Savers have been urged by the head of Australia's central bank to make banks work harder for their money.
Asked if Australian banks are profiteering from rising interest rates, Reserve Bank governor Philip Lowe said he could understand why people were asking questions following Commonwealth Bank's record profit of $10.2 billion.
"But just to remind you, as well, the banks have a large amount of capital - the regulatory system requires banks to hold a lot of capital, and the CBA's return on equity was 14 per cent."
He said the return on equity for Australian banks was high but not out of line with overseas or other companies.
"Over the past year, in most major economies, banks are earning between 10 and 15 per cent return on equity at the moment because write-offs are low, because problem loans are low, and because unemployment rates are very low".
But he said there were concerns about competition across deposit products, which was a common theme around the world.
"So if you don't like the fact that banks are earning so much money, then I encourage you to shop around and make them work harder for your money," he said, noting some banks were paying more than five per cent interest on deposits.
The consumer watchdog is investigating the behaviour of banks when it comes to passing on higher interest rates to savers following concerns hikes across deposit products are ad hoc and conditional.
Dr Lowe made the remarks on banks at a parliamentary hearing, which will be among his last public appearances as head of the RBA.
Deputy and incoming governor Michele Bullock and other senior officials, also attended the hearing.
Dr Lowe also offered his thoughts on rent controls, which have been hotly debated in an environment of fast-rising rents.
He said rent controls reduce incentive to add to supply in most cases.
"It might help in the short run, it might relieve some pressure on people in the short run, and clearly that's the case.
"But we've got to keep a medium term perspective on this - will it add to the supply of rental accommodation over time? My judgment would be that it would not."
He recommended a longer term focus to the pressures on the housing market, flagging planning and zoning reforms as an opportunity to make the supply side of the market more flexible.
"Generally, giving people more money or capping prices doesn't help with the balance of supply and demand in the market," Dr Lowe said.
The central bank has hiked interest rates 12 times since May last year but has kept the cash rate on hold for two months in a row, fuelling speculation the peak has been reached.
Dr Lowe noted interest rates had been jacked up a lot in a short period and cash rate movements take time to work through the economy.
He said economic data lined up with Australia travelling down the "narrow path" he had been speaking about for some time.
But he said there were two main risks complicating this scenario.
The first was household consumption, which on one hand, has been supported by the strong labour market, and on the other, was under pressure from declining real incomes and higher borrowing costs.
There was also a risk of services inflation staying high due to strong demand for services in the wake of the pandemic, stronger growth in nominal wages and incomes and weak productivity growth.
© AAP 2023