level for real GDP growth over the next couple of years, so it's low but still positive. It depends heavily on that business investment holding up.[11]

2.14ANZ similarly observed that:

GDP growth remains subdued, with our economists forecasting only one per cent growth in 2023, rising slightly to 1.3 per cent in 2024. In particular, the weakness and per capita GDP means the economy may feel more challenging than the headline numbers suggest.[12]

2.15As it turned out, GDP growth was better than expected for the remainder of 2023, with through-the-year headline GDP growth of 1.5percent as at December 2023.[13] However, headline GDP growth over the year to September 2024 has been just 0.8percent—propped up by public spending, with zero contribution to economic growth from the private sector.[14]

2.16Nonetheless, the banks remained broadly upbeat when questioned later in the interest rate tightening cycle, in August 2024, despite economic growth deteriorating, and despite the failure to realise the banks’ widely reported predictions of interest rate relief in 2024—more on this below. The banks acknowledged, however, that further economic pain may be in store before Australians can expect a return to more normal conditions. For example, NAB told the Committee in August 2024 that it:

…remains optimistic about the longer term outlook for Australia, though the reality today is challenging. Growth is weaker than it has been for many years though still positive. The job market continues to show resilience but is softening. Business conditions are only slightly below the long-term average. We do, however, expect the economy to grow more quickly in the second half of [2025].

…I do feel like we're getting to a point where interest rates will start to come down. That will provide more money in the economy, more demand in the economy, which will mean that businesses will be healthier; therefore, they'll be able to hire more and pay more. … When interest rates do start to come down at some point next year, which we are hopeful they will, I think that will have positive impacts for everybody. We do see Australian GDP growth trending to more normalised levels once those interest rates start to come down. But it's going to be tough, I think, for the best part of the next six to nine months for many people.[15]

2.17Similarly, Westpac reported:

From a macro perspective, the Australian economy is proving resilient compared to global peers, just as it did during COVID. Australia's key economic indicators remain stable, and, while we've seen low economic growth and slightly higher unemployment, this performance should be viewed in the context of global conditions which are more challenging. Westpac's view is that the Australian economy is well placed for a return to higher levels of growth when pressures ease… We're expecting a growth rate of…2.3 per cent for 2025 and 3.5 per cent for 2026. That's why we're a little bit more confident about the outlook.[16]

2.18Interest rate and employment forecasts were also discussed at the hearings. However, interest rate and employment predictions by forecasters at the major banks—and by many, many other market commentators—proved consistently off the mark in 2023 and 2024. The expected timing of the first rate cut has been repeatedly pushed out, while on the upside, predictions of significantly higher unemployment have also been unrealised.

2.19These developments have been consistent with the RBA’s declared strategy of a slower return to within-target-band inflation in mid or late 2025 in order to preserve labour market gains, as discussed in the Committee’s concurrent review of the RBA’s 2022 and 2023 annual reports.

2.20Bank and market rate forecasts have also significantly differed from RBA messaging. Asjust one example, media reported in January 2023 that a major bank was forecasting rates to peak at 3.35percent in early 2023, with rate cuts of 0.5percent by the end of 2023.[17] In contrast, in December 2022, the RBA had said that it expected above-target inflation to persist into 2024, that the economy was growing, the labour market was tight, and that the Board ‘expects to increase interest rates further over the period ahead’, though this was not ‘a pre-set course’.[18]

2.21The banks’ rate cut predictions over 2023 and 2024 maintained this pattern (see Table 2.1)—repeatedly failing to materialise. This over-optimism has been common across Australia’s financial markets, which served as an unusually poor guide to predicting RBA cash rate moves over the past two years.[19]

Sources: RateCity, www.ratecity.com.au, and RBA Monetary Policy Decisions, www.rba.gov.au/monetary-policy/int-rate-decisions/. a) Alex Ritchie, ‘How high could savings and term deposit rates go in 2023?’, RateCity, 2 May 2023, www.ratecity.com.au/savings-accounts/news/high-savings-term-deposit-rates-go-2023, viewed 12 January 2025; b) Alex Ritchie, ‘Is now the time to look for a term deposit?’, RateCity, 5 September 2023, www.ratecity.com.au/term-deposits/news/time-look-term-deposit, viewed 12 January 2025; c) Eden Radford, ‘Cash rate to hold steady but will the RBA put borrowers back on notice?’, RateCity, 6May 2024, www.ratecity.com.au/home-loans/mortgage-news/cash-rate-hold-steady-will-rba-put-borrowers-back-notice, viewed 12 January 2025; d) Laine Gordon, ‘CPI at lowest level in 3.5 years while CBA pushes back cash rate cut forecast to 2025’, 30 October 2024, www.ratecity.com.au/home-loans/mortgage-news/cpi-lowest-level-3-5-years-cba-pushes-back-cash-rate-cut-forecast-2025, viewed 12 January 2025; e) RBA, ‘Statement by Philip Lowe, Governor: Monetary Policy Decision’, Media Releases, 4 April 2023 and 2 May 2023; f) RBA, ‘Statement by the Reserve Bank Board: Monetary Policy Decision’, Media Release, 5 September 2024; g) RBA, ‘Statement by the Reserve Bank Board: Monetary Policy Decision’, Media Release, 7 May 2024; h) RBA, ‘Statement by the Reserve Bank Board: Monetary Policy Decision’, Media Release, 24 September 2024.*RBA messaging was extracted from the most recent Monetary Policy Decision prior to each RateCity report.

2.22In fairness to bank forecasters and other market analysts, scepticism about RBA forward guidance was partly informed by the gross inaccuracy of forward guidance during COVID-19, when the RBA had famously assured Australians that ultra-low interest rates would most likely continue for years. This led the bank to review its forward guidance practices.[20] Further, RBA modelling published during this period often incorporated market assumptions about future interest rate moves—for example, modelling in the RBA’s Financial Stability Review, published in April 2023, assumed the cash rate would peak at 3¾percent, based on survey-based forecasts and market pricing in February 2023.[21] Distinctions between the use of market assumptions on rates to generate such economic projections, and the RBA Board’s own view, may have been lost on some observers.

2.23The gap between market expectations of imminent rate cuts and RBA messaging (and monetary policy decisions) may also reflect a disjuncture between the widespread lived experience of economic fragility on one hand, with record numbers of Australians experiencing homelessness or turning to food banks[22], and the persistence of consumer demand growth in aggregate on the other hand. Bank evidence suggested continuing demand-side inflation may have been driven by increases in spending in a particular demographic, while other demographics have absorbed extremely punishing hits to their living standards, as discussed later in this chapter.

2.24At the time of writing in January 2025, the cash rate target is still 4.35percent, and all banks are predicting a rate cut in February 2025.[23]

2.25At the August 2024 hearings, some banks reported that their forecasts pointed to multiple rate cuts in 2025. For example, Westpac said its forecasts:

…assume a cash rate cut of about 100 basis points…during next year, 2025. That's how we're seeing it. We're probably, hopefully, at the hardest part of the cycle, and we'll get those interest rate cuts early next year. But we've still got a bit of time to get through before we get there.[24]

2.26ANZ advised:

We still expect the Reserve Bank to reduce the cash rate by 75 basis points next year, with the first cut likely to be in February.[25]

2.27CBA noted that ‘the market, notwithstanding the governor’s comment, is still strongly indicating that there’ll be a rate cut this calendar year’[26] (this did not eventuate), while NAB’s CEO said that ‘I do feel like we’re getting to a point where interest rates will start to come down’.[27]

2.28Media reports in late November 2024 said the four banks were all predicting between three and five rate cuts over 2025.[28] Many Australians will be hoping that this time, the forecasts will be right.

2.29On the upside, pessimistic predictions of substantially higher unemployment under higher interest rates also failed to materialise, with unexpected resilience in the labour market in late 2023 and throughout 2024. For example, in July 2023, ANZ had warned:

Unemployment is expected to rise to 4.2 per cent this year and 5 per cent next year. We're conscious that this will be difficult for many.[29]

2.30In fact, the unemployment rate was just 3.8percent at the end of 2023,[30] and at the time of writing, the latest data release still has unemployment at just 4percent at the end of 2024.[31]

2.31The banks viewed the strength of the labour market as a positive for Australian households, with low unemployment helping most Australians to remain resilient despite the twin challenges of inflation and higher interest rates, and the worst cost-of-living pressures in decades. For example, ANZ commented in July 2023 that:

…the nation is fortunate that households have entered this period of rate increases with the benefit of a strong labour market. This has meant higher real incomes at the start of this interest rate cycle. Good incomes mean that people can better absorb increased expenses, even if they don't remove the pain altogether.[32]

2.32CBA similarly observed that:

The strength of the labour market is I think something overall to celebrate with the lowest levels of unemployment in 50 years. I think the resilience has probably surprised us a little as well. The last labour and employment data at 3.6percent was a bit stronger than we were expecting. … We don't see that deteriorating particularly quickly. We were probably expecting an unemployment rate above four per cent by the end of this year. That may end up being too pessimistic. We still hear that there is quite strong demand for labour more broadly.[33]

2.33By late 2024, bank predictions on peak unemployment had been dialled back significantly. For example, Westpac reported that:

The labour market has held up well. The economy is creating jobs, and therefore the unemployment rate has probably outperformed what we thought. If you look at our forecast now, we do see unemployment edging up a little bit into the high fours. That's still well below what we had pre-COVID so you always have to look at these things in context. We're hopeful of the so-called soft landing being managed and that will be good if we can maintain the robustness of the labour market while also getting inflation under control.[34]

Global economic conditions and future risks

2.34The banks acknowledged significant challenges and risks for the global economy—including ongoing inflation and higher rates across developed economies, Chinese economic weakness and geopolitical instability. The banks reported that supply chain blockages and energy prices had moderated, and export prices had held up reasonably well (despite easing). However, all stressed that much uncertainty remained.

