Register For Our Mailing List

Register to receive our free weekly newsletter including editorials.

Home / 328

Welcome to Firstlinks Edition 328

  •   16 October 2019
  •      
  •   

Chief executives of banks usually give their pricing committees free rein to adjust fees, deposit and loan rates, as there are hundreds of prices regularly changing. But there is one rate which must always be cleared by the boss: the variable home loan rate. This demand goes back at least 30 years, because the managing directors know the Federal Treasurer of the day will hit the phone and the airwaves to complain if banks do not pass on a full cash rate cut.

And so it was with Josh Frydenberg this week, only this time, he went a step further. In this Media Release, he directed the Australian Competition and Consumer Commission (ACCC) to undertake an inquiry into the pricing of residential mortgage products. Didn't he just announce a Retirement Income Review? Isn't the House of Representatives Standing Committee on Economics holding hearings in November as part of its ongoing review of the banks? Didn't the Productivity Commission already issue an Inquiry Report in 2018 into mortgage pricing? And not to forget the granddaddy of them all, the Financial Services Royal Commission. No wonder the banks are calling it 'inquiry fatigue'.

Then the Prime Minister's Office accidentally distributed the talking points provided to Coalition MPs, which told them what to say about the ACCC Inquiry in the last two dot points below. It excuses the Financial Services Royal Commission from not examining the pricing issue because it "focused on misconduct". So relax, bankers, your pricing behaviour is not misconduct.

ACCC Chairman Rod Sims will need to issue a dictionary. On 14 March 2002, almost 18 years ago, I did a segment on ABC Radio National called 'A Banker's Dictionary' where I described some of the words used in bank pricing committees. Many of these are now politically incorrect, but there are new ones. Mr Sims will learn about the difference between the back book and the front book, loyalty taxes, maturity transformation and (standing the test of time) retail inertia.

The ACCC will learn that banks do not fund much of their book at the cash rate, and deposit rates have also not reduced by the amount of the cash rate fall. Banks are attempting to maintain margins by clawing a few points from variable mortgage rates.


Source: Reserve Bank Chart Pack, October 2019

This week's investing articles ...

Where do investors find income these days? Shane Oliver updates his five charts on investing for income and cash flow, showing the tradeoff between adequate income and taking more risk.

Charles Dalziell asks a legitimate question for every investor: in the rush for safety, are government bonds, bond proxies and highly-sought blue chips really defensive at these prices?

There is a commonly-held view that money held in superannuation is protected from the claims of creditors under bankruptcy. Julie Steed tests the boundaries of this statement.

Hayden Briscoe believes a seismic event is unfolding which markets do not fully appreciate as investors adjust their portfolios when more Chinese securities are included in global indexes. It's a shift unlike any seen in decades recognising the rise of Chinese economic power.


This week's Sponsor White Paper from AMP Capital is called 'Women, parental leave and financial stress'. Financial wellness research finds 24% of working women feel financially stressed versus only 14% of working men.

The BetaShares ETF Review for September 2019 shows total Australian ETFs now exceed $55 billion following a strong $2 billion growth over the month.

Our own news story: Cuffelinks acquired by Morningstar

We are excited to advise that Cuffelinks, now branded as Firstlinks, has been acquired by Morningstar. My assistant, Leisa, and I will join the Morningstar team and continue to bring Firstlinks to you for free, but with the resources of a global publisher and researcher whose values closely align with our own. We also look forward to bringing new services to you.

See Chris Cuffe's letter on the journey since 2012; Managing Director of Morningstar Australasia, Jamie Wickham on why his company bought the business; and I reflect on the support received from writers, sponsors and readers as we move onwards and upwards with a new owner.

 

Graham Hand, Managing Editor

For a PDF version of this week’s newsletter articles, click here.

 


 

Leave a Comment:

banner

Most viewed in recent weeks

The case for the $3 million super tax

The Government's proposed tax has copped a lot of flack though I think it's a reasonable approach to improve the long-term sustainability of superannuation and the retirement income system. Here’s why.

7 examples of how the new super tax will be calculated

You've no doubt heard about Division 296. These case studies show what people at various levels above the $3 million threshold might need to pay the ATO, with examples ranging from under $500 to more than $35,000.

The revolt against Baby Boomer wealth

The $3m super tax could be put down to the Government needing money and the wealthy being easy targets. It’s deeper than that though and this looks at the factors behind the policy and why more taxes on the wealthy are coming.

Meg on SMSFs: Withdrawing assets ahead of the $3m super tax

The super tax has caused an almighty scuffle, but for SMSFs impacted by the proposed tax, a big question remains: what should they do now? Here are ideas for those wanting to withdraw money from their SMSF.

The super tax and the defined benefits scandal

Australia's superannuation inequities date back to poor decisions made by Parliament two decades ago. If super for the wealthy needs resetting, so too does the defined benefits schemes for our public servants.

Are franking credits hurting Australia’s economy?

Business investment and per capita GDP have languished over the past decade and the Labor Government is conducting inquiries to find out why. Franking credits should be part of the debate about our stalling economy.

Latest Updates

Superannuation

Here's what should replace the $3 million super tax

With Div. 296 looming, is there a smarter way to tax superannuation? This proposes a fairer, income-linked alternative that respects compounding, ensures predictability, and avoids taxing unrealised capital gains. 

Superannuation

Less than 1% of wealthy families will struggle to pay super tax: study

An ANU study has found that families with at least one super balance over $3 million have average wealth exceeding $19 million - suggesting most are well placed to absorb taxes on unrealised capital gains.   

Superannuation

Are SMSFs getting too much of a free ride?

SMSFs have managed to match, or even outperform, larger super funds despite adopting more conservative investment strategies. This looks at how they've done it - and the potential policy implications.  

Property

A developer's take on Australia's housing issues

Stockland’s development chief discusses supply constraints, government initiatives and the impact of Japanese-owned homebuilders on the industry. He also talks of green shoots in a troubled property market.

Economy

Lessons from 100 years of growing US debt

As the US debt ceiling looms, the usual warnings about a potential crash in bond and equity markets have started to appear. Investors can take confidence from history but should keep an eye on two main indicators.

Investment strategies

Investors might be paying too much for familiarity

US mega-cap tech stocks have dominated recent returns - but is familiarity distorting judgement? Like the Monty Hall problem, investing success often comes from switching when it feels hardest to do so.

Latest from Morningstar

A winning investment strategy sitting right under your nose

How does a strategy built around systematically buying-and-holding a basket of the market's biggest losers perform? It turns out pretty well, so why don't more investors do it?

Sponsors

Alliances

© 2025 Morningstar, Inc. All rights reserved.

Disclaimer
The data, research and opinions provided here are for information purposes; are not an offer to buy or sell a security; and are not warranted to be correct, complete or accurate. Morningstar, its affiliates, and third-party content providers are not responsible for any investment decisions, damages or losses resulting from, or related to, the data and analyses or their use. To the extent any content is general advice, it has been prepared for clients of Morningstar Australasia Pty Ltd (ABN: 95 090 665 544, AFSL: 240892), without reference to your financial objectives, situation or needs. For more information refer to our Financial Services Guide. You should consider the advice in light of these matters and if applicable, the relevant Product Disclosure Statement before making any decision to invest. Past performance does not necessarily indicate a financial product’s future performance. To obtain advice tailored to your situation, contact a professional financial adviser. Articles are current as at date of publication.
This website contains information and opinions provided by third parties. Inclusion of this information does not necessarily represent Morningstar’s positions, strategies or opinions and should not be considered an endorsement by Morningstar.