Big four bank bosses face two-day parliamentary grilling

Australia needs to drastically slow its net migration to help younger people get into the housing market, a major bank’s CEO has warned.

Commonwealth Bank chief executive Matt Comyn told the House of Representatives standing committee Australia needs to slow its migration levels to allow infrastructure to catch up with demand.

“Perhaps that number is something in the order of 180,000 per annum,” Mr Comyn said.

“It gives both the Commonwealth and states the ability to plan for critical infrastructure, including housing.”

The chief executive was quick to point out this was a personal view he held and not the view of the bank.

Current estimates for this financial year sees a migrant influx of 260,000, down from 460,000 last year.

The government estimates this number will fall to 225,000 a year for the rest of the decade.

Mr Comyn said while increasing supply would ultimately help drive down house prices, there were many barriers.

“You need a lot of co-ordination between the federal and the state level,” he said.

“I think the availability of labour, of skilled labour in and around multiple sectors, including this one, is challenged.”

Mr Comyn also said the Australian government’s aspirational 1.2m new homes by 2029 was ultimately a good thing.

Following Mr Comyn’s grilling, Westpac chief executive Anthony Miller faced the music during the afternoon’s session.

Westpac quizzed about chronic underpayment

Westpac’s questioning got off to a fiery start, as chair of the committee Ed Husic said the bank had failed in its post royal commission duties because it was plagued by a chronic underpayment of staff for more than a decade.

“I note last week that your institution signed an enforceable undertaking with the Fair Work Ombudsman after underpaying 47,000 staff and the ombudsman stated that underpayments occurring under an 11-year period were primarily caused by failures in Westpac’s systems, governance, process and compliance.

“So are you comfortable with your processes?” Mr Husic asked.

“Those relate to events that occur prior to 2020,” Mr Miller responded.

The chief executive went on to say “The work over the last five years has been very much about making sure we have in place those standards.”

“Obviously we got that wrong and we have addressed that.”

The Royal Commission into the banking sector was finalised in February 2019.

Rates need to be held

In a move that will frustrate cash-strapped mortgage holders, Mr Comyn said earlier in the day the cash rate would likely remain unchanged for at least 12 months.

“Our economics teams forecast the cash rate will remain on hold for the foreseeable future,” he said.

“What does that practically mean, more than likely through to 2026, although forecasting is a difficult game.

“Clearly, the more recent CPI data was higher than the RBA was expecting and the labour market remains strong, so I think it’s unlikely rates will move in the near term.”

Mr Comyn’s grim forecast follows the Reserve Bank of Australia holding interest rates over its last two meetings at 3.60 per cent.

Experts were previously forecasting up to two more interest rate cuts at the start of the year but are now saying the next move could be a lift in interest rates.

Liberal member for Bowman Henry Pike questioned whether energy costs were a structural driver of inflation.

“I think energy costs have been increasing for many years, for many households and businesses,” Mr Comyn said.

“Understandably, there will be ongoing scrutiny around energy prices.”

In the September quarterly data, inflation surprisingly jumped to 1.3 per cent for an annual growth rate of 3.2 per cent.

The Reserve Bank of Australia’s all-important trimmed mean inflation rate, which removes volatile and seasonally adjusted items such as energy, came in at 1.0 per cent for the quarter and 3 per cent for the year.

Anything above 0.9 per cent the RBA considers a “material miss”.

International payment providers taken to task

Labor member for Bennelong Jerome Laxale used his time to smash international credit card providers for the lack of taxes they paid in Australia.

“These are multinationals that pay little to no tax in Australia. Looking at the 2023-2024 transparency index, MasterCard paid no tax on $357m worth of income, Visa $3m worth of tax on $108m in income, Google $130m in tax on $2bn in income,” he said.

“So if these schemes by your modelling increase their profitability some of them pay no tax, what long-term impact will this have on the domestic payment industry and by extension small businesses and consumers?”

Mr Comyn said it would have a negative impact on the payments sector, but the media and telcos had similar taxation issues.

“I think there’s a point of principle in terms of the sovereignty of Australia having a very clear view …. That everyone that participates and operates here does so by the same laws and rules and makes a fair contribution,” he said.

“One of the ways it should be done is through taxation.”

Mr Comyn said the issue would only get worse.

Scheme’s ‘very small pick-up’

The CBA boss was also asked about the Albanese government’s extension of the first-home buyer scheme.

Deputy chair Simon Kennedy asked if the government’s 5 per cent housing scheme had lifted property prices.

Referencing a Cotality report that showed house prices rose 1.2 per cent nationally in October, Mr Kennedy questioned if this was due to the housing scheme.

“Higher demand leads to higher prices,” Mr Comyn quipped.