2.35For example, in July 2023, NAB warned the Committee that the international outlook for inflation and economic growth remained ‘somewhat risky’:

…in the sense that every country is battling the same issue as Australia is with inflation and having to take moves to slow their own economies down to get inflation out. We are seeing that with our big trading partners: in the US, in Europe, and in the UK. Some are doing a better job than others, but it is still a reasonably tough situation to be dealing with globally. One of our biggest trading partners, China, is starting to come out of its COVID lockdown; it will be interesting to see where that goes. Overall, we have seen some industry pricing coming off in the agriculture sector. Many of the commodity prices for agriculture are well and truly off their highs, but they are still reasonable numbers in the long term. But the position globally is much more difficult than it has been for some time.[35]

2.36CBA comments concurred with this outlook:

You touched on geopolitical instability and energy prices. We also have seen dramatic volatility swings in certain markets over the last 6 to 12 months, some as a consequence of that; others unrelated in the context of higher rates and a rapid change in rates across developed economies around the world. This is clearly having an impact, and particularly in the US we saw some pressures in the financial system. Certainly risks abound, and while inflation is looking stickier than we would like around the world there is still some uncertainty about exactly where rates will finish.[36]

Most households resilient

2.37As Australia grappled with rising interest rates and a high-inflation environment, the Committee sought the banks’ insights on the impact on households. The banks have access to significant data on consumer and business behaviour in the real economy. Their evidence highlighted that despite areas of profound financial distress—particularly for younger Australians—customers showed remarkable resilience in aggregate.

2.38CBA told the Committee that households had experienced ‘extreme shocks in recent years’, and that many customers were struggling. It reflected that:

Many of our customers are finding it difficult to deal with the higher cost of living. … As you know, the effect of monetary policy is unevenly felt across the country, with different experiences for borrowers and depositors. Our insights tell us that, in aggregate, households are spending more on essentials and are cutting back on discretionary spend. We can also see that savings are being depleted, particularly by working families. Younger Australians, who tend to have lower incomes and smaller savings buffers, are the most sensitive to these changes in prices. Those aged 35 to 44 have the highest share of mortgage balances and are most exposed to higher interest rates.[37]

2.39At the time of the public hearings in August 2024, the RBA had not raised the cash rate since November 2023, providing some relief for households. The banks nonetheless observed that the high cost of living, including for essential goods and services, continued to weigh on consumer sentiment. NAB informed the Committee that its Consumer Sentiment Survey continued to show quite widespread stress among households—with one in three Australians reporting ‘very high’ stress related to the cost of living.[38]

2.40CBA similarly reported a ‘real lack of confidence’—with a ‘steep decline’ in consumer confidence over the six months to August 2024, particularly due to the long timeframe over which cost-of-living pressures persisted.[39]

2.41However, the banks also reported that most households were broadly coping and still managing to repay their loans, with low rates of delinquencies. The Committee heard that strong prudential lending standards, particularly post-Hayne Royal Commission, have made it more difficult for bank customers to access credit (discussed further in Chapter 6)—resulting in very few households being unable to meet debt repayments despite the unexpected rate rises.

2.42The banks advised the Committee that the number of customers failing to make repayments was historically low, and in some instances lower than before the pandemic.[40] For example, ANZ reported that at the time of the July 2023 public hearing, only $6 out of every $1,000 in its home loan portfolio was overdue by more than 90 days.[41]

2.43NAB made similar observations, noting that customers had been proactive in managing their finances in response to the changed situation:

There are a number of things that we've seen over the last few years. One is that customers have been paying down their mortgages. The number of months ahead for our customer base is about 41, on average. Our customers have taken the opportunity, over the last few years of lower interest rates, to continue to pay that down. We've seen the household balance sheets continue to strengthen over the last few years as well. House prices and savings rates have increased. We also see customers taking action to manage their own expenditures to ensure that they can deal with all of the outgoings that they're facing. We're seeing a pretty resilient customer base, and it's held up probably better than we expected this time last year.[42]

2.44Hardship and mortgage stress both increased over the course of the inquiry, but remained resilient overall. Westpac, for example, told the Committee in August 2024 that total loan stress had increased to 1.4percent of its loan book—but said that this was lower than expected, and that more than 78percent of its mortgage customers were ahead on repayments.[43] Westpac also advised that around 19,000 of its customers were in hardship arrangements, representing around 0.6percent of customers with a debt product.[44]

2.45The banks further observed that Australians had not borrowed to their maximum capacity, which had contributed to this overall financial resilience. ANZ shared that:

I think it's important to note that the vast bulk of Australians when they take out a home loan, even today, do not borrow to their maximum capacity. People are prudent. People are sensible. They're smart. They know that they're taking on an obligation for 25 years. They know there's uncertainty. They know that interest rates may change. They know their life circumstances and income level may change. People don't tend to borrow the most they can.[45]

2.46The banks also observed record levels of household savings, partly due to reduced spending opportunities during the COVID-19 lockdowns, as well as government job protection and income support measures. These had allowed some cohorts to build substantial financial buffers.

2.47However, the Committee heard that these buffers have been eroding as cost-of-living challenges continue, and the banks reiterated that Australians were ‘not having fun’.[46] They also advised that the pattern of resilience was not consistent across all demographics and locations.

2.48For example, in July 2023, NAB told the Committee that charities were reporting rising homelessness, while other households were ‘moving along quite nicely’:

We are seeing, in our conversations with the likes of the Salvation Army and other groups that are looking after those who are struggling, that homelessness is a real problem. You are seeing a bifurcation of some who are really struggling and hurting with the cost of living, the cost of housing and the cost of rental, and other people who are moving along quite nicely.[47]

2.49In 2024, NAB further observed that while most consumers were ‘getting by’, experiences diverged geographically as well:

Most consumers are getting by. They're juggling it, they're balancing it but they're not having fun; they're not enjoying it. It's tough. The problem is that the averages don't tell the story, and we live in a very diverse country. Regionally, if you live in WA, Queensland or the NT, economic growth is significantly higher than the averages that we're seeing in Australia. You can go into some regional towns and see new trucks and new tractors; people are doing well. We're probably going to have one of the best agricultural harvests we've had in a very long time. Conversely, if you look at south-east Australia, and I think Victoria in particular, people are doing it tougher. These economies are more correlated to domestic demand, more correlated to interest rate settings than the resource correlated economies I mentioned prior. I think that's where we're seeing the hardship emerging in our books. I think Victoria and to some extent New South Wales are showing numbers slightly worse than our averages.[48]

2.50The banks also reported to the Committee on national trends in spare cash flow, repayments on credit cards and unsecured loans, and the experiences of recent home buyers and renters—discussed below.

Spare cash flow

2.51The Committee discussed trends in spare cash flow with the banks. Spare cash flow is important for household financial resilience, providing a buffer against economic shocks and unexpected expenses.

2.52At the time of the public hearings in July 2023, the ‘restrictive’ phase of the monetary policy cycle was well and truly underway. Although inflation had come down from its December 2022 peak, it remained both quite high and broad based. Households were therefore experiencing both persistent inflation and interest rates well above the levels forecast during COVID-19. Lower-income borrowers with limited cash flow and savings, as well as first home buyers and borrowers with high debt-to-income ratios, were especially vulnerable to financial stress, with less ability to absorb cost increases.

2.53The Committee discussed projections from the RBA predicting that a significant number of households would have negative spare cash flow under higher rates. Released in April 2023 as part of the RBA’s Financial Stability Review, the RBA modelled both baseline and adverse scenarios for the period between December 2022 and December 2023.

2.54The RBA’s baseline scenario projected that the share of borrowers with negative spare cash flow would reach around 15 per cent by the end of 2023, with the adverse scenario predicting 17 per cent. The baseline scenario assumed that the cash rate would peak at 3¾percent, based on survey-based forecasts and market pricing at the time of the February 2023 Statement on Monetary Policy.[49]

2.55The Committee sought the banks’ views on these projections. The banks, having highlighted resilience across most of the economy, did not fully agree with the RBA’s modelling and some of the underlying assumptions used.

2.56For example, CBA advised that the projections were ‘not actually reflective of the major banks’, as the RBA’s data was based on residential mortgage-backed securities rather than bank loans.[50] Further, CBA suggested that the RBA had made conservative assumptions about household expenditure, leading to projections significantly worse than CBA observed among its customers:

In the order of 80 per cent of that volume [of residential mortgage-backed securities] would be coming from nonbanks; whereas they represent about five per cent. So it's sort of heavily skewed, and I'm sure the RBA adjusts for that, but it's not actually reflective of the major banks. It's probably a much easier data series for them to analyse. I'm sure they have adjusted for it; I just don't know how they've adjusted it. … Secondly, as I understand it, they have made a number of very conservative assumptions, particularly around household expenditure, and then they have made some assumptions within the way that data is presented. Ultimately, what does that lead to? I think it's orders of magnitude higher, certainly, than what we are experiencing across our customer base at the current cash rate. …

As I said, I've seen the data from the RBA. … It's not reflected in what we are seeing. It would also, for example, assume that no customers were able to switch from principal and interest to interest only. I think the number in terms of negative cash flows is much lower than that. Obviously, with each subsequent cash rate increase, that does increase. As I touched on earlier, even if you are not in negative cash flow, clearly your repayments or your rental payments are an increasing proportion of your household expenditure. With everything else going up—groceries and energy prices—then of course households have less available for discretionary expenditure, which would be putting some households under pressure. We see and feel that acutely.[51]

2.57ANZ similarly informed the Committee that its customers appeared to be ‘far more resilient’ than the RBA’s modelling suggested. Specifically, ANZ highlighted that the rise in nominal incomes over recent years had mitigated the impacts of increased living costs and home loan obligations. Regarding the RBA modelling, ANZ noted that it would ‘have to do some real work to sit down and understand more clearly where that data came from’, as the results were opposed to its own experience.[52]

