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

Simple maths says the AI investment boom ends badly

This AI cycle feels less like a revolution and more like a rerun. Just like fibre in 2000, shale in 2014, and cannabis in 2019, the technology or product is real but the capital cycle will be brutal. Investors beware.

Why we should follow Canada and cut migration

An explosion in low-skilled migration to Australia has depressed wages, killed productivity, and cut rental vacancy rates to near decades-lows. It’s time both sides of politics addressed the issue.

Are LICs licked?

LICs are continuing to struggle with large discounts and frustrated investors are wondering whether it’s worth holding onto them. This explains why the next 6-12 months will be make or break for many LICs.

Australian house price speculators: What were you thinking?

Australian housing’s 50-year boom was driven by falling rates and rising borrowing power — not rent or yield. With those drivers exhausted, future returns must reconcile with economic fundamentals. Are we ready?

Retirement income expectations hit new highs

Younger Australians think they’ll need $100k a year in retirement - nearly double what current retirees spend. Expectations are rising fast, but are they realistic or just another case of lifestyle inflation?

Welcome to Firstlinks Edition 627 with weekend update

This week, I got the news that my mother has dementia. It came shortly after my father received the same diagnosis. This is a meditation on getting old and my regrets in not getting my parents’ affairs in order sooner.

  • 4 September 2025

Latest Updates

Shares

Why the ASX may be more expensive than the US market

On every valuation metric, the US appears significantly more expensive than Australia. However, American companies are also much more profitable than ours, which means the ASX may be more overvalued than most think.

Economy

No one holds the government to account on spending

Government spending is out of control and there's little sign that Labor will curb it. We need enforceable rules on spending and an empowered budget office to ensure governments act responsibly with taxpayers money.

Retirement

Why a traditional retirement may be pushed back 25 years

The idea of stopping work during your sixties is a man-made concept from another age. In a world where many jobs are knowledge based and can be done from anywhere, it may no longer make much sense at all.

Shares

The quiet winners of AI competition

The tech giants are in a money-throwing contest to secure AI supremacy and may fall short of high investor expectations. The companies supplying this arms race could offer a more attractive way to play AI adoption.

Preparing for aged care

Whether for yourself or a family member, it’s never too early to start thinking about aged care. This looks at the best ways to plan ahead, as well as the changes coming to aged care from November 1 this year.

Infrastructure

Renewable energy investment: gloom or boom?

ESG investing has fallen out of favour with many investors, and Trump's anti-green policies haven't helped. Yet, renewables investment is still surging, which could prove a boon for infrastructure companies.

Investing

The enduring wisdom of John Bogle in five quotes

From buying the whole market to controlling emotions, John Bogle’s legendary advice reminds investors that patience, discipline, and low costs are the keys to investment success in any market environment.

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.