If you want more evidence the big problem with inflation in the Australian economy isn’t government spending – despite what right-wing economists insist — or that wage-price spiral we were warned about for so long that stubbornly failed to happen, check the Reserve Bank’s new report on bank fees released yesterday.
The report shows that bank revenue from fees rose 5% in 2023-24 — the first rise in seven years. And Australian households paid almost 10% more in bank fees in 2023-24.
Before you yell “gouging bastard banks”, however, much of the household fee revenue came from more Australians travelling internationally, which led to higher credit card usage overseas. The banks all enjoyed higher revenue from fees for international transactions and foreign currency conversions (with their rip-off conversion rates).
But they also did very well from fees for taking out personal loans, doubtless as a result of soaring inflation and mortgage interest rates. Revenue from personal loan fees soared 34%, handing $390 million to the banks, much of it almost certainly from people already struggling financially.
But there was also a 5% rise in home loan fees — after two years of declines in home loan fee revenue. Why? “Easing competition in the mortgage market resulted in many banks withdrawing financial incentives such as cashback deals, which are offered to attract new or refinancing customers and subtract from fee earnings.”
Call those tens of millions in extra revenue from home loan fees an oligopoly tax, because that’s what they are — however much it might not fit with the peddled narrative that inflation is caused not by greedy corporations but by greedy workers and consumers. This revenue contributed to the cost of housing, which was one of the strongest drivers of inflation over 2023-24.
Even revenue from fees on deposits rose, and banks charged people for withdrawing their own money to seek better returns elsewhere. Don’t forget the Commonwealth tried to impose a $3 in-person transaction fee last year (and ANZ has a $2.50 fee).
The report also notes that the banks failed to compensate 2 million low-income people for holding them in high-fee accounts between 2021 and 2022. ASIC told the banks to start repaying customers in July 2023, but a year later, little has happened. “While banks have started responding to the recommendations, the majority of fee refunds is expected to occur during 2024/25.”
It’s no wonder big bank shares have outperformed the market — even the troubled ANZ is doing OK. Commonwealth Bank shares rose 21% in the July-December 31 period of 2024, and 37% over calendar 2024. Its peers ANZ, Westpac and NAB enjoyed rises that averaged 33% in the same period. It’s always good to be an investor in an oligopoly. Luckily, via our super accounts, most of us are whether we like it or not.
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