Credit cards and unsecured loans

2.58Credit cards can serve as both a lifeline and a potential risk for customers under pressure. However, evidence from the banks indicated that customers were not over-relying on unsecured credit, and delinquencies have stayed low. In July 2023, the banks informed the Committee that arrears on credit card repayments remained low and were not a significant concern.[53] By August 2024, stress among credit card customers was ‘slightly up’, however customers were generally not showing signs of dependency on credit limits for basic living expenses.[54]

2.59ANZ highlighted that one contributing factor was the overall shift of customers away from using credit cards as a primary source of unsecured credit. This trend was further influenced by responsible lending requirements, which have made it harder for customers to obtain credit cards. Consequently, the demographic of credit card users has been skewed towards older, wealthier customers, or those interested in accruing rewards.[55]

2.60Westpac further reported that during the COVID-19 pandemic, credit card debt fell by 30percent. A significant factor contributing to this decline was that many individuals withdrew funds from their superannuation accounts to pay off their credit card debts. This option was part of the Government’s early release scheme, which allowed eligible Australians facing financial hardship to withdraw up to $20,000 from super—with many taking advantage of this opportunity to reduce high-interest debt. Since this ‘step down’ in credit card balances, Westpac had not seen much growth since.[56]

2.61While credit card stress was not significantly concerning to the banks, CBA observed that personal loans tended to exhibit signs of financial stress earlier than credit cards. CBA informed the Committee in July 2023 that it had seen an increase in arrears on personal loans, although this was subject to ‘some seasonality’:

As I go through and listen to calls in our financial assistance solution team, who are to support customers in financial difficulty, I am seeing an increase in calls coming from customers with personal loans who are overcommitted. That is probably the area we are working from an absolute basis, at very low levels. But in the four or five calls I listened to, more than half of those were personal loan customers, which is a much smaller book than the rest of our products. It gives you a sense of where the incidents would show up, but it is very much related to some aspects of the community and renters in particular, who are finding it very challenging at the moment.[57]

2.62NAB reported that both credit card and personal loan arrears remained low among its customers, and credit card balances were not escalating. However, it also pointed out that the banks had no visibility into the use of non-bank credit, such as pay-day loans or Buy Now Pay Later schemes, where charities were picking up signs of stress:

One of the areas that we look at historically, when there is an economic downturn…is unsecured lending. I am talking about credit cards and personal loans. That is often the spot where we see stress start to emerge early. There are two things we look for there. One is customers getting behind on repayments, so missing repayments. We talked about that earlier: that 30-day, 60-day and 90-day delinquency. The other thing we look for, particularly in credit cards, is whether there has been a spike in the amount of debt that customers are leaving on their credit cards rather than paying them down. The good news for customers is that we are not seeing either of those things at the moment. Both of those measures are well below long-run averages and pre-COVID, but we do watch those. What we cannot see…are those who are using other forms of credit, like payday lending or Buy Now, Pay Later who aren't our customers. They are the customers that the Salvation Army and the Good Shepherd are seeing starting to emerge under stress.[58]

2.63NAB noted that ‘[t]he volume of no-interest loans that we have through Good Shepherd is up about 20 per cent and the dollar value out is about 40 per cent up over the last 12 months’ to July 2023,[59] suggesting areas of very severe hardship. Further evidence on the banks’ efforts to support customers in hardship is presented later in this chapter.

Home equity withdrawals

2.64The Committee also explored whether customers who had paid off a larger share of their home loan had started drawing on their home equity. The banks said they had not seen evidence of this.

2.65ANZ observed that most Australians were ‘significantly ahead’ on their home loan obligations, continuing to meet minimum monthly repayments even when interest rates increased. In circumstances where households had paid off more debt than required, and so had higher equity, ANZ said it had not observed a significant change in households redrawing these funds for spending.[60] Further, ANZ told the Committee that it had not seen trends of those who owned their home outright seeking to take out new loans against the value of their home or otherwise access the equity.[61]

2.66CBA concurred, telling the Committee that it had not observed changes in home equity withdrawals.[62]

2.67The Committee also enquired into trends in discretionary spending, particularly noting data that demonstrated growth in discretionary spending among the over-50s cohort, while discretionary spending for younger cohorts—particularly those in their mid to late 20s—had declined.[63] That data is discussed later in this chapter.

Surprising resilience among first home buyers, despite ‘doing it tough’

2.68The experience of more recent home buyers was also discussed, particularly those who had secured mortgages at historically low fixed rates, and thus faced significantly higher repayments as fixed terms expired. This discussion also highlighted the impact of rising house prices, which have led to higher levels of debt among new buyers.

2.69The banks shared their observations on recent first home buyers. For example, CBA observed that most young people who had bought their first home during the pandemic had reduced their spending. Further, approximately a third of recent first home buyers had reduced their spending by more than 30percent year-on-year.[64]

2.70Westpac reflected on its customers in hardship arrangements, which mainly consisted of first home buyers with mortgages, and people with higher loan-to-value ratios (LVRs). Westpac commented that:

Of the 19,000, about 73 per cent of them are mortgage holders. We are finding that we've got about 70 per cent of people in that group who are into hardship for the first time, but about 80-odd per cent of them only need support for three months. Normally, there's been some kind of life event or some reduction in income, and, after a three-month period, they get back to repayments. So it's a particular group we see in mortgages. They are mainly owner-occupied first-home buyers and those with higher LVRs.[65]

2.71ANZ acknowledged that those who had recently purchased a property were more likely to be stressed, but also noted that, in aggregate, total loan stress was still ‘remarkably low’.[66] ANZ explained that even though households had availed themselves of home loan rates as low as 1.94percent during the pandemic, the serviceability buffer requirements meant that banks had assessed their ability to meet repayments at a rate of over 5percent. Surprisingly, ANZ reported that people facing the widely feared ‘mortgage cliff’ had been more resilient than the average customer:

For most of those clients they're just rolling into and now they're using the buffer. What's surprising—and it's certainly not intuitive—is that the cohort of people who went from fixed to this high rate floating, the mortgage cliff that people keep talking about, are actually less stressed than the average customer. The reason for that, even though it's counterintuitive because they're the ones having the biggest increase in home loan repayments, is they're prepared for it. They know it's coming. It's not a surprise. They knew. Of course, the banks, including ANZ, talk to our customers well in advance of that change coming, and people prepare and they modify their household budgets to ensure they can meet their obligations.[67]

2.72Similarly, NAB said it had not seen a ‘material difference’ in the performance of first home buyers compared with the rest of the portfolio. Acknowledging that first home buyers were likely to be more highly leveraged and have lower incomes, it said it was watching this segment ‘pretty closely’.[68] In 2024, NAB reported that younger families who had purchased a home in the past five years were probably the worst-off mortgagors, but that they too were managing with increased costs.[69]

Renters ‘doing it toughest’ with significant rent increases

2.73Approximately one-third of Australians rent their homes, yet discussions on economic conditions often focus on mortgage holders, particularly those with variable rate loans who are directly impacted by interest rate changes.

2.74The rising cost of renting a home has become an increasing concern, driven by a combination of chronic low housing supply and very strong demand for rental properties. Australian rents rose 7.6percent over the year to September 2023—the largest annual rise since 2009[70]—and a further 6.7percent over the 12 months leading up to the September 2024 quarter.[71] Advertised or ‘market’ rents (for new rental contracts) increased even higher, recording consecutive years of double-digit growth. The PropTrack Rental Affordability Report released in March 2024 said that ‘affordability has hit its worst level in at least 17 years, when records begin’ and that ‘[m]edian-income households have never been able to afford so few rentals’. It further reported that:

In 2023, median advertised rents surged 11.5%, which followed even stronger growth in 2022, when rents grew 15.6%. Relative to before the pandemic, rents nationally are up 38%, which has significantly worsened affordability.[72]

2.75The situation has been exacerbated by the increases in interest payments for mortgaged landlords, which are usually passed on to tenants, thereby adding to their cost-of-living expenses in an already challenging economic climate. These factors collectively contribute to the financial strain experienced by renters, highlighting the need for comprehensive policy responses to address housing affordability.

2.76Despite having less visibility into the renting cohort, the banks shared their observations with the Committee regarding renters’ economic position. They noted that renters typically face unique financial pressures, including precarious employment, low incomes, rising housing costs (usually without commensurate increases in the value of property assets they own) and limited opportunities for savings, which make them particularly vulnerable to cost-of-living pressures during a downturn.

