The Commonwealth Bank called on the Federal Government yesterday to trim its budget deficit.
The managing director of the bank, David Murray, said, “”We cannot afford to allow the fiscal position to deteriorate in the growth stage of the economy, I believe the Government should be using every opportunity to trim that fiscal position.”
On the other hand he thought it was too early for the Reserve Bank to be looking at a change in monetary policy.
Mr Murray was speaking on the ABC television’s bottom line.
He said with the economy growing there was a danger of an escalation of imports and a deterioration of the current account.
He confirmed the bank would not be increasing interest rates like Westpac and the ANZ.
“”The bank has not yet seen all the factors present which would led us to change our home loan variable rates and until we see those factors we will not be changing them.”
Improvements in the bank’s efficiency had enabled it to hold rates and customers some of the benefits to be passed on.
He did not foresee a war of attrition on margins because the banks had a very important prudential responsibility. However, there would be a period of intense competition.
He saw less of a risk of banks repeating the mistakes of the 1980s. They had learned to go beyond the security to back debt and analyse the borrowing itself and the capacity to repay. Skilful credit management could give a bank a competitive edge. Further in the 1980s government had compounded the problem with the timing of its high-interest-rate monetary policy.
Mr Murray acknowledged the nature of the home-lending market had changed with the entry of more non-bank financiers.
“”Now we can look at any organisation with modern technology and marketing capabilities and we can regard anybody as a potential competitor for all or part of our services,” he said.