Reforms needed in Australia's banking sector but not rate control: Australia & NZ Bank

11:42, October 31, 2010      

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Further economic reforms are necessary in Australia, but not in the form of interest rate control, Australia and New Zealand (ANZ) Banking Group chief Mike Smith said on Sunday.

Speaking on the ABC's Inside Business program, Smith said Australia's economic growth was at stake in Opposition treasury spokesman Joe Hockey's nine-point plan to increase banking competition and restrict home loan interest rate rises.

Hockey last week called for a full-scale review of Australia's banking sector, saying the big four lenders were increasingly moving to lift their interest rates far above the Reserve Bank of Australia's official cash rate.

His plan called for increased power for the Australian Prudential Regulation Authority to look at the banks and what financial risks they may be taking. Hockey's call was supported by the Greens and is set to be the subject of a Senate inquiry.

Smith said that Hockey's proposals have a massive economic impact in the country, and to the average Australian.

"What happened there was this idea of actually imposing an interest rate regime, really looking at further regulating the banking industry, and really taking it back to an era that has long since gone," Smith told the Australian Broadcasting Corp. Sunday.

Meanwhile, Smith said the broader economy needed continuous reforms to make it more open and market-based.

"The success of the Australian economy over the last 20 years really is a credit to the reform agenda that has been driven by successive governments, both Labor and Liberal, and we must keep that going because that is critical for the future growth of Australia," Smith said.



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