2.77For example, ANZ told the Committee that the:

…renter population, for a number of reasons, is less likely to have secure employment—not always, but they're less likely. They're less likely to have higher incomes and more likely to be either young or older. They tend to be in the barbells of the community… frankly, cost of living is much more likely to impact you if you're a renter than it is elsewhere. It's a gross generalisation, but those are where the cohorts are.[73]

2.78Similarly, CBA noted that the renter cohort tended to ‘skew younger’, and that Australians who did not own their own home were under greater financial pressure:

Then, obviously, there are people who haven't quite bought their own home—another third of Australian households would be renting. They tend to skew younger. As we touched on earlier, that's what we're seeing in terms of greater financial pressures outside our mortgage portfolio—customers who are renting. Again, there will be some subtleties and nuances in between those, with some generalisations there.[74]

2.79The banks acknowledged that astronomic increases in rental prices were a source of financial stress for many households. NAB told the Committee that renters were ‘doing it toughest’, with some households experiencing rental increases of 50 to 60percent, without increases in income keeping pace.[75]

2.80ANZ, which highlighted that it had regular discussions with community groups, referral networks and financial counsellors, told the Committee that it was hearing a lot of concern around rentals:

We've seen the recent figures on increasing rents. They are astounding. It's not surprising that part of the community would be really struggling. When you overlay that with cost of living generally, with utilities increases, I think that is clearly where the current economic pressures are being felt most strongly. While we watch very closely our [loan] book, we're also really conscious that we don't see possibly where some of the worst pain is being experienced.[76]

Differences in spending behaviour based on age and property ownership

2.81At the July 2023 public hearing, the Committee asked CBA if its customer spending data could shed light on widespread reports of a ‘two-tier economy’ in Australia, with some Australians ‘really hurting’ and others ‘probably navigating okay’. CBA replied:

Mr Comyn:As you were touching on in the question, I think averages can be misleading. … People's experiences are quite different. I could talk to the demographics. We would say that the age bands we're seeing the greatest strain at the moment are between the ages of 30 and 34. The least strain is between 60 and 74. There are obviously dimensions within that. We see renters under more pressure than those with a mortgage, and those who own their own home outright, the least. We can see changes in discretionary spend, changes in buffers. …

Mr Cohen:Just to give a bit of colour to Mr Comyn's comment around the under 35s reducing their expenditure more so…just within that under 35 band where we are actually seeing the biggest reductions in expenditure is in the 25 to 29-year-old range. There we're seeing considerable reductions in a number of areas—retail, travel, et cetera—and more so than in the other cohorts within that sub-35 band. It's an interesting area to watch. They could be impacted considerably by people who are facing rental increases… That's the age [25–29 years] where you might expect people to move out of home, for example, move out of their parents' home, incur their own rent, food, energy, et cetera, costs. We issued a report in May around expenditure across the different cohorts, and our early observation was that particular cohort is probably impacted most by rental as well as taking on costs that perhaps in the past, before moving out, they haven't incurred.[77]

2.82By contrast, the Committee noted that CBA data had shown an increase in discretionary spending by Australians over 50—despite successive interest rate rises—whereas ‘particularly for those in their 20s, it seems to have fallen off a cliff’ (in a Committee member’s words). Asked why this pattern had emerged, CBA suggested higher rates of home ownership and lower property debt among older Australians, and rental costs borne by younger Australians, were making a decisive difference. CBA also mentioned the role of greater savings buffers accumulated during COVID and investment income:

…by far the biggest explanatory factor for that would be that above that age…there's a much higher proportion of people who own their own home outright, so they're less subjected to or certainly have a smaller proportion of outstanding debt, and, therefore, a function of what the impact would be on their household spending. Then, generally speaking, people tend to have larger loan sizes earlier. Then, obviously, there are people who haven't quite bought their own home—another third of Australian households would be renting. They tend to skew younger. As we touched on earlier, that's what we're seeing in terms of greater financial pressures outside our mortgage portfolio—customers who are renting. Again, there will be some subtleties and nuances in between those, with some generalisations there. But, by far, that absolutely will be the biggest driver. … Again, broadly speaking, people who are above 50 have larger savings buffers—larger savings that were built up during the course of the pandemic and beyond. Obviously, very substantial household savings were developed over that period, in excess of $250 billion, and that's unevenly distributed. Then I think some of that's the flexibility of not feeling as acutely some of the pressures of the cost of living. I also think that customers who tend to be in some of those older demographics have far less borrowings and probably have more investments, including things that might be tied to either the share market or the cash rate—fixed income et cetera. In many of those cases, they may be deriving more income from savings and deposits.[78]

2.83The Committee requested that CBA provide, on notice, detailed breakdowns of savings and spending trends across demographics. CBA provided the following data to the Committee later in 2023 (Figure2.1), showing the dramatic divergence in deposit balances, spending and savings in Australia by age over 2022 to 2023.

2.84The data shows that Australians under 35 years of age significantly reduced their savings and also reduced spending over the year to July 2023. In contrast, older Australians—particularly those aged over 65 years—had continued to grow their savings and deposit balances, as well growing their spending. Further, while spending appeared to be decreasing or at least slowing for most segments, it was accelerating for older Australians.

Source: CBA responses to questions arising from public hearing of 13 July 2023. See House Economics Committee, Review of Australia’s Four Major Banks, Additional Documents, www.aph.gov.au/Parliamentary_Business/Committees/House/Economics/Ausfourmajorbanks/Additional_Documents, viewed 3 February 2025.

2.85The Committee questioned the banks further about this data at the August 2024 public hearing. CBA provided the following update:

What you can see—and we see and hear it clearly and directly—is that obviously higher prices and inflation, which are very challenging for many households, are continuing to erode savings. Then, if you look at spending across different cohorts, a larger proportion, particularly of younger cohorts, is now being forced into essential, and they're reducing their discretionary spend. And then—which is entirely consistent with [RBA] Governor Bullock's comments—inflation has had a disproportionate impact on lower income earners, and we can see that in some of the data that we've presented on both spending and saving. There's a faster depletion. I can refer to the slide, but I know from a savings perspective in the 25- to 34-year-old cohort it's down 11 per cent, which is basically double the rest of the cohort if you look at the lower quarter of income. So we see that consistently, and that's to be expected. Generally, younger people have fewer financial savings, fewer buffers, less resilience. The vast proportion of household debt, particularly in the form of mortgages, is across the 35- to 44-year age group, so they're bearing the effects of monetary policy and the cash rate. But quite clearly and simply, even for those who do not have debt, you can see the impact of inflation.[79]

2.86Westpac added:

…interest rates are a blunt tool. They don't really differentiate based on circumstance. So I think some of the changes to help people on lower incomes—whether it be energy rebates or assistance with tax—have been good because they're the people doing it tough. … In terms of age groups, I don't think there are any surprises. Those in their 30s to 40s typically have mortgages, so they're the people who have been most impacted by rate rises. Likewise, savings tend to be held by more later in-life people, so they're benefiting from the higher rates. I don't think we're seeing anything different to what you would have heard from other banks.[80]

2.87The Committee was concerned by the equity implications of these trends, and of CBA’s supporting evidence that much of the divergence is attributable to differences in property ownership.

2.88Housing affordability has deteriorated dramatically over the past decades, with steadily declining rates of home ownership and steadily increasing rents and mortgage debt burdens on younger Australians, now reaching crisis proportions. Many young Australians are functionally locked out of the dream of home ownership, and most that do manage to buy homes have to rely on the so-called ‘bank of mum and dad’.[81] (Housing affordability is discussed further in Chapter 6.)

2.89The above CBA data suggests a further cruel side-effect of the intergenerational housing divide, in conjunction with the ageing population. The CBA data suggests that contractions in consumer demand in response to high inflation and monetary policy tightening from mid-2022 to mid-2023 were disproportionately borne by Australians under 35, who significantly reduced their living standards. However, this counter-inflationary impulse may have been more than offset by increased spending by those older Australians with the security of home ownership and (in many cases) investment and interest income streams—implying an ongoing impetus to inflation from aggregate consumer demand in net terms.

2.90Although the large increase in savings by the 65+ cohort is consistent with the usual operation of monetary policy—with higher interest rates incentivising increased savings—the Committee was concerned to see that older cohorts had increased spending at rates well in excess of target inflation. The resulting persistence—and possible net increase—of aggregate consumer demand implies inflation and interest rates that stay higher for longer, and the impact of this will disproportionately be felt by younger renters and owner-occupiers with large loans, as discussed previously.

2.91At the time of writing, CBA’s latest quarterly CommBank iQ Cost of Living Insights report (November 2024) suggested that these divergences in spending behaviour are persisting. The Insights report stated:

Younger Australians continue to reduce spending in response to cost of living pressures. Under 40s have again recorded negative overall spending growth, signalling a consumption drop.

Spending growth among 60 to 69 years olds coupled with falling inflation suggests consumption is expanding for those over 60.[82]

2.92CBA’s media release elaborated:

Young Australians continue to feel the pinch more than any other age group with those aged 18–29 cutting back on spending by 2 per cent over the past year, with a notable decline in both essential (-2.3 per cent) and discretionary (-1.9 per cent) spending. In the past 12 months 30- to 39-year-olds have also recorded negative overall spending growth, with a 1.1 per cent drop in essential spending and 1.0 per cent drop in discretionary categories.

By contrast, those aged 60-69 increased spending by 3.9 per cent and over 70s by 7.7 per cent, underscoring the continued generational spending gap.[83]

Experience of businesses

Overview

2.93The banks broadly perceived the business sector as resilient.[84] Although the banks identified several sectors experiencing higher levels of stress, they also noted factors that mitigated the potential for more widespread and severe stress across the broader business landscape.

2.94The Committee heard that while sectors like retail, construction and healthcare have been facing more difficulties, overall business conditions were stronger than anticipated, with some experiencing good trading conditions. CBA reflected:

…there are certainly examples where businesses, notwithstanding the challenging situation…have had some periods of good trading conditions; their balance sheets are in good shape. I think there are some instances where there were labour shortages; they're prepared to make some additional investments at times. Some of the access to capital, machinery and equipment has been harder to source and procure; that's now easier. There would also be examples there that people would be increasing working capital. They're getting squeezed in some sectors. Inventory management has been really important. Many companies are needing to discount to get some of the inventory that they might be holding away. Often that will increase a firm's need for working capital. There are a variety of different circumstances, and, in some areas of retail, trade, construction, commercial property and probably in some aspects of health care, they would be some of our weaker [sectors]. But overall, when we look at things like hospitality, we actually would have expected more weakness. We can see that people are spending less, but patronage is still quite good. Trading conditions have definitely softened, but they're probably stronger than we would have otherwise anticipated.[85]

2.95Westpac informed the Committee that despite an overall decline in business investment, certain sectors demonstrated resilience and growth. Investments in the energy transition, infrastructure and mining sectors meant that the ‘drop-off in business investment’ was ‘not as big as you would think’.[86] As noted previously, NAB’s evidence also highlighted the existence of a ‘two-speed economy’, with economic performance varying across different sectors and regions.[87]

2.96However, while some sectors and geographies were doing well and were ‘ambitious to grow’, particularly in resources and agricultural industries, this was not the case across the whole business community.[88] During a cost-of-living crunch, households prioritise essential expenses such as housing, food and utilities over discretionary spending. Some banks noted that this reduction in non-essential spending and decreased consumer demand had negatively impacted business customers in demand-sensitive sectors.[89] NAB, for example, observed that:

We’re seeing that with probably less discretionary expenditure flowing through to some of our business customers as well. Those businesses that rely on discretionary household expenditure such as cafes, restaurants, hotels, fashion retailers and others are experiencing tougher trading conditions.[90]

2.97CBA informed the Committee that one of the most acute areas of stress within its business customer base was housing construction and development—‘a consequence of a rapid escalation of input costs and a number of other factors that have put a real challenge on a number of those companies’.[91] Over the course of the inquiry, the Committee heard that other reasons for the stress in the construction and development sectors included labour shortages, delays in project timelines due to planning regulations and approvals, and suppressed consumer demand due to higher interest rates.

