Update The political heat over record bank profits has intensified after the head of ANZ bank accused shadow treasurer Joe Hockey of ''pure populism'' and independent MPs offered support for a parliamentary inquiry to investigate competition within the banking industry.
ANZ chief executive Mike Smith used today's unveiling of record annual profits of more than $5 billion to hit back at Mr Hockey.
"I think it's a real shame that the Coalition ... has now come down to the comments of Mr Hockey," Mr Smith told reporters. "It's pure populism and I don't think it serves anyone's interests."
In later comments, Mr Smith denied there was any need for a parliamentary inquiry to investigate competition within the banking sector. The Senate will hold such a probe and will report its findings by the end of next March.
Mr Smith told reporters the idea the Australian banking system is not competitive is ‘‘not right’’, and Australia’s banks were the most successful of any in those countries who are members of the Organisation for Economic Development (OECD).
He said the margins banks made on mortgages were around 450 basis points in the mid 1980s and due to increased competition in the sector, these margins were now at around 180 basis points.
‘‘Competition between banks is extremely fierce,’’ he said. ‘‘What are they going to enquire about?''
‘‘The system is not broken. In fact the system is in extremely good shape.’’
Mr Smith said Mr Hockey seemed to be on ‘‘some sort of personal vendetta’’.
'Bank CEOs can shoot me'
Mr Hockey shrugged off Mr Smith's earlier criticism about populism, vowing to keep the pressure on the major banks.
‘‘Bank CEOs can shoot me, they can decry me, they can have a go at me, I don’t mind,’’ he told reporters in Canberra today. ‘‘We are standing up for small business, we are standing up for the people that are missing out on competition in banking.
‘‘We have four major financial institutions that are doing very well, and we should be happy that they are doing very well.’’
Mr Hockey said he would be happier if the banks provided more competition for home borrowers, for credit-card holders and for business ‘‘desperately trying to employ more people and create more wealth’’.
A likely Senate inquiry looking at competition in the banking sector was a good first step, but the best outcome would be a comprehensive review.
‘‘It is going to be an incredibly challenging banking environment for many years to come because reform is happening whether the government likes it or not,’’ Mr Hockey said.
It's pure populism and I don't think it serves anyone's interests
Plan to bolster competition
Mr Hockey has outlined a nine-point plan to bolster competition within the industry, a move that drew luke-warm support yesterday from Opposition Leader Tony Abbott. His move also reportedly defied concerns within the Liberal party that he was undermining the Coalition's economic credibility.
Among his demands, Mr Hockey has questioned the wisdom of providing a safety net to the big banks as part of the Financial Claims Scheme set up by the Rudd government.
He said the federal government should consider withdrawing the bank guarantee for bigger lenders with taxpayers continuing to underwrite deposits of up to $1 million until at least October 2011, when it will be reviewed.
"There is a strong and compelling argument to have that funding guarantee in place for smaller players, but I'm not necessarily sure that a bank that makes a $4 billion profit, such as NAB did (yesterday), necessarily needs to continue to have that guarantee," he told ABC Television last night.
"I will leave that to the ongoing debate."
Inquiry push
That debate is likely to gather momentum with several independent MPs today backing calls for a parliamentary inquiry to investigate competition within the banking sector.
The Reserve Bank board also meets next Tuesday to decide on whether to lift its official rate - a move that would give the banks an opportunity to tack on an additional increase. Investors are correctly rating the likelihood of an RBA rate rise as a one-in-five chance.
Independent senator Nick Xenophon today said consumers are being ''ripped off'' by exorbitant fees and charges, and interest rate margins higher than anywhere else in the world.
''I think most people feel enough is enough,'' he told ABC Radio.
''What Australians are paying in ATM fees is disgrace.''
The ''forensic'' inquiry would be like no other parliament has conducted into the banking sector: ''We're reaching a tipping point where we need to have some concrete solutions to bring about reforms,'' Senator Xenophon said.
Independent MP Rob Oakeshott says the banking sector needs to be supported in a free-market economy.
Mr Oakeshott told ABC Radio he wants the government to honour a promise to hold an inquiry into the ability of small business to access credit...a key point in an agreement he signed with Labor in return for supporting minority government.
''I hope that begins sometime soon,'' he said. As well, he said he was keen to discuss Mr Hockey's nine-point reform plan.
''If it's got some substance I'd certainly do what I can to help him move it forward.''
Political risks
Earlier this week, Prime Minister Julia Gillard accused Mr Hockey and the Coalition of "economic Hansonism" that threatened to undo decades of deregulation of markets.
Ms Gillard's comments drew indirect support yesterday from NAB chief executive Cameron Clyne, as he unveiled record profits for the bank of more than $4.5 billion.
"The domestic political environment has stepped up a few gears in recent weeks," he said, indicating that politicians now formed a new area of risk for his bank.
"What implications this may have for the sector is unclear, but now that's been consistent for more than 18 months, and political intervention remained a real threat, and many of the moves we have taken over that time have positioned us well, should that intervention occur," Mr Clyne said.
Australia's top four banks have a market value of about $265 billion at current levels. Interestingly enough, three of them have lagged the overall share market this year, which is down 3.6 per cent to date. ANZ's shares are up 8.1 per cent, contrasting the 6-8 per cent falls by the other three.
The popular anger over banks also comes as the federal government prepares to consider the plan by Singapore's stock exchange to take over the ASX in a deal potentially worth more than $8 billion. Greens leader Bob Brown is among politicians saying he may oppose any change to the 15 per cent foreign ownership cap on the ASX.
With Eric Johnson, BusinessDay, and AAP