There was a key missing question in yesterday’s Insiders interview with Wayne Swan, a question that should be enough to ensure the banks do indeed pass on all the looming RBA interest rate cuts.

Treasurer, do you think the Australian Securitisation Forum’s proposal for a Canadian-style mortgage bond system would introduce greater competition in the home loan market?

The answer is that the ASF’s proposal would resuscitate the near-dead non-bank lenders and immediately slash interest rates for owner-occupiers. And our Big Bank Club would hate it. The threat of introducing it is Swan’s biggest stick to restrain bank greed.

The ASF campaign received a major setback last week when RBA assistant governor Philip Lowe spoke against the “unintended consequences” of government structures to increase the supply of credit. He was of course being economically rational – but he doesn’t have to get elected again in two years to keep an enhanced pay packet.

There is also a question about how serious the federal government actually might be about helping home buyers. For all the political handwringing, the harder heads know Australia already invests plenty in its housing stock, possibly too much.

But if you were a big, rich bank continuing to report record profits and looking forward to increased cartel power having burnt off the non-club competition, you wouldn’t want to tempt a federal treasurer by being too greedy right now.

Now, Wayne, just what do you think of the ASF scheme?

Peter Fray

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