Australian banks are partially responding to political pressure to become more transparent in their mortgage fees and other costs, but it is unlikely their New Zealand operations will follow suit without the same sort of political pressure.
ANZ Bank yesterday became the first Australian bank to drop its exit fees on all mortgage products.
But while dropping its exit fees, the ANZ incurred the wrath of Australian Prime Minister Julia Gillard, who criticised the bank for putting up its interest rates beyond the adjustment of the Reserve Bank of Australia.
Ms Gillard said that despite ANZ Bank dropping its exit fees, Australians would still be angry that the bank put up its variable rates by 0.39% to 7.8%.
"I believe Australians are angry enough that they will be looking again at the conduct of their own bank and judging what they should do next based on that conduct.
"There is no excuse for the sorts of interest-rate movements we've now seen from the Commonwealth Bank and the ANZ Bank."
The Government's competition reforms would empower consumers to walk away from their bank if they were not satisfied, she said.
ANZ's decision was interpreted as a move to potentially soften the earnings blow from the Government's crackdown on the lucrative exit fees on mortgages.
The fee increased the likelihood that NAB (the owner of the Bank of New Zealand) and Westpac would follow ANZ (the owner of ANZ-National Bank) and CBA (the owner of ASB Bank) by raising lending rates by more than the RBA's 0.25% official cash rate rise to cover the cost shortfall.
The Australian Securities & Investments Commission (ASIC) released new guidelines on exit fees, which Craigs Investment Partners broker Chris Timms said were unlikely to significantly affect bank industry returns in isolation.
Although ANZ responded quickly to the new guidelines by abolishing exit fees on all mortgage products, he estimated that would reduce the ANZ's cash earnings for 2011 by less than 0.6%.
"We see the ANZ's move as a pragmatic response to the heightened public focus on fees but we see a risk that banks overdo it.
"There is no requirement for the New Zealand operations to follow that lead.
"Whether they want to react on the basis of goodwill and follow their parent or wait and be forced to do it, we will have to wait and see.
"The cynic in me suggests they won't do anything unless they are forced into it."
Mr Timms said the removal of exit fees in Australia might strengthen the competitive position of banks, given the non-banking sector relied on exit fees to a much larger extent than banks.
Council of Trade Unions economist Bill Rosenberg said from Wellington that banks in New Zealand had a public duty to take a greater oversight on how their actions affected the wider community.
The public stood by ready to bail out the banks during the global financial crisis and there now needed to be a closer oversight on whether interest rates were truly reflecting the borrowing costs of banks.
Several major issues around bank fees and charges were revealed during the parliamentary banking inquiry and many of those issues had not gone away, he said.
With the Reserve Bank of New Zealand indicating it was holding its official cash rate at 3% until perhaps March next year, there was no pressure on retail banks here to lift their lending rates.
But once the Reserve Bank indicated it was lifting rates, banks were sure to follow that lead, even though they still might have access to cheaper money from other sources, Mr Rosenberg said.
