Review of the Reserve Bank of Australia annual report 1998-99

Media release: 22 May 2000

FEES REVENUE NOW OVER 20% OF BANK INCOME

The House Economics Committee today (Monday 22 May) released data on bank fees in Australia provided to the Committee by the Reserve Bank at a parliamentary hearing with the Governor in Melbourne.

Committee Chair, David Hawker MP, said 'in the submission the Bank has updated and expanded information previously published in the Bank's Bulletin of June 1999 and in a submission to the Committee on 29 November 1999. Data now covers the six largest banks and 10 additional banks from 1997 to 1999.'

'The data showed that bank fees on deposits, loans and payment services had increased by 13 per cent in 1999, to $5.4 billion Mr Hawker said. This represented 22 per cent of total income for the banks in that year.'

Examination of the fee structure, indicated that fees on housing and small business loans fell in 1999 but some fees on deposits and retail transactions had increased. Mr Hawker noted that discounting of establishment fees had slowed the growth of household loan fees but that fees from transaction services had become notably more important. Fees charged to small businesses grew by 5 per cent in 1999, while for large businesses the increase was 13 per cent.

'The data show that 1999 had seen a continuation of the contraction of interest margins received by the banks. Mr Hawker said the average spread between interest on loans and interest on deposits had fallen by 0.3 per cent in 1999, to 2.9 per cent. This was a contraction of 0.7 of a percentage point since 1997 and 1.25 percentage points since 1994.'

The Reserve Bank states, said Mr Hawker, that as available data covered only a short period, firm conclusions could not be drawn. On this basis, the Bank's assessment was that:

• revenue from fees on household deposits and transactions reflects increases in unit charges;
• revenue from fees on housing loans has fallen but fees on personal loans have continued to rise quickly; and
• fees per loan are falling for small business borrowers.

Mr Hawker added that 'the committee is pleased that the new data continues to suggest that the falling interest margins have not, on average, been offset by higher fees. However, members are very concerned that low income customers without a loan, but with low balances and high transactions, still do not benefit from these trends in banks' pricing practices.'

Further analysis of the fees submission will appear in the House Economics Committee's report on the hearing with the Reserve Governor. The report is expected to be released in late June.

Ends
22 May 2000

Further information:
David Hawker MP (Chairman) (03) 5572 1100 (Electorate)
Tas Luttrell (Principal Research Officer) 02 6277 4587
Email: EFPA.Reps@aph.gov.au
For Media enquiries:
Sally Webster (Media Adviser) (02) 6277 2063 Mobile: 0401 143 724
Email: Sally.Webster.Reps@aph.gov.au

Copies of the submission on bank fees are available from the committee secretariat or from the committee's website:

http://www.aph.gov.au/house/committee/efpa/rba9899/rbaindex.htm

Committee Membership

Chairman: Mr David Hawker MP
Deputy Chairman: Mr Gregory Wilton MP
Members:
Mr Anthony Albanese MP
Ms Anna Burke MP
Ms Teresa Gambaro MP
Mrs Kay Hull MP
Mr Mark Latham MP
Mr Christopher Pyne MP
Hon Alex Somlyay MP
Dr Andrew Southcott MP

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