My question is to the Treasurer. I refer the Treasurer to the reported statement yesterday by the National Australia Bank CEO, Cameron Clyne, that the country’s major banks will not be backing off on their arguments for higher interest rates regardless of the movements in the Reserve Bank’s cash rate. Given that the banks have ignored the Treasurer’s first 31 warnings, why will they take the 32nd warning seriously and not increase interest rates outside of the RBA’s movements?

I thank the shadow Treasurer for his question. I certainly do welcome an informed discussion about our financial system and about the relative strength of the various components of our financial system. I welcome a discussion about the need for greater competitive forces in our financial system and the need for there to be greater competition against our four major banks. Those four major banks are large, well capitalised and of course very profitable.

This involves a couple of essential elements of policy that need to be understood very clearly. Our four major banks have done well because in this country we have regulated our financial system much better than many other countries, but our major banks have done better because of the bank guarantees put in place at the height of the financial crisis by this government and opposed by those opposite.

On a point of order, Mr Speaker: it was not a general question. I asked the question: why will the banks take seriously the Treasurer’s 32nd warning about increasing interest rates outside of what the RBA does? Why?

Order! The Treasurer will relate his response directly to the question.

We would not have profitable banks if it had not been for the action of this side of the House in putting in place a bank guarantee opposed by those opposite every inch of the way.

Order! The Treasurer will return to the question.

Because we have come through the global financial crisis in such good shape, we do need greater competitive forces in our banking system. That is why the government has been putting in place some very substantial reforms in our banking system. They are substantial reforms which have policy credibility—they are not the fudges which have been put forward by those opposite. What are those reforms and what are the fudges put forward by the shadow Treasurer? We are having a crackdown on unfair mortgage exit fees. The member opposite was the financial services minister in this House for three years. He could not find the wit at any time in those three years to put in place a reform like that.

Order! The minister will relate his comments to the question.

Mr Speaker, I am relating them to the question. The question was about competition, keeping the big banks honest, putting in place the competitive forces that are required but were never attended to by those opposite when they were in power. We propose putting in place a single national consumer law, something that could not be done by those opposite in 12 years. We talk about investing in AAA rated residential mortgage backed securities to get greater competitive forces in our system. But we know what the answer is not. We know the answer is not to abolish the independence of the Reserve Bank, as has been put forward by those opposite. That is not the answer to this challenge. I say there is no justification whatsoever for the major banks moving interest rates over and above any movement by the Reserve Bank. This government, as always, will put in place the proper competitive policies to keep the banks honest

Order! The Treasurer will conclude his answer

Mr Simpkins interjecting

The member for Cowan is warned.

Mr Randall interjecting

The member for Canning, who has been warned, should be careful.