Weekly Update: 13th October 2023

“Required payments will continue to rise a little further in the period ahead as fixed-rate loans taken out during the pandemic reach the end of their fixed-rate period. The share of such loans has already fallen substantially, from close to 40 per cent in early 2022 to about 20 per cent today.” 

– Christopher Kent, RBA Assistant Governor (Financial Markets), addressing Bloomberg on 11 October

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Parliamentary Update:

• Treasurer Jim Chalmers released draft legislation for public consultation to amend the Payment Systems (Regulation) Act 1998 to update the definition of ‘payment’ and ‘payments systems’ to capture new payment methods. Submissions are open until 1 November. The Treasurer said the amendments will:
  • ensure the Reserve Bank of Australia can regulate new and emerging payments systems, such as digital wallet providers, and
  • introduce a new Ministerial designation power that would allow particular payments services or platforms that present risks of national significance to be subject to additional oversight by regulators.
     
• Housing Minister Julie Collins announced the formal commencement of Housing Australia, which will be responsible for delivering social and affordable rental homes under the Albanese Government’s $10 billion Housing Australia Future Fund and funds committed under the National Housing Accord for new affordable rental housing.
  • All current programs currently administered by the National Housing Finance and Investment Corporation will be continued by Housing Australia.
     
• Assistant Minister Andrew Leigh announced the first partnership of the Australian Centre for Evaluation (ACE), which aims to help put evaluation evidence at the heart of policy design and decision‑making. The partnership will be with the Department of Employment and Workplace Relations.

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Policy Update:

• The ABA met with DFAT and delegates from the Africa Continental Free Trade Area (AfCFTA), including its Secretary General H.E. Wamkele Mene, to discuss key areas of opportunity between respective jurisdictions.

• The ABA attended the Insurance Council of Australia’s annual conference, ‘Insuring Tomorrow Together’ and heard from government and industry on issues impacting the financial services sector, including global risks, insurance affordability and emerging issues.
   
• The ABA participated in a consultative forum led by the National Emergency Management Agency and the Department of Home Affairs on the banking and finance sector’s involvement in natural disaster response and recovery, and shared with government key asks of the industry to support disaster response. 
   
• The ABA presented at a COSBOA Roundtable to COSBOA’s membership on ABA’s recent release of its Banking by Numbers – Small Business publication and shared with attendees’ information about the newly relaunched Financial Assistance Hub.

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Regulatory Update:

• APRA Chair John Lonsdale spoke at the Citi Australia and New Zealand Investment Conference on lessons learned from APRA’s recent hypothetical banking stress test. The stress test used a scenario which involved severe downturn featuring high inflation, unemployment rising to 10 per cent and house prices falling by a third. All participating banks, including the four majors, retained sufficient liquidity and banks continued to provide credit.
   
• RBA Assistant Governor (Financial Markets) Christopher Kent spoke on the transmission of monetary policy at an address to Bloomberg. He noted that the pass-through rate of the cash-rate to deposits is high in Australia, relative to comparable jurisdictions: UK, Norway, NZ, US and Canada.
   
• The RBA’s Payments System Board released its annual report for 2023.
   
• ASIC appeared before the Senate Committee Inquiry into Management and Assurance of Integrity by Consulting Services.
   
• The Treasurer announced that Peter Costello had advised the Government of his decision not to seek a third term as Chair of the Future Fund, and that a formal merit-based recruitment process will now commence to appoint a new Chair.

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Economic Update:

• Purchases made with debit cards are now the most common way people make card payments Australia, overtaking credit cards during the COVID period, Figure 1.
   
• Despite this, credit card use has been steadily increasing since 2020, and at a faster rate than in the lead up to COVID.
   
• However, total credit card balances remain low, as do balances accruing interest, suggesting that the return to credit card payments isn’t an indicator of consumer detriment, Figure 2.

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Communications and Media:

• ABA CEO Anna Bligh spoke to ABC Radio about how consumers are changing the way they pay for goods and services and the gradual phase out of cheques. Read the full transcript of the interview here.
   
• ABA CEO Anna Bligh spoke at an Allens webinar about ‘spotting and stopping scams’. Anna outlined how a strong ecosystem approach to fighting scams – with banks, government, telcos, crypto, social media platforms, individuals and law enforcement – is critical.

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Upcoming Submissions:

Published submissions

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Selected Media:

• AFR – New RBA powers to regulate Apple, Google payments
• AFR – The fixed rate mortgage ‘cliff’ was a myth
• AFR – Major banks survive APRA’s ‘severe but plausible’ stress tests.
• SMH – ‘Third wave’ of inflation is looming as oil prices surge
• AFR – Inflation forces workers to take on extra hours

Weekly Update