But the chief executive stopped short of blaming the Albanese government.

“Specifically to your question, we have provided 38,000 loans (under these schemes) since 2022, which is a relatively small number.

“We have not done any of our own specific work with how much the demand side may have shifted.”

Mr Comyn said he thought there would be a “very small” pick up in demand from customers.

The Albanese government recently expanded the 5 per cent deposit scheme for first-home buyers to unlimited places for those trying to get into the market. The scheme started on October 1.

Westpac boss agreed with Mr Comyn.

Liberal member for cook Simon Kennedy also questioned the Westpac chief executive whether the government’s five per cent deposit scheme was making housing less affordable.

“We have 1.6 million customers who we have provided a mortgage to and approximately 29,000 since the five per cent deposit scheme came in.”

“I think in the context of looking at housing prices today, there’s certainly an increase in prices that is sometimes worrying in terms of people getting access to property and so you know from where we sit the challenges remain,” Mr Miller said.

“I don’t think the home buyer scheme is the driver of housing prices, the simple proposition is we have more demand than supply.”

The policy was expanded by the removal of salary caps and an increase in price caps for eligibility to $900,000 in Melbourne, $1m in Brisbane and $1.5m in Sydney.

Bank refuses to pay back $285m

Committee chair Ed Husic grilled Mr Comyn over fees charged by the major bank for low-income customers and customers in hardship.

Between 2019 and 2024, the Australian Securities and Investments Commission found the Commonwealth Bank charged about $285m in excess account and overdraw fees for two million low-income customers.

The major bank said it wouldn’t issue a bulk refund but instead “goodwill adjustments” to customers who inquired about the money to the bank.

When asked why the bank didn’t just refund the money and why the impacted customers had to reach out to the bank to get a refund on fees that shouldn’t be charged in the first place, Mr Comyn said: “The origins of the reviews by ASIC were to look into Indigenous customers. We supported that work and refunded those fees for that cohort of around $25m.”

Mr Comyn said the ASIC framework was then extended beyond the Indigenous hardship payments, with CBA arguing that not all concession card holders should qualify for a refund.

“If I was you and was thinking you work for a financial institution, your institution makes lots of money, why don’t you just give the money back?” he said.

“In this particular insistence there is no unlawful conduct, these are fees and charges that were associated with those products.”

Mr Husic pressed further, asking about the hurdles customers faced to get the money back.

“In the Indigenous customer cohort, it was identified and fully reimbursed,” Mr Comyn said.

He said other impacted customers would have to go through the process with CBA before any refunds were issued.

Labor member for Deakin Matt Gregg grilled Mr Comyn about whether these customers were told about the cheaper fee accounts.

“I would make the distinction that it’s a generalisation that all of those customers are low-income customers but definitively not all of them,” Mr Comyn said.

“There are a variety of different accounts. The more basic low fee or zero fee account is available to customers but it has more restrictions.”

Mr Gregg interrupted twice and asked if these concession card holders knew their rights.

“Well, I believe it was disclosed, but we may have differing views of the adequacy of that disclosure and I would have to take on notice exactly what steps were taken beyond general (procedures).”

CBA defends ‘super profits’

Mr Comyn defended the major bank’s revenue, saying the narrative it makes “super profits” is simply untrue.

He is the first big four bank boss to front up as part of a two-day grilling in front of the House of Representatives Standing Committee on Economics.

“This view that banking is very concentrated, has very high barriers to entry and therefore super profits are being earned is a narrative we have done a poor job of countering and has been left unchallenged,” he said.

Mr Comyn said the banks needed to generate a level of profitability in order to be viable.

“One of the reasons profitability is so important versus profits is that banking is different in that we don’t just take deposits and make loans,” he said.

“Every time we make a loan we have capital set aside for expected and unexpected losses.

“There’s only two sources for that, either you have to generate profits as an institution or ask the shareholders or investors for the money.”

Mr Comyn said for every $500,000 loan, the bank would set aside $15,000, but if the person repaying the loan fell behind, the bank had to up that rate to more than $100,000.

“Why this matters is we have seen some significant competitive shifts and of course that increasing competition and pressure is by and large good for consumers,” he said.

Big four brace for political grilling

The bosses of Australia’s biggest banks are facing a parliamentary grilling over the next two days as the government takes aim at interest rates, fees and scam protections.

On Tuesday and Wednesday, parliament will haul the big four bank leaders in for committee hearings ordered by Treasurer Jim Chalmers.

After Mr Comyn, Westpac chief executive Anthony Miller will appear on Tuesday afternoon. ANZ and NAB executives will face questioning on Wednesday.

The committee will take aim at the major banks over interest rates, bank surcharge fees, scam protection, the closure of regional banks and the use of artificial intelligence.