Former Treasurer Peter Costello says evidence before the Hayne Royal Commission showed the banks had behaved poorly.
And the regulators, he said, were asleep at the wheel.
The end result, he said, will be a credit squeeze and financial advice becoming more expensive.
“Coming out of all of this, I think, will be that banks won’t be so profitable and credit will be harder to get, and financial advice will be more expensive,” Mr Costello said.
Mr Costello was passing his observations yesterday when delivering the results of the Future Fund. Mr Costello is the fund’s chairman.
“It’s clear that some of the banks have behaved appallingly,” Mr Costello said.
“It’s clear that the people that were responsible for administering the banks probably haven’t done their jobs.”
Mr Costello, Australia’s longest serving Treasurer in the former Howard government from 1996 to 2007, said questions had to be asked about the Australian Securities and Investments Commission.
“We want to know where the regulator was. Where was ASIC when all this was happening? I think that’s the next step of the royal commission, to actually find out why the regulatory agencies weren’t awake at the wheel.”
Mr Costello said borrowers need to prepare for increased interest rates and out of cycle rate hikes.
“The Australian banks borrow a lot of money offshore, particularly the US, and US rates are rising so I do think the banks will be looking to increase rates and some have done that already,” he said.
“It’s important that monetary policy is mediated by the Reserve Bank but given the international pressures, I do think they will be looking for out of cycle rate hikes,” Mr Costello said, adding that it was “time for a bit of prudence.”
“The market is moderating international rates are rising, and credit is going to be harder to get.”
Sure enough, Westpac yesterday lifting variable interest rates for owner occupied and residential investment property loans, to counter the rise in its wholesale funding costs threatening its profit margins. This lifted the bank’s variable mortgage rates by 14 basis points, or 0.14 percentage points, for both new and existing customers.
This will see Westpac’s standard variable home loan rate for owner occupiers with principal and interest repayments rising to 5.38 per cent. It will come into effect on September 19.