Sydney, 26 April, 2006: The Consumer Price Index (CPI) data from the Australian Bureau of Statistics (ABS) released today showed there was a fall in the cost of key banking products.

This is the third quarter that the ABS has included financial services in the CPI. 
Today’s data for March quarter 2006 shows that while there were price rises for pharmaceuticals (+14.2%), vegetables (+7.9%), motor vehicles (+1.4%), automotive fuel (+1.4%), secondary education (+6.9%) and tertiary education (+4.8%). Offsetting these rises were price falls for deposits and loan facilities (-2.1%), furniture (-3.2%), clothing and footwear accessories (-3.5%).

This outcome for this quarter remains good news for bank customers over the longer period of nine months, since the financial services component was introduced in the CPI. Since June 2005, prices for deposits and loans have fallen 0.5%, while in this same time, the overall CPI has increased by 2.4%.

The ABS measures two components when calculating the price of financial services:

1. prices of deposit and loan facilities, which fell 2.1% in March quarter. This covers fees charged to households but also interest rate margins; and
2. prices of ‘other’ financial services which increased by 0.6% in March quarter.

Overall, the cost of financial services fell by 0.9% in March quarter 2006 and has only increased by 0.6% since it was introduced to the CPI in June 2005. When comparing financial services with the total CPI over the last nine months, the rate of price increase for the CPI (+2.4%) is four times higher than for financial services (+0.6%). 

David Bell, Chief Executive of the Australian Bankers’ Association, said: “Despite continuing media reports about how costly banking can be for Australians, this quarterly data shows there has been price reductions for consumers in deposits and loans. The data shows that households are still benefiting from competition in the banking industry because savings due to lending margin declines are greater than increases in fees.”

“The margin today between official rates and home loans is almost two and a half percent narrower than a decade ago. This translates into very significant savings for home buyers, amounting to thousands of dollars on their mortgage each year.
“And most banks are providing low-cost or no-cost bank accounts, which eliminate financial barriers for low-income customers, students and pensioners, accessing banking transactions.”

In the highly competitive environment of modern banking, charges such as interest rates and fees can, to a significant extent, be influenced by the individual customer. Fees can be minimised by choosing a bank account which best suits your needs. Other tips include completing transactions and staying within specified limits, using your own bank’s ATMs for transactions and withdrawing money at the supermarket via EFTPOS at the same time as paying for groceries.