Step too far

There will be plenty of mortgage holders and borrowers cursing Commonwealth Bank this morning, after it responded to the RBA’s 25 basis point rate rise by jacking up its mortgage rates by 45 basis points.

But perhaps we should be thanking CBA, which Treasurer Wayne Swan has rightly slammed as “arrogant” for making a “cynical cash grab”.

CBA’s decision to move so quickly (one can only assume they thought they could get away with it on Melbourne Cup day) appears to have jolted the Government into taking action to improve banking competition, with Swan now promising to release banking reforms next month.

We’ve been trying to raise this issue for the best part of two years, but getting the ear of government has been tough.

While Opposition small business spokesman Bruce Billson has campaigned strongly on the issue of SME access to credit, former Small Business Minister Craig Emerson was largely dismissive of the problem.

His replacement, Senator Nick Sherry, has acknowledged that there is a clear issue with the lack of competition from smaller, specialist SME lenders, and a lack of understanding of SME issues from the big banks.

But under pressure from Joe Hockey – and in response to a growing community outcry at bank profits and decisions such as that taken yesterday by the CBA – Swan now appears prepared to act.

Now, this won’t be easy or quick. As Swan said this morning, you cannot simply snap your fingers and re-regulate what is a crucial sector in the Australian economy. Nor can you “create” competition overnight.

But these are issues that the Government needs to start tackling sooner rather than later. It’s taken Labor a while to come round, but it’s great to see they are starting to get it.