Eleven top lenders warned on dodgy consumer credit insurance; APRA tells NAB, ANZ, Westpac to hold $500m additional risk capital

ASIC has warned eleven major lenders of "significant enforcement action" after finding consumer credit insurance is "extremely poor value" and has consistently failed consumers. 

Also the prudential regulator APRA has told three major banks to put aside an additional $500 million in capital to deal with risk management issues and remediation stemming from the banking Royal Commission.

I speak with ASIC commissioner Sean Hughes and banking analyst Brett le mesurier.

Wall Street bounces on renewed expectations of US rate cut

US Federal Reserve chairman Jerome Powell signals a rate cut is likely in comments to the US Congress:

"A bad deal for most workers" - Grattan Institute warns compulsory super increase to 12pc will slice into retirement savings

Here's my story from The World Today


Workers could be worse off in retirement despite the scheduled increase in compulsory superannuation to 12 percent in 2024, according to updated research out this morning.

The Grattan Institute warns the legislated increase in the superannuation guarantee from the current 9.5 percent to 12 percent would slice $30,000 from average superannuation savings because of reduced access to the age pension and lower wages.

The modelling suggests a 30 year old worker earning $58,000 today would get less than a one percent boost to retirement incomes by losing 2.5 percent of wages each year in additional superannuation contributions.

Grattan Institute director of household finances Brendan Coates warns that unless employers pick up half the cost of the scheduled increase workers are in for a "super shock".

"Raising compulsory super to 12 percent won't translate into higher retirement incomes for middle income Australians," Mr Coates said.

"They'd sacrifice higher wages in exchange for little or no increase in their retirement incomes. The best evidence is that higher super contributions are paid for via lower wages."

The research argues that higher super at retirement is offset by lower pension payments due to the pension assets test and that pension payments will also fall because the aged pension is indexed to wages which would be lower with higher contributions.

Mr Coates also suggests that higher compulsory superannuation will bite into future budget surpluses with taxpayers funding an extra $2 billion to $2.5 billion in tax breaks to high income earners.

"High compulsory super might be justified if it save the budget money. But in fact higher compulsory super actually costs the budget," Mr Coates said.

However, the Grattan Institute research has been slammed by the actuarial firm Rice Warner which describes the warnings as "an obfuscation of facts".

Senior consultant Nathan Bonarius says Rice Warner research has been "twisted" to suit the Grattan argument that opposes the increase in compulsory contributions from 9.5 percent.

In a statement, Mr Bonarius says the contribution level of 10 to 15 percent is necessary and reasobable to "more people self-sufficient in retirement". 

The warning about "a bad deal for workers" comes as the federal government considers a review of the $2.8 trillion superannuation sector which the Productivity Commission last year described as "an unlucky lottery for some".

Compulsory superannuation was established by the Hawke-Keating Labor government in the early 1990s with the current contribution set to rise to 10 percent in 2021 and 12 percent in July 2025.


Follow Peter Ryan on Twitter @peter_f_ryan

ASIC targets short term lenders and 990 percent loans to vulnerable Australians

The corporate regulator has announced a crackdown on short-term lenders who target vulnerable Australians with fees that can go close to a thousand percent of a loan amount. 

ASIC has targeted two firms, Cigno and Gold-Silver Standard Finance, under its new product intervention powers where consumers from low socio-economic groups can be hit with 990 percent interest on loans. 

The regulator has identified "significant consumer harm" where often desperate Australians take out high interest loans just to make ends meet

Here's my report from The World Today where I speak with ASIC commissioner Sean Hughes and Gerard Brody from the Consumer Action Law Centre.

Westpac refunds wrongly-charged mortgage customers

Westpac has been forced to compensate around 40,000 customers who've been ripped off on their mortgage repayments. 

In the latest fallout from last year's banking Royal Commission, Australia's second biggest bank is on track to shell out close to a $100 million after discovering the customers had been charged too much when their loans switched off "interest only" payments. 

Here's my report from this morning's AM program

Markets surge in low rates world. But could a correction be on the way?

Australian shares are set to hit a record high later this week as investors race to secure returns on their money. 

CMC Markets chief strategist Michael McCarthy says the stockmarket is an attractive proposition as central banks continue to lower interest rates.