Don’t get mad at banks, get more interest, Lowe says

afr.com:

Departing Reserve Bank governor Philip Lowe has urged savers to demand increased deposit rates on their accounts of at least 5 per cent, while dismissing Labor MPs’ suggestions lenders are reaping “super profits” and worsening inflation.

In his blunt-talking 16th and final appearance before a parliamentary inquiry, Dr Lowe on Friday also suggested that talk of an economy-damaging “mortgage cliff” was overstated, with most households hit by large increases still able to afford repayments.

Philip Lowe enjoys a lighter moment with his successor as RBA governor, Michele Bullock, at his last parliamentary hearing appearance on Friday. Alex Ellinghausen

Dr Lowe faced a series of questions from House of Representatives economics committee members that accused the nation’s banks of making excessive profits in the current rising interest rate environment.

Speaking a day after the Commonwealth Bank announced a 6 per cent increase in full-year cash profit to a record $10.16 billion, boosted by an expansion in the difference between interest earned from borrowers and what it pays to savers, Dr Lowe agreed with some MPs that “bank profits are high”.

He said he understood why people were interested in the topic because of the large dollar numbers involved.

However, he linked the large sums to the fact that regulators force the banks to put aside large capital buffers to secure the loans and other business they write, which means the return on equity across the industry is more modest than headline numbers suggest.

“I just remind you that the banks have a large amount of capital [set aside],” he said.

Dr Lowe noted that CBA’s return on equity, a key measure of profitability, was 14 per cent, partly because loan write-offs were low in