Background: The Treasury is seeking submissions on its Consultation Paper on the Financial Claims Scheme. REIA represents around 80% of real estate agencies and is an important element of the broader property and construction sector, which makes a significant contribution to Australia’s social climate and economic development. The real estate profession employs approximately 77,000 persons with most agencies having less than 10 employees and contributes $300 billion annually in economic activity.
REIA has the commitment of providing and assisting research and well-informed advice to the Federal Government, Opposition, professional members of the real estate sector, media and the public on a range of issues affecting the property market.
In responding to the Consultation Paper the REIA welcomes the opportunity to be part of the process and address the following issues: · the cap on the Financial Claims Scheme from October 2011 · additional coverage to depositors whose funds are held in selected pooled trust accounts current. The cap on the Financial Claims Scheme (FCS) from October 2011 That competition in the banking sector has declined following the GFC can be seen by the increase in concentration of credit in a few financial institutions and by the increase in lending margins by the major banks relative to the small ones. The changes in the concentration of business lending and net interest rate margins (NIM) by the major banks indicate that small lenders were being pushed out of the market and the big four banks were consolidating their market power.
REIA is concerned that reducing the deposit guarantee cap level to between $100k and $250k would have a negative impact on the level of competition in the financial sector. Any move that reduces the competitiveness of the smaller financial institutions could be harmful to the Australian economy, particularly at this time with concerns about the “two-speed economy”.