Swan rejects bank regulation bid

Federal Treasurer Wayne Swan says the opposition is putting Australia's "pillars of
prosperity" at risk by demanding the government regulate bank interest rates.
Opposition treasury spokesman Joe Hockey on Thursday called for the treasurer to
legislate if necessary to ensure banks don't raise mortgage interest rates higher
than adjustments by the Reserve Bank of Australia (RBA).
Mr Hockey said Mr Swan had previously warned banks that they would feel the
government's wrath if they raised rates beyond cash rate rises, but had failed to
follow through with any action.
"What levers are available? ... Obviously, legislation is part of it," he said.
"But I would say ... none of the levers should be ruled out because, ultimately, the
Australian people need to know where the banking system is going."
Mr Hockey said possible measures included cutting red tape, funding the residential
mortgage-backed securities market, differentiating between support for smaller
entities and the larger banks, varying fees paid to the bank regulator, and
negotiating with the banks on new capital and liquidity rules.
Mr Hockey declined to say whether he had spoken with Opposition Leader Tony Abbott
before opening the new front in the coalition's criticism of the Gillard government.
When asked what the government should do on interest rates, Mr Abbott told
reporters: "Well, the point is that the government shouldn't make commitments that
it can't keep."
Asked on ABC Radio what he felt about the idea, fellow frontbencher and former
leader Malcolm Turnbull said: "I'm not aware of any precedent for the federal
parliament regulating interest rates, at least in recent years."
Mr Swan told parliament former Liberal prime minister John Howard and his
long-serving treasurer Peter Costello would wince at Mr Hockey's suggestions.
"It's an attack on the very pillars of our prosperity and therefore, an attack on
prosperity itself," Mr Swan said.
"Because they risk fracturing that economic consensus that has been so important to
confidence domestically and confidence in the international economy."
Mr Swan said he would defend the independence of the Reserve Bank to set interest
rates "no matter how uncomfortable that may be for any of us from time to time".
West Australian Liberal parliamentary secretary Don Randall mistakenly rubbished Mr
Hockey's comments, describing as "lunatic fringe-type" the idea of parliament
regulating how banks increase their interest rates.
But he later told parliament he meant to direct his comment at the Greens, rather
than Mr Hockey's proposals and he had been misunderstood.
Australian Greens leader Bob Brown has proposed legislation to control "unfair"
mortgage increases.
"This means that the interest rate payable by the consumer will rise and fall in
line with changes to the lender's cost of funds," he said.
Australian Bankers' Association chief Steven Munchenberg said rate moves by the RBA
were just one factor banks took into account when setting interest rates for their
customers; others included higher offshore funding costs and the higher costs of
deposits.



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