2.98The Committee asked about the burdens of labour shortages and increasing wage costs on businesses more generally. The banks suggested that labour shortages were a significant concern; less so wage increases. For example, CBA advised in August 2024 that although wages growth was ‘higher in certain sectors’:

…it's at a reasonable and certainly forecastable level. We understand and welcome those wage increases, particularly in certain sectors. I don't hear that very often as a specific concern. Labour shortages were an enormous concern on the minds of businesses.[92]

Small businesses

2.99In challenging economic conditions, the resilience of small businesses is important for maintaining broader economic stability. According to data published by the Australian Small Business and Family Enterprise Ombudsman, approximately two-thirds of Australians are employed by small- and medium-sized enterprises (SMEs).[93] The Committee questioned the major banks closely on how their small business customers were coping with inflation and rate hikes, and on the adequacy of available business credit lines—particularly for start-ups.

2.100NAB is Australia’s largest business lender. In July 2023, it told the Committee that it had good visibility into small business conditions. It said the sector was proving resilient overall, but key industries showed emerging signs of stress, including construction, farming, hospitality and discretionary retail:

Mr Dooley:As Australia's largest business bank, with a particularly strong footprint in 'small', we get to see a really good picture of the health of the economy overall, and I think we've seen generally a pretty good performance in resilience…across that client base. I'd say that what we call our 90-day past due and gross impaired assets ratio to our loan book at March was 56 basis points, and that's still below the pre-pandemic levels. … That being said, we are starting to see stress, and there have been well-reported sectors…where stress has emerged. We've certainly seen issues emerge for construction, particularly with house construction for builders and others. …

There [are] areas where we're starting to see an increase, again, off a pretty low basis, …I'd say that probably, in areas such as construction, property and business services, we have seen a little bit of challenge [and] in some parts of the agriculture book…we've seen commodity prices fall away and some parts of the agri sector impacted by supply chain issues. Costs for farmers continue to increase, including energy costs, and the difficulty in getting labour and other aspects continue to be a challenge for them.

In some parts of hospitality and those with exposure to discretionary retail expenditure, we've seen areas of increasing stress but nothing to be alarmed about at the moment. Certainly, we're watching it pretty closely…

Mr McEwan:Just one other fact point. To the end of March 2023, in our own business we saw a very large uptick in sales coming through into the small business marketplace. This turnover of $5 million or less was very strong…we had seen strong sales in that market, which says to me that it still has good resilience; it's starting to quieten down a wee bit but it is still very strong.[94]

2.101In August 2024, the Committee questioned the banks about ASIC insolvency data indicating the highest rate of business insolvencies in decades. The Committee also asked about the impact of Australian Tax Office (ATO) pursuit of tax debts, in particular COVID-era debts that had been suspended for several years as an emergency support measure.

2.102CBA clarified that the uptick in ASIC insolvency data largely reflected a change from the unusually low rate of insolvencies during COVID-19—when many struggling businesses were protected from bankruptcy by extraordinary government support measures. It further explained that worsening insolvency data did not appear to be flowing through into credit losses, though smaller businesses were struggling:

If you look at our results, it's not really flowing through into credit losses. There are some examples… In areas like construction, there have been higher levels of insolvency. … Some part of that is, entirely reasonably, activities to recover…outstanding debt with the ATO, and then it's just a multitude. It tends to be the smaller businesses that don't have debt or much debt but also don't have as much financial resilience, but, whilst every insolvency is no doubt very difficult, they are still at reasonably low levels.[95]

2.103ANZ informed the Committee in August 2024 that Australian small businesses were struggling with higher costs, including increased wages—but were resilient in aggregate. ANZ said its data suggested small businesses were managing well, but warned of further pain to come:

…our small-business customers are also facing higher costs, including for wages, and we know from ASIC insolvency data that more businesses throughout the economy are getting into trouble; however, our data seems to suggest that, despite these conditions, small-business customers at ANZ are managing well. Published figures for our small-business customers indicate that around two in every 1,000 are in hardship; that's encouraging, and it suggests that many of our small-business customers are managing the challenges of today's economy well. Of course, under the headline figures are people, and those people are finding it harder to pay housing and everyday expenses, and businesses are struggling with higher costs. Sadly, we expect that more people in business will get into difficulty in the coming months.[96]

2.104The Committee also questioned the banks on policies to support businesses in hardship—discussed at the end of this chapter.

2.105The Terms of Reference for this inquiry include ‘the role of banks in supporting the flow of credit, including to small businesses’. Adequate financing channels for small businesses are essential for continued economic growth and productivity—as well as to help those businesses navigate financial challenges. The Committee questioned the banks on their current lending activities to small business. Committee members were particularly interested in the availability of unsecured lending, to support pathways to entrepreneurship and business ownership for the growing number of young Australians who cannot put up one or more residential properties as collateral.

2.106RBA data indicates that the vast majority of lending to small businesses in Australia is secured, usually by residential property—and this is usually the business owner’s own home. As house prices become increasingly unaffordable, the Committee raised concerns that a lack of access to unsecured lending would potentially limit productivity gains from the creation of start-ups and other new businesses by younger generations. Data from the RBA shows lending to small businesses has flatlined, while lending to medium and larger businesses has increased.[97]

2.107The banks told the Committee that they were pursuing increased lending to SMEs, and that it was a highly competitive area. They also said that while businesses tend to prefer secured loans in Australia—as secured loans attract lower interest rates than unsecured loans—the banks take a case-by-case approach to SME lending. They also advised that they were pursuing opportunities for enhanced data capabilities to lend against other guarantees, besides property.

2.108The banks also highlighted the constraint of responsible lending rules for small businesses. Westpac told the Committee:

Responsible lending rules apply to small business up to $5 million in lending. Broadly, that means, in a sense, that you need to have a bit of a track record to access debt. … In housing, it's probably a little bit easier, because we're looking at the history of people's salaries, and that's pretty predictable. We'll lend to small businesses, but we do have to take account of responsible lending.[98]

2.109These responsible lending obligations have been suspended for small businesses since 2020—with the original COVID-era suspension being extended four times since, most recently in October 2024.[99] The Government’s latest renewal of the exemption was welcomed by the Australian Banking Association (ABA), which said it would ‘help ensure small businesses across Australia can continue to access the credit they need to thrive and grow’.[100]

2.110CBA also advised it had risk appetite for small business lending, and highlighted its support for a diverse range of businesses, including significant assistance to small businesses during the pandemic through underwriting and guarantees: ‘We underwrote about 50 per cent of the SME loan guarantee products to all of our smaller business customers’. However, CBA advised that the risk profiles of many start-ups were a challenge:

I wouldn't say that we are great at start-up. For a financial institution there's at some point equity, and, where debt looks like equity, that's not necessarily in our risk appetite. It depends; we certainly have supported and lent to a number of different businesses.[101]

2.111ANZ offered a similar observation about the differences between bank loans and equity funding, suggesting that there was ‘something lost in translation here’:

We actually convened—I think it was when I was chair of the ABA—a round table where the Reserve Bank brought in COSBOA and the various small businesses so they could talk to the banks and tell them what they were missing. What we found—and I'm paraphrasing and not pointing the finger at small business—is that, when a lot of small businesses say they can't get access to funding, in our language, as bankers, what we hear is that they really need equity, but I'm not saying we're right. They don't have business plans. They don't have cash flow. It would be imprudent—forget regulation—to lend to somebody with just a big idea. So what they really need is equity. I'm not shifting the blame here, but that seems to me to be where the real gap is.[102]

2.112The banks told the Committee they were pursuing opportunities to provide better lending to small businesses, particularly through leveraging insights from long-standing relationships and better use of data. NAB highlighted opportunities available to approve loans more quickly for healthy businesses based on high-quality data, and to lend against working capital and cash flow, not just property assets:

…in certain cases where we have a long history with customers and we have good data for them, we would approve them in a matter of minutes and actually have the cash in the account in a matter of minutes, which is quite an incredible capability. The issue is that it doesn't happen enough. And I need more money being delivered that way.

