Treasurer Scott Morrison called out the big banks on their insanely large returns

Cole Bennetts /Getty.

“No, the government didn’t make you do it,” was the blunt message to the big four banks from federal treasurer Scott Morrison today after they raised mortgage rates last week by between 0.15% (CBA) and 0.20% (Westpac).

Morrison took aim at the banks on 2GB, pointing out that their return on equity (ROE) was “almost double what it is in Europe”.

That’s something highlighted by Business Insider as banks blamed Australia’s prudential regulator, APRA, for the rate increases. It’s less about regulatory capital and more about shareholder returns and ROE.

The NAB specifically highlighted that in noting “we know we have to balance the interests of our customers with the needs of more than 550,000 shareholders”. The implication appears to be Australia will benefit because at least 550,000 Australians, plus those of us who might hold NAB shares through super, will benefit from the increase in rates.

But that viewpoint has clearly raised the ire of the treasurer, who has broken with the more conciliatory approach of his predecessor.

Morrison said having strong and profitable banks is a “good thing”, but also made a veiled reference to their oligopoly market power in saying “they are in a position to actually pass these costs on”.

He means they have market power and are using it.

Which is exactly what the Murray enquiry told us. It is also why APRA has been increasing bank capital in a valiant yet essentially futile attempt to level the banking playing field.

It’s clear though that none of it has worked. Morrison’s resignation to the action of the banks, for all his protest, made that clear.

“I think what I have to focus on is what are the things I can change and what are the things I can do something about,” he said.

It’s clearly better to be a shareholder than a borrower at any of the big four banks.

NOW WATCH: Money & Markets videos

Want to read a more in-depth view on the trends influencing Australian business and the global economy? BI / Research is designed to help executives and industry leaders understand the major challenges and opportunities for industry, technology, strategy and the economy in the future. Sign up for free at research.businessinsider.com.au.