Graham Perrett (Moreton, Australian Labor Party) Share this | Hansard source

I rise to speak in support of the Competition and Consumer Amendment Bill (No. 1) 2011. This is one of a number of bills that have come before the House recently to moderate the behaviour of Australia's banks—fine institutions that they are. However, one of the roles of government is to regulate and moderate our banks. This legislation says something about the Gillard government's commitment to ensure a better deal for Australian consumers and small businesses. Unfortunately, it might also reflect a general reluctance on the part of banks to always act in a competitive, consumer-friendly manner, without the gentle, moderating, guiding hand of the Gillard Labor government.

Where the market fails, responsible government must apply the law to ensure strength in our banking sector and a fair go for all Australian consumers. The banks have done very well for themselves from Australian consumers and businesses. There is no doubt about that. Consequently, they have a responsibility to act in the interests of their customers. This is their social licence. Our big four have reported first half-yearly profits of $11.9 billion. The Commonwealth Bank posted a profit of $3.3 billion to December 2010; NAB, $2.67 billion; Westpac, a cool $3.16 billion; and ANZ's six-month profit was up a massive 38 per cent to $2.66 billion. Nice work if you can get it.

I will describe the landscape in which these profits were delivered. This inform­ation is from the statistics and mapping section of the Parliamentary Library. I caution those opposite that I cannot guarantee that some of this information was not prepared by economists. I am pretty sure some of it would have been prepared by economists but I do not have their names to name them. Here are some of the key points. Looking at interest rates, we see the average home loan standard variable interest rate has remained steady for the past seven months at 7.8 per cent. Bankruptcies and business investments are always a good guide to what is actually going on in the money-making section of the community. In the March quarter 2011, total bankruptcies decreased by 17.4 per cent when compared to the same period last year. It is a bit constrained, a bit tight out there, but some of these key indicators suggest that the economy is holding firm. However, we obviously we need to do as much as we can to support it. This bill before the House will drive greater competition in the banking sector by empowering the ACCC to act against banks who signal their prices to competitors to undermine competition. I also note that the ANZ job ads were up and that unemployment was steady at 4.9 per cent.

The ACCC has reported evidence of anti-competitive price signalling by the banks. We are not talking about collusion but behaviour where the banks communicate their pricing intentions to competitors. We have seen the announcements on the TV quite regularly. This is usually done via press release and media rounds. We are not talking about backroom boys type of behaviour, but nevertheless it has aspects of collusion because the banks indicate their pricing intentions to their competitors. For example, they may signal in advance what their response will be to a change in interest rates by the Reserve Bank. That is followed by what is almost a nod and a wink, with the understanding 'if you raise your mortgage rates we'll raise ours too'. Our banks, reliable as they are, have been able to get away with this behaviour because it is done with no formal price agreement and, like a three card trick, it is always done right before our eyes—as I said, through the media. Unfortunately, the losers from this behaviour are Australian consumers, who because of reduced competition face higher interest rates.

Under current laws there is nothing to stop banks behaving in this way—and I stress again that it is not illegal or unlawful; it is just the resulting squeeze on consumers that is wrong—and that is why the Gillard Labor government has acted. The bill before the House amends the Competition and Consumer Act 2010 to prohibit, firstly, the private disclosure of pricing information between competitors outright, which is called the per se prohibition, and, secondly, the disclosure of pricing or other information if made for the purpose of substantially lessening competition. Initially this will apply only to the banking sector, but it could be extended to other areas of the economy after further review.

The per se prohibition bans private communications between banks about their prices. This amendment targets disclosures that are clearly anticompetitive and damag­ing to consumers. For example, if one bank gets on the phone to another bank to tell them privately about a planned mortgage interest rate rise, the ACCC can take action. As I said, this bill also empowers the ACCC to prosecute a bank for communicating its pricing intentions to substantially lessen competition. This means a bank cannot inform its competitors that it will follow them if they raise mortgage rates.

These tough new laws are accompanied by strong civil penalties of up to $10 million, 10 per cent of a business's annual turnover or three times the benefit of the conduct—whichever is the higher. These are very, very strong civil penalties, but we are talking about banks; we are not talking about the local bowls club. These are significant institutions with significant resources. The prohibitions are, however, subject to specific exclusions to ensure pro-competitive behav­iour is not restricted. These exemptions allow banks to comply fully with their disclosure and legal obligations.

There will also be occasions when banks need legitimately to discuss pricing with their competitors. This bill ensures that these business activities can continue through the joint venture exception, which captures act­ual and proposed joint ventures. Banks will also be able to obtain immunity from the prohibition from the ACCC.

It is important that we close this loophole in competition law. It brings Australian law into line with those of the United States, the United Kingdom and the European Union. These laws strike the right balance by enabling banks to get on with their legitimate business while providing the necessary protections for consumers by eliminating anticompetitive price signalling. I commend the bill to the House.

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