We're working really hard also to improve the data capabilities that we have of our customers, leveraging cloud accounting platforms and our own data and information if we have a deposit account. When we do that really well, I think the data gives us a very good sense of the working capital and cash flows in a business. And it's my view that has lending value, so that we can lend against that safely, because it's important that we do lend safely. Everyone always needs to remember that it's not our money; it's our depositors' money that we're lending. But I think there's more and more opportunity for us to leverage data to make lending decisions versus always relying on physical security.[103]

Hardship policies

2.113In May 2024, ASIC released a report reviewing how 10 large home loan lenders had supported customers experiencing financial hardship. Concerningly, ASIC found that lenders tended to focus more on financial risk and operational efficiency, and that hardship functions were not managed in a customer-centric way. ASIC’s key findings were that:

• lenders did not make it accessible for customers to give a hardship notice
• assessment processes were often difficult for customers
• lenders did not communicate effectively with customers, and
• vulnerable customers often were not well supported.[104]
  114. The report said more than a third of applicants for financial assistance found the process so difficult they dropped out at least once, and that 40percent of customers who received assistance fell into arrears immediately after the assistance ended.[105]
  115. The Committee closely questioned the banks on how they were supporting customers in financial hardship—especially in the context of community concerns about record banking sector profits.[106] The banks described a proactive approach to contacting customers experiencing financial strain under current conditions, including the use of algorithms to identify customers who might benefit from hardship arrangements.
  116. For example, NAB advised:

We've got about 800 staff members in our area who look after customers who might be experiencing more financial difficulty. Through that process, we talk to them about various options to either reduce or defer payments for a period of time to help them get back on their feet; to look at the amount of interest they're paying and maybe adjust that for a period of time to help them get back on their feet; but, more particularly, to stay in close contact with them. It's most important for obviously our customers who are experiencing difficulty but also the communities in which they live that we get as many of our customers back into a viable situation as quickly as possible.[107]

2.117CBA detailed a range of avenues that could be used to provide assistance to customers, including proactive and early contact. CBA reported in August 2024 that ‘[i]n the past year, we have deliberately and proactively contacted customers and have initiated 132,000 tailored payment arrangements to those most in need’.[108] CBA also highlighted that for customers with broadly healthy finances but experiencing unexpected temporary shocks, it had made more than six million customers eligible to access up to $2,000 in emergency credit with no interest and no monthly fee.[109]

2.118ANZ told the Committee that in response to fears about customers ‘sleepwalking into hardship’ due to the increased cost of living, it had provided extra training to frontline staff and boosted the number of dedicated hardship roles, in addition to operating hardship hubs. ANZ also detailed its use of algorithms to identify customers at risk:

Some of the other banks are doing this as well, but we know that the earlier we can start working with someone in hardship the faster and the more effective the recovery can be. One of the things we have put quite a lot of effort into more recently is trying to be more predictive and working with people before they actually technically get into hardship. We have created a bunch of algorithms to sweep across our customer cohort. We can see figures that indicate if someone is suddenly getting unemployment benefits, or if their income drops by more than 10 per cent. We can pretty well consistently see their outgoings and expenditures. If we start seeing that in a period of time their expenditures are exceeding their income, we look across all of that and we start to send pre-emptive messaging out to those customers asking them to come and work with us earlier. Again, the earlier we can work with them the better. The other thing we are doing is really making sure that we've got specialist care for people who are vulnerable. It is bad enough to be in hardship but if that hardship is also overlapping with something like financial abuse or domestic violence, then we've got a lot of hardship hubs as well. We have a lot going on to make sure that we are in the best place we can be to look after our customers.[110]

2.119Westpac said it uses a similar indicator to identify customers’ vulnerability and assess the likelihood of financial difficulty, including for those with credit cards:

If we have a look at the things that we do, we take a range of data to see where there might be some vulnerabilities. We think about people in hardship and people who have applied for hardship but didn't complete it. We look at people who may have dishonour fees, people who may be constantly paying interest on their credit card and people who may have gambling spend. We look for a range of different things to see where there might be cohorts of customers in trouble. As you mentioned, we do have the area dedicated to hardship, so we're looking for customers who might need some assistance, and there are a broad range of things that we've provided that I went through earlier today. For your question about non-mortgage holders, what we probably look at there is credit card debt. We look for people who might be in persistent credit card debt. How we define that is that we look at someone who may have paid interest 10 months out of 12 months. If they're constantly paying interest on their credit card and not getting ahead, then we will proactively contact them—we do it four times a year, every quarter—and we will just give them information about a range of different things that they could do.[111]

2.120ANZ shared that it was also using data analytics and modelling to identify hardship triggers for small business customers, including reduced income or negative cash flow. ANZ told the Committee that although some small business customers were ‘hesitant’ to reach out for help, it had a proactive approach to giving support, including pausing or reducing payments, and restructuring loans.[112]

2.121During the time of the inquiry, the ATO began recovering outstanding business tax debt suspended during COVID-19. CBA described how it was supporting customers through this change:

There's about $50 billion of that outstanding. About $10 billion of that, by and large, might be to Commonwealth Bank customers. We've changed our policies so that we can support customers with the ATO debt. I can't remember what the cap on that might be; maybe it's half a million dollars. If you have to repay the ATO you have to do that at an 11.34 per cent interest rate over a two-year amortising loan, which is quite challenging. … We probably have some of the capabilities to be able to manage that debt. That's to try and give you an example. We have to be very cognisant of the decisions that we're making, because if we put either our customers or ourselves in a position where too many of those loans are not being repaid, that would be problematic. But, fundamentally, the heart of our business model is having a risk appetite that supports businesses, and there's nothing that gives us more satisfaction than lending to a small business that then grows into a large and successful business.[113]

Committee comment

2.122The Committee acknowledges the significant cost-of-living pressures confronting many Australians. These pressures have not been felt evenly across the economy. New first home buyers and renters—largely younger Australians—have been particularly severely hit by inflation and higher mortgage repayments.

2.123The Committee is very concerned by bank data suggesting that Australia’s intergenerational housing divide may be fuelling an intergenerational spending divide under conditions of higher interest rates. Demographic differences in spending in aggregate obviously do not reflect the lived experiences of all individuals: some younger Australians will be far better off, and some older Australians far worse off than suggested by aggregate spending data. The Committee heard that owning one’s home was a decisive factor in spending behaviour across demographics. Nonetheless, the Committee is concerned about the implications of these trends for both the effectiveness of monetary policy and uneven outcomes across the generations over the decades to come, as Australia’s population continues to age.

2.124The Committee notes comments by the major banks on the critical importance of addressing Australia’s housing affordability crisis, and acknowledges efforts by the Government throughout the 47th Parliament to legislate comprehensive policies to address this, in addition to securing reforms at the state and territory level through National Cabinet.

2.125Despite the ongoing economic challenges, the Committee notes that all banks have continued to report a high degree of resilience among their customers. The Committee notes that the banks have attributed this resilience to many factors, but in particular the continued strength of the labour market—consistent with the Government’s directive to the RBA to give equal consideration to its mandates of full employment and price stability—as well as many customers’ large savings buffers accrued during COVID-19—largely due to supports implemented by the previous government.

2.126Nonetheless, the Committee is concerned about the growing number of bank customers experiencing hardship and even insolvency under continued inflation and restrictive monetary policy.

2.127While the Committee acknowledges efforts by the banks to support customers in hardship, it is concerned by the findings of ASIC’s May 2024 report Hardship, hard to get help, suggesting that more than a third of Australians applying for hardship support have dropped out of excessively onerous application processes at least once, and that 40 percent fall into arrears immediately after hardship support ends. The Committee agrees with ASIC’s assessment that this is not good enough. While ASIC’s report looked at 10 banks, the four major banks should be held to particularly high standards due to their large market shares and direct impact on the lived experiences of most Australians.

2.128The Committee urges all banks to continue offering hardship support to those in need, ensuring that customers have access to the necessary resources to manage the current exceptional levels of financial stress in many segments of the community.

2.129The Committee emphasises that hardship support should extend to supporting viable small and medium businesses—where most Australians work—to ride out current headwinds where possible, so they can continue to play productive roles in the economy in years to come. The Committee notes the Government’s renewal of the small business responsible lending obligations exemption, and urges the major banks to use this judiciously to support investment and growth by those businesses with growth potential—and financial resilience for those struggling now, but still likely to be viable once current pressures subside.

2.130The Committee acknowledges that divergences between market and media expectations of rate cuts and RBA messaging may reflect the extremely uneven distribution of the economic impacts of tighter monetary policy, with most Australians absorbing a serious shock to living standards—but with this contraction at least partly offset by continued strong spending growth in other segments.

2.131Given the elevated community interest in the timing of rate cuts, and consistently cautious forward guidance from the RBA, the Committee suggests that bank forecasters and media teams (as well as members of the media who report on interest rate forecasts) may wish to reflect on lessons learned about calibrating their messaging on uncertainties, so as not to raise false hopes. The RBA was—justifiably—criticised for issuing inadvertently misleading messages about the trajectory of interest rates during the COVID-19 pandemic, and has revised its approach to forward guidance accordingly. Perhaps it is time for outside commentators to engage in a similar process of reflection.

Footnotes

[1]Mr Matt Comyn, Chief Executive Officer, Commonwealth Bank of Australia (CBA), Committee Hansard, 29August 2024, Canberra, p. 1.

[2]At the time of writing, this inquiry was still underway. See: House Economics Committee, Review of the Reserve Bank of Australia Annual Report 2023, www.aph.gov.au/Parliamentary_Business/Committees/House/Economics/RBAAnnualReport2022, viewed 3February 2025.

[3]Australian Bureau of Statistics (ABS), Australian National Accounts: National Income, Expenditure and Product, September 2024 (released 4December 2024), www.abs.gov.au/statistics/economy/national-accounts/australian-national-accounts-national-income-expenditure-and-product/latest-release, viewed 8 January 2025.

[4]Mr Matt Comyn, Chief Executive Officer, CBA, Committee Hansard, 13 July 2023, Canberra, p. 1.

[5]Mr Andrew Irvine, Chief Executive Officer, National Australia Bank (NAB), Committee Hansard, 30 August 2024, Canberra, pp. 1–2.

[6]Mr Andrew Irvine, Chief Executive Officer, NAB, Committee Hansard, 30 August 2024, Canberra, p. 1.

[7]Mr Matt Comyn, Chief Executive Officer, CBA, Committee Hansard, 29 August 2024, Canberra, p. 1.

[8]Mr Peter King, Chief Executive Officer, Westpac, Committee Hansard, 13 July 2023, Canberra, p. 31.

[9]Mr Shayne Elliott, Chief Executive Officer, Australia and New Zealand Banking Group (ANZ), Committee Hansard, 30August 2024, Canberra, p. 30.

