The competition and consumer regulator is examining how banks set interest rates on savings accounts and why they are not in line with the Reserve Bank’s cash rate increases, as part of an inquiry launched in February.
Releasing an issues paper on Friday, the Australian Competition and Consumer Commission said it would look at how banks have adjusted their rates for deposit accounts following the central bank’s changes to the cash rate target from 0.1 per cent to 3.6 per cent in response to high and rising inflation in the 10 months from May 2022.
The ACCC said despite variable rate home loan interest rates rising in line with the cash rate, which was now at its highest since May 2012, the increases had not been passed on to savings interest rates paid to customers. Interest rate rises on retail deposit accounts had been smaller or conditional, the ACCC said.
“We are eager to hear about competition and consumer issues affecting the supply of retail deposit products to Australian consumers and self-managed super funds. This inquiry will closely examine how banks make decisions on interest rates, and any barriers consumers face in getting a better deal,” ACCC chair Gina Cass-Gottlieb said.
The inquiry will also examine how interest rates of similar products vary between consumers depending on amounts held in accounts, and the degree of variation between new or existing customers, the demographic of customers and the numbers of accounts held.
“We also want to hear from consumers and consumer organisations about experiences in searching for and taking up retail deposit products, including any impediments consumers face in switching banks to get a better deal,” Cass-Gottlieb said.
Australians hold over $1.45 trillion in retail deposit accounts and the interest earned on these accounts was an “important source of income”, she said.
How banks and other financial institutions compete with each other, and barriers to entry for new competitors, will also face scrutiny as part of the inquiry.
Treasurer Jim Chalmers directed the ACCC to launch the inquiry into the supply of retail deposit products on February 14. The regulator is expected to submit its findings on December 1.
Submissions from banks and other stakeholders are due by May 19.
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