Instructive RBA survey

THE Reserve Bank of Australia has just released its latest survey of the fees charged by Australian banks in 2000. The survey covers the fees that banks earn in the process of taking deposits, making loans and providing payment services to households and businesses within Australia.

The main findings were:

p banks’ fee income, in aggregate, continues to grow strongly, though only a little more strongly than banks’ assets;

p fees paid by households are growing faster than fees for business, with fees on household transactions growing particularly quickly; and

p the rise in fee income has offset only a small part of the reduction in banks’ interest margins over recent years.

The total domestic fee income of banks in 2000 was $6.3 billion. This is an increase of 14 per cent from the previous year. When you go back over the past four years it is interesting that the growth in fee income has far outstripped the rate of inflation.

The growth in the past year was 14 per cent from 1999.

Another aspect of interest is the proportion of the fee income derived from households and businesses. Fee income from business accounts for two-thirds of total fee income. Despite the fact that business fee income is twice as large as that from households, the rate of growth of the house-hold fee income has been greater.

The type of fees that households pay varies from account-service fees on deposit and loan accounts to transaction fees on deposit accounts.

Of the $2.15 billion that households paid in fees last year, loan fees contributed the largest share at present, while transaction fees have been the most rapidly growing component in recent years (see table below).

There are important contributing reasons for the growth in household fees.

The substantial growth in transactions that are being undertaken is a major reason.

The volume of lending in recent times has also been growing substantially and this has also been a contributing factor.

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