[10]See the evidence to the Committee’s concurrent Review of the Reserve Bank of Australia Annual Reports 2022 and 2023: House Economics Committee, Review of the Reserve Bank of Australia Annual Report 2023, www.aph.gov.au/Parliamentary_Business/Committees/House/Economics/RBAAnnualReport2022, viewed 3 February 2025.

[11]Mr Peter King, Chief Executive Officer, Westpac, Committee Hansard, 13 July 2023, Canberra, p. 31.

[12]Mr Shayne Elliott, Chief Executive Officer, ANZ, Committee Hansard, 12 July 2023, Canberra, p. 2.

[13]ABS, Australian National Accounts: National Income, Expenditure and Product, December 2023 (released 6March 2024), www.abs.gov.au/statistics/economy/national-accounts/australian-national-accounts-national-income-expenditure-and-product/dec-2023, viewed 3 February 2025.

[14]ABS, Australian National Accounts: National Income, Expenditure and Product, September 2024 (released 4December 2024), www.abs.gov.au/statistics/economy/national-accounts/australian-national-accounts-national-income-expenditure-and-product/latest-release, viewed 16 January 2025.

[15]Mr Andrew Irvine, Chief Executive Officer, NAB, Committee Hansard, 30 August 2024, Canberra, p. 1, 10.

[16]Mr Peter King, Chief Executive Officer, Westpac, Committee Hansard, 29 August 2024, Canberra, p. 29, 44.

[17]Nassim Khadem, ‘A 30 per cent house price fall “unlikely” with RBA tipped to cut interest rates in late 2023’, ABC News, 4 January 2023, www.abc.net.au/news/2023-01-04/house-price-falls-2023-reserve-bank-hikes-vs-cuts-interest-rates/101823534, viewed 12 January 2025.

[18]Reserve Bank of Australia (RBA), ‘Statement by Philip Lowe, Governor: Monetary Policy Decision’, MediaRelease, 6 December 2022, www.rba.gov.au/media-releases/2022/mr-22-41.html, viewed 12 January 2025.

[19]Warren Hogan, ‘Opinion—The markets have got it wrong (again) on rate cuts’, Australian Financial Review, 8December 2024.

[20]See House Economics Committee, Review of the Reserve Bank of Australia Annual Report 2021, December 2022, www.aph.gov.au/Parliamentary_Business/Committees/House/Economics/RBAAnnualReport2021/Report, viewed 3 February 2025, p.14.

[21]RBA, ‘Box B: Scenario Analysis of Indebted Households’ Spare Cash Flows and Prepayment Buffers’, Financial Stability Review – April 2023, www.rba.gov.au/publications/fsr/2023/apr/box-b-scenario-analysis-on-indebted-households-spare-cash-flows-and-prepayment-buffers.html, viewed 3 February 2025.

[22]For example: Mostafa Rachwani, ‘“Busiest Christmas I have seen”: families turn to food banks in Australia’s cost-of-living crisis’, Guardian, 21 December 2023, www.theguardian.com/australia-news/2023/dec/20/busiest-christmas-i-have-seen-families-turn-to-food-banks-in-australias-cost-of-living-crisis, viewed 15 January 2025; Joe Attanasio, ‘Crowds on city streets reveal number of Aussies who “just can’t afford to live”’, yahoo!news, 19 June 2024, au.news.yahoo.com/crowds-on-city-streets-reveal-number-of-aussies-who-just-cant-afford-to-live-224109693.html, viewed 15 January 2025.

[23]Cameron Micallef, ‘The big four banks now all believe rates will be cut in February’, news.com.au, 31January 2025, www.news.com.au/finance/economy/interest-rates/economic-case-is-not-there-major-call-on-february-rate-cut/news-story/cf81ef196d0ca5875bed0abcc12f2543, viewed 3 February 2025.

[24]Mr Peter King, Chief Executive Officer, Westpac, Committee Hansard, 29 August 2024, Canberra, p. 44.

[25]Mr Shayne Elliott, Chief Executive Officer, ANZ, Committee Hansard, 30 August 2024, Canberra, p. 30.

[26]Mr Matt Comyn, Chief Executive Officer, CBA, Committee Hansard, 29 August 2024, Canberra, p. 26.

[27]Mr Andrew Irvine, Chief Executive Officer, NAB, Committee Hansard, 30 August 2024, Canberra, p. 10.

[28]Mark Bristow, ‘When will interest rates go down?’, RateCity, 29 November 2024, www.ratecity.com.au/home-loans/mortgage-news/when-will-interest-rates-fall-again, viewed 12 January 2025.

[29]Mr Shayne Elliott, Chief Executive Officer, ANZ, Committee Hansard, 12 July 2023, Canberra, p. 2.

[30]ABS, Labour Force, Australia, December 2023 (released 18 January 2024), www.abs.gov.au/statistics/labour/employment-and-unemployment/labour-force-australia/dec-2023, viewed 3 February 2025.

[31]ABS, Labour Force, Australia, December 2024 (released 16 January 2025), www.abs.gov.au/statistics/labour/employment-and-unemployment/labour-force-australia/latest-release, viewed 3 February 2025.

[32]Mr Shayne Elliott, Chief Executive Officer, ANZ, Committee Hansard, 12 July 2023, Canberra, p. 1.

[33]Mr Matt Comyn, Chief Executive Officer, CBA, Committee Hansard, 13 July 2023, Canberra, p. 2.

[34]Mr Peter King, Chief Executive Officer, Westpac, Committee Hansard, 29 August 2024, Canberra, p. 31.

[35]Mr Ross McEwan, Chief Executive Officer, NAB, Committee Hansard, 12 July 2023, Canberra, p. 38.

[36]Mr Matt Comyn, Chief Executive Officer, CBA, Committee Hansard, 13 July 2023, Canberra, p. 3.

[37]Mr Matt Comyn, Chief Executive Officer, CBA, Committee Hansard, 29 August 2024, Canberra, p. 1.

[38]Mr Andrew Irvine, Chief Executive Officer, NAB, Committee Hansard, 30 August 2024, Canberra, p. 2.

[39]Ms Monique Macleod, Group Executive, Marketing and Corporate Affairs, CBA, Committee Hansard, 29August 2024, Canberra, p. 3.

[40]For example: Mr Matt Comyn, Chief Executive Officer, CBA, Committee Hansard, 13 July 2023, Canberra, p.1; Mr Shayne Elliott, Chief Executive Officer, ANZ, Committee Hansard, 12 July 2023, Canberra, p. 1; MrPeter King, Chief Executive Officer, Westpac, Committee Hansard, 13 July 2023, Canberra, p. 31; MrRoss McEwan, Chief Executive Officer, NAB, Committee Hansard, 12 July 2023, Canberra, p. 37.

[41]Mr Shayne Elliott, Chief Executive Officer, ANZ, Committee Hansard, 12 July 2023, Canberra, p. 1.

[42]Mr Shaun Dooley, Group Chief Risk Officer, NAB, Committee Hansard, 12 July 2023, Canberra, p. 43.

[43]Mr Peter King, Chief Executive Officer, Westpac, Committee Hansard, 29 August 2024, Canberra, p. 30.

[44]Mr Peter King, Chief Executive Officer, Westpac, Committee Hansard, 29 August 2024, Canberra, p. 30.

[45]Mr Shayne Elliott, Chief Executive Officer, ANZ, Committee Hansard, 12 July 2023, Canberra, p. 11.

[46]Mr Andrew Irvine, Chief Executive Officer, NAB, Committee Hansard, 30 August 2024, Canberra, p. 2.

[47]Mr Ross McEwan, Chief Executive Officer, NAB, Committee Hansard, 12 July 2023, Canberra, p. 38.

[48]Mr Andrew Irvine, Chief Executive Officer, NAB, Committee Hansard, 30 August 2024, Canberra, pp. 2–3.

[49]RBA, ‘Box B: Scenario Analysis of Indebted Households’ Spare Cash Flows and Prepayment Buffers’, Financial Stability Review – April 2023, www.rba.gov.au/publications/fsr/2023/apr/box-b-scenario-analysis-on-indebted-households-spare-cash-flows-and-prepayment-buffers.html, viewed 3 February 2025.

[50]Mr Matt Comyn, Chief Executive Officer, CBA, Committee Hansard, 13 July 2023, Canberra, p. 19.

[51]Mr Matt Comyn, Chief Executive Officer, CBA, Committee Hansard, 13 July 2023, Canberra, p. 19.

[52]Mr Shayne Elliott, Chief Executive Officer, ANZ, Committee Hansard, 12 July 2023, Canberra, p. 14.

[53]For example: Mr Matt Comyn, Chief Executive Officer, CBA, Committee Hansard, 13 July 2023, Canberra, p.14; Mr Shayne Elliott, Chief Executive Officer, ANZ, Committee Hansard, 12 July 2023, Canberra, p. 14.

[54]Mr Shayne Elliott, Chief Executive Officer, ANZ, Committee Hansard, 30 August 2024, Canberra, p. 30.

[55]Mr Shayne Elliott, Chief Executive Officer and Mr Kevin Corbally, Chief Risk Officer, ANZ, Committee Hansard, 12 July 2023, Canberra, pp. 14–15, p. 17.

[56]Mr Peter King, Chief Executive Officer, Westpac, Committee Hansard, 13 July 2023, Canberra, p. 36.

[57]Mr Matt Comyn, Chief Executive Officer, CBA, Committee Hansard, 13 July 2023, Canberra, pp. 16–17.

[58]Ms Rachel Slade, Group Executive, Personal Banking, NAB, Committee Hansard, 12 July 2023, Canberra, p. 44.

[59]Mr Ross McEwan, Chief Executive Officer, NAB, Committee Hansard, 12 July 2023, Canberra, p. 44.

