Warren Entsch (Leichhardt, Liberal Party) Share this | Link to this | Hansard source

I rise today to raise serious concerns about what I see as unconscionable gouging practices by the big banks in my electorate. Over an extended period of time, Far North Queensland has suffered what could be described as almost the perfect storm. The hangover from the GFC has stopped many travellers from 2008 until now travelling to our region. The region's economy is 40 per cent reliant on the tourism industry. The high Australian dollar means it is relatively more expensive for overseas tourists to come to Cairns. It also means it is cheaper for Australians to travel overseas, which impacts on domestic destinations. The Japanese earthquake has done little to encourage travel from that area. Media coverage of Cyclone Yasi and the floods has misled many potential tourists into believing the area had significant cyclone damage. Also, as a result of these sorts of issues, our unemployment is the highest in the country. If you add to that the damage to our sugar crop and our dairy industry on the tablelands, we have really being doing it tough for a long period of time. The other problem we have is that the majority of people, particularly in Cairns, work in the private sector. We have very little in the way of government spending in that area. So these sorts of events have a significant negative impact on businesses.

What we are seeing now—and it worries me considerably—is some of the major banks stepping in and encouraging the valuers to go out and revalue commercial properties downwards some 20 per cent. They are then calling in those borrowers and raising issues in relation to their debt to equity ratios. Prior to 2008, lending was often available at a 70 to 80 per cent loan to valuation ratio. They were very keen to throw money at any of their clients looking to borrow and invest in these areas. What they are doing now is reducing these valuations on people who have not defaulted or in any way missed their payments. They are now calling them in and saying, 'We have reassessed the value of your assets and we need to bring your borrowings back into order.' They are now seeking 65 per cent or lower debt to equity ratios.

This is being driven primarily by the banks. They are saying, 'We want you to either put more money into it or sell assets.' However, when people are trying to sell assets the banks are very reluctant to lend on them, so you are in a situation where you are having to find somebody to buy it with cash and in this market it is very difficult. They are driving it down and down and down as we speak. They are charging an extra three per cent premium because they call it an extra risk. I have one situation were a constituent is being charged an extra $48,000 a month in penalty interest by the bank, which has forced him into a default situation. That money has been accumulated on top of what is already a significant debt. We need these banks to show some compassion, because there is no way in the world this matter is going to be resolved if they keep driving people down and driving businesses into bankruptcy. There is no benefit at all to our community. I call on the banks to have a moratorium on this issue and to lay off our business community. Give them a chance to recover. There are some very positive prospects as we look towards the future—if the banks lay off a little bit, particularly in relation to the LDRs and allow people a chance to recover. We as a community would all prosper if they did this, but instead they continue to bankrupt businesses that have been great clients of theirs. Quite frankly, I think it is totally inappropriate that they continue to gouge in this way.