Simon Kennedy (Cook, Liberal Party, Shadow Assistant Minister to the Leader of the Opposition) Share this | Hansard source

by leave—I fully endorse the committee chair's comments. The governance and culture of the major banks need to be continually put under the microscope to ensure they're fulfilling their standards to customers and to suppliers and their social licence to the community abroad. I'd really like to thank the chair, for the bipartisan way in which he ran the committee, and the full secretariat. I think it was a very good report of a very good inquiry, and, hopefully, is the first of many to come.

I think ensuring competition is at the heart of our banking sector. It needs to be part of the relentless focus of this committee's work. The banks hold a privileged position in Australia's economy, and we need to ensure they discharge that privileged permission, putting Australians—and, particularly, Australian businesses and customers—first.

I think we also need to ensure there's appropriate competition in the sector, whether that's through new entrants in the payment space or through stable coins and other financial products. We need to ensure Australia stays at the forefront of innovation in the banking sector.

This inquiry examined the performance of the banking sector and the pressures Australia faces across housing, the cost of living, business conditions and financial access. It's important to acknowledge at the outset that Australia's banking system remains resilient. The major banks are stable; they continue to lend and are supporting households and businesses through a somewhat challenging economic period—even during this fuel crisis.

But the evidence also made clear that the system is operating under strain. Yes, we heard from the chair on the governance strains—that I fully endorse. We heard about the cultural strains. But a consistent theme also emerged across the inquiry: that regulatory settings are very focused on managing risk and not sufficiently focused on enabling growth.

Now, we heard clearly that this is not accidental. Following the global financial crisis, financial systems, appropriately, around the world, shifted towards regulatory regimes primarily focused on managing risk. Australia did the same. This contributed a lot to stability and is a big reason for how resilient and stable our banking system remains.

However, globally, this shift is now moving back towards an approach which balances growth against this risk. The United States has already moved in this direction. The regulators in the UK are now explicitly stating the need to move from managing risk towards balancing risk and growth. Australia as a country has not yet made that regulatory shift. This matters because access to finance is central to economic expansion. When settings are overly cautious, lending becomes constrained, investment slows and productivity suffers. We are seeing this play out in real time. Small business lending is subdued and has largely been flat for much of the last decade. There's a growing sense the system is calibrated towards avoiding risk and supporting expansion. This creates a drag on both growth and productivity at a time when the economy needs it the most. We need to get banks growing their small business books and growing them aggressively.

Australia is also facing a structural imbalance between demand and supply, not only in the overall aggregate demand of the economy but also in housing. Demand continues to be driven by strong population growth and policy settings while supply has not kept pace. This gap is placing sustained upward pressure not only on inflation and on interest rates but also on rents and house prices, making it harder for Australians, particularly first homebuyers, to enter the market. Policies such as low deposit schemes, including the five per cent deposit pathway, were raised as part of this discussion. While intended to support access, in supply constrained environments, they risk increasing purchasing power without increasing the number of homes available. That dynamic does not improve affordability. It drives prices higher, increases the size of mortgages, and the size of mortgages is correlated to the size of banking profits.

The long-term cost to the economy is significant. Analysis from Cotality shows that, for a median dwelling of $850,000, a buyer entering with a five per cent deposit would pay approximately $850,000 in interest over a 30 year loan. By comparison, a buyer with a 20 per cent deposit would pay $130,000 less in interest alone. These policies don't just affect access; they are locking Australia into higher debt burdens and they are fuelling banks' profits.

Migration was also a key factor raised throughout the inquiry, and there's broad recognition, including voiced by bank CEO Matt Comyn, that a more sustainable migration intake would help balance housing. Mr Comyn referenced the figure of 180,000 and the need to align population growth with housing supply, infrastructure and services. When that alignment is not achieved, the pressure shows up in higher housing costs, congestion and broader impacts on the cost of living. We also heard clearly from the banking sector about the importance of policy certainty, particularly in relation to energy and investment. We all want Australia to be a country of low energy prices and a strong economy. We heard from the CEO of ANZ, Nuno Matos, who warned that we can't let the medicine kill the patient in our approach to energy.

The inquiry also examined the payment system and broader financial infrastructure. Australia is undergoing rapid change in how payments are made and processed. There's clear innovation underway. However, the regulatory framework is struggling to keep pace. Costs remain a concern, competition is uneven and there are questions about whether innovation is being fully supported. I'd like to congratulate the chair on bringing on a payments inquiry that we look forward to reporting on soon.

In addition, issues such as debanking have emerged as a persistent barrier to competition and growth in the economy. Businesses and individuals are being excluded from financial services due to risk settings and compliance pressures. This has real economic consequences and it affects Australia's competitiveness. It limits participation, restricts growth and reduces confidence in the financial system at a time when access to finance is essential to economic activity.

Taken together, the evidence points to a broader conclusion: the banking system is operating within economic conditions that are placing increased strain on the economy, households and businesses. High demand without sufficient supply is driving up household pressures and business pressures. Inflation and interest rates are reducing household capacity and business capacity, and policy uncertainty has the effect of affecting investment decisions. Banks can respond to these economic conditions better. We must ensure they are acting in customers' and the national interests but we recognise that policy settings influence this as well.

This responsibility sits with government. If demand continues to outpace supply, affordability will not improve and neither will interest rates nor inflation. We need to avoid policy settings that create uncertainty, otherwise investment will not accelerate. If we continue to prioritise risk without appropriately enabling growth, the economy will continue to underperform—banks included—making Australians poorer. The central issue identified through this inquiry is now where we are looking for banks and regulators to address their focus. Again, I would like to thank the chair and the secretariat for a great bipartisan approach to this important issue.

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