[60]Mr Shayne Elliott, Chief Executive Officer, ANZ, Committee Hansard, 12 July 2023, Canberra, p. 10.

[61]Mr Shayne Elliott, Chief Executive Officer and Mr Kevin Corbally, Chief Risk Officer, ANZ, Committee Hansard, 12 July 2023, Canberra, p. 11.

[62]Mr Matt Comyn, Chief Executive Officer, CBA, Committee Hansard, 13 July 2023, Canberra, p. 18.

[63]For example, CommBank iQ, Cost of Living Insights Report, November 2023, www.commbank.com.au/articles/newsroom/2023/11/cost-of-living-november23.html, viewed 3 February 2025, p. 11.

[64]Mr Matt Comyn, Chief Executive Officer, CBA, Committee Hansard, 13 July 2023, Canberra, p. 1.

[65]Ms Carolyn McCann, Group Executive, Customer and Corporate Services, Westpac, Committee Hansard, 29 August 2024, Canberra, p. 30.

[66]Mr Shayne Elliott, Chief Executive Officer, ANZ, Committee Hansard, 12 July 2023, Canberra, p. 11.

[67]Mr Shayne Elliott, Chief Executive Officer, ANZ, Committee Hansard, 12 July 2023, Canberra, p. 11.

[68]Mr Shaun Dooley, Group Chief Risk Officer, NAB, Committee Hansard, 12 July 2023, Canberra, p. 42.

[69]Mr Andrew Irvine, Chief Executive Officer, NAB, Committee Hansard, 30 August 2024, Canberra, p. 3.

[70]ABS, Consumer Price Index, Australia, September Quarter 2023 (released 25 October 2023), www.abs.gov.au/statistics/economy/price-indexes-and-inflation/consumer-price-index-australia/sep-quarter-2023, viewed 12 Jan 2025.

[71]ABS, Consumer Price Index, Australia, September Quarter 2024 (released 30 October 2024), www.abs.gov.au/statistics/economy/price-indexes-and-inflation/consumer-price-index-australia/sep-quarter-2024, viewed 3 February 2025.

[72]PropTrack, PropTrack Rental Affordability Report – 2024, 9 March 2024, www.realestate.com.au/insights/proptrack-rental-affordability-report-2024/, viewed 12 January 2025.

[73]Mr Shayne Elliott, Chief Executive Officer, ANZ, Committee Hansard, 30 August 2024, Canberra, p. 48.

[74]Mr Matt Comyn, Chief Executive Officer, CBA, Committee Hansard, 13 July 2023, Canberra, p. 18.

[75]Mr Andrew Irvine, Chief Executive Officer, NAB, Committee Hansard, 30 August 2024, Canberra, p. 3.

[76]Ms Evelyn Halls, Customer Fairness Adviser, ANZ, Committee Hansard, 12 July 2023, Canberra, p. 14.

[77]Mr Matt Comyn, Chief Executive Officer, CBA, and Mr David Cohen, Deputy Chief Executive Officer, CBA, Committee Hansard, 13 July 2023, Canberra, pp. 8–9.

[78]Mr Matt Comyn, Chief Executive Officer, CBA, Committee Hansard, 13 July 2023, Canberra, p. 18.

[79]Mr Matt Comyn, Chief Executive Officer, CBA, Committee Hansard, 29 August 2024, Canberra, p. 3.

[80]Mr Peter King, Chief Executive Officer, Westpac, Committee Hansard, 29 August 2024, Canberra, p. 30.

[81]Sam Nichols, ‘First home buyers are using the bank of mum and dad more than ever, but is it deepening a class divide?’, ABC News, 11 November 2023, www.abc.net.au/news/2023-11-11/bank-of-mum-dad-inheritance-worsening-housing-crisis/103077386, viewed 13 January 2025.

[82]CommBank iQ, Cost of Living Insights — November 2024, 19 November 2024, www.commbank.com.au/articles/newsroom/2024/11/CommBank-Cost-of-Living-Insights-Report.html, viewed 13 January 2025, p. 4.

[83]CBA, ‘Spending on essentials slows as Aussies under 40 grapple with cost-of-living’, Media Release, 19November 2024, https://www.commbank.com.au/articles/newsroom/2024/11/CommBank-Cost-of-Living-Insights-Report.html, viewed 3 February 2025.

[84]For example: Mr Andrew Irvine, Chief Executive Officer, NAB, Committee Hansard, 30 August 2024, Canberra, p. 1; Mr Matt Comyn, Chief Executive Officer, CBA, Committee Hansard, 13 July 2023, Canberra, p. 14.

[85]Mr Matt Comyn, Chief Executive Officer, CBA, Committee Hansard, 39 August 2024, Canberra, pp. 24–25.

[86]Mr Peter King, Chief Executive Officer, Westpac, Committee Hansard, 13 July 2023, Canberra, pp. 31–32.

[87]Mr Andrew Irvine, Chief Executive Officer, NAB, Committee Hansard, 30 August 2024, Canberra, p. 1.

[88]Mr Andrew Irvine, Chief Executive Officer, NAB, Committee Hansard, 30 August 2024, Canberra, p. 1.

[89]Mr Peter King, Chief Executive Officer, Westpac, Committee Hansard, 13 July 2023, Canberra, pp. 31–32.

[90]Mr Shaun Dooley, Group Chief Risk Officer, NAB, Committee Hansard, 30 August 2024, Canberra, p. 11.

[91]Mr Matt Comyn, Chief Executive Officer, CBA, Committee Hansard, 13 July 2023, Canberra, p. 14.

[92]Mr Matt Comyn, Chief Executive Officer, CBA, Committee Hansard, 29 August 2024, Canberra, p. 25.

[93]Australian Small Business and Family Enterprise Ombudsman, Contribution to the Australian Economy, www.asbfeo.gov.au/small-business-data-portal/contribution-australian-employment, viewed 12 January 2025.

[94]Mr Shaun Dooley, Group Chief Risk Officer, NAB, and Mr Ross McEwan, Chief Executive Officer, NAB, Committee Hansard, 12 July 2023, Canberra, pp. 47–48.

[95]Mr Matt Comyn, Chief Executive Officer, CBA, Committee Hansard, 29 August 2024, p. 25.

[96]Mr Shayne Elliott, Chief Executive Officer, ANZ, Committee Hansard, 30 August 2024, p. 30.

[97]The most recent data from the RBA is available as part of its published chart packs. See: RBA, Chart Pack Business Sector, November 2024, www.rba.gov.au/chart-pack/business-sector.html, viewed 3 February 2025, p. 10.

[98]Mr Peter King, Chief Executive Officer, Westpac, Committee Hansard, 29 August 2024, Canberra, p. 49.

[99]The Hon Julie Collins MP, Minister for Agriculture, Fisheries and Forestry and Minister for Small Business and the Hon Stephen Jones MP, Assistant Treasurer and Minister for Financial Services, ‘Albanese Government extends the small business responsible lending obligations exemption’, Media Release, 1 October 2024, ministers.treasury.gov.au/ministers/julie-collins-2024/media-releases/albanese-government-extends-small-business-responsible, viewed 3 February 2025.

[100]Australian Banking Association, ‘Banks welcome extension of Responsible Lending Obligation exemption for small businesses’, Media Release, 1 October 2024, www.ausbanking.org.au/banks-welcome-extension-of-responsible-lending-obligation-exemption-for-small-businesses/, viewed 12 January 2025.

[101]Mr Matt Comyn, Chief Executive Officer, CBA, Committee Hansard, 29 August 2024, Canberra, p. 17.

[102]Mr Shayne Elliott, Chief Executive Officer, ANZ, Committee Hansard, 30 August 2024, Canberra, p. 56.

[103]Mr Andrew Irvine, Chief Executive Officer, NAB, Committee Hansard, 30 August 2024, Canberra, p. 20.

[104]See: ASIC, REP 768: Hardship, hard to get help, 20 May 2024, asic.gov.au/regulatory-resources/find-a-document/reports/rep-783-hardship-hard-to-get-help-lenders-fall-short-in-financial-hardship-support/, viewed 3 February 2025.

[105]ASIC, ‘ASIC report: Australians need better hardship support from their lenders’, Media Release, 20 May 2024, asic.gov.au/about-asic/news-centre/find-a-media-release/2024-releases/24-104mr-asic-report-australians-need-better-hardship-support-from-their-lenders/, viewed 13 January 2025.

[106]See the discussion with CBA in Committee Hansard, 13 July 2023, Canberra, pp. 22–23 and Committee Hansard, 29August 2024, Canberra, pp. 22–23.

[107]Mr Shaun Dooley, Group Chief Risk Officer, NAB, Committee Hansard, 30 August 2024, Canberra, p. 4.

[108]Mr Matt Comyn, Chief Executive Officer, CBA, Committee Hansard, 29 August 2024, Canberra, p. 1.

[109]Ms Monique Mcleod, Group Executive, Marketing and Corporate Affairs, CBA, Committee Hansard, 29 August 2024, Canberra, pp. 3–4; Mr Matt Comyn, Chief Executive Officer, CBA, ‘2024 Commonwealth Bank AGM: CEO’s address’, Media Release, 16 October 2024, www.commbank.com.au/articles/newsroom/2024/10/agm-ceo-address.html, viewed 15 January 2025.

[110]Ms Maile Carnegie, Group Executive, Australia Retail, ANZ, Committee Hansard, 30 August 2024, Canberra, p. 36.

[111]Ms Carolyn McCann, Group Executive, Customer and Corporate Services, Westpac, Committee Hansard, 29 August 2024, Canberra, p. 50.

[112]Mr Shayne Elliott, Chief Executive Officer, ANZ, Committee Hansard, 30 August 2024, Canberra, p. 30.

[113]Mr Matt Comyn, Chief Executive Officer, CBA, Committee Hansard, 29 August 2023, Canberra, p. 17.