Don't Take Our Cheap Money Away
Sydney Morning Herald
Saturday December 20, 1986
ONE OF the bankers who will stop work on Monday as his union steps up its campaign against the fringe benefits tax is a money adviser who has a house, two cars and a boat. He has a hefty credit card bill and a medical loan for his wife's teeth.
The man, who would not be identified, says he is $2,700 a year worse off since the interest rates on his loans and credit cards went up earlier this year. He says bank staff are the largest single group of employees to suffer under the FBT.
The three major banks - Westpac, the ANZ and the National - have passed on additional costs by increasing interest rates on employees' cheap loans and credit cards.
The Australian Bank Employees' Union argues that its members' fringe benefits are a traditional means of making up the total wages and conditions of bank employees to the level of the general workforce.
The Commonwealth and State banks have already agreed not to increase interest rates on staff home loans.
But Westpac and the National Bank have refused to talk on the basis that the FBT is not an "award matter" and not the domain of union interests. The ANZ broke ranks this week and agreed to negotiate over the FBT as part of an overall package including superannuation and salary restructuring.
An investment consultant at Westpac's city office who would not allow his name to be used, says he is $2,700 a year worse off since the interest rates on his loans and credit cards went up earlier this year.
For the first time in a decade, the consultant, 42, is put in the uncomfortable position of regularly worrying about his finances and wondering how he can make ends meet each week.
Luxuries have disappeared and his wife, also a bank employee, is considering selling her car to pay off bills.
No longer can they afford to go to cheap Italian restaurants. They consider themselves lucky to have paid off their yacht. They chase cheap petrol specials and a regular carton of beer cans each week has become a once-a-month thing.
The largest part of the consultant's $29,000 a year salary is tied to loan repayments. His total outgoing to the Westpac Bank is $877 a month or 36 per cent of gross monthly salary.
He joined Westpac in 1963 and, after several refusals, qualified for his first cheap bank home loan in 1969.
If it was not for the 1970s public sector-led wages boom under the Whitlam Government, the consultant believes his family and many others would not own their homes today.
He now pays $216 a fortnight on a $50,000 mortgage at 7.5 per cent a year interest for the new town house at Castle Hill he and his wife moved into after they married in February.
Westpac's interest staff rates for home loans went up from 6.5 per cent to 7.5 per cent. This is still considerably less than the 18.5 per cent charged for regular mortgages but if the man is forced to change homes his interest rate will rise to 8.1 per cent.
His monthly Bankcard bill is $50 at 10.2 per cent. The yearly interest rate has risen from 7.5 per cent before the FBT but still compares well with the market rate of 18 per cent.
His monthly Mastercard bill is $85 at 10.2 per cent, after rising from 7.2 per cent last July compared with the market rate of 15 per cent.
He repays $65 a fortnight for a recent $12,600 car loan at 1.5 per cent interest for his Toyota Tarago. If he changes cars, the interest rate will rise to 3.7 per cent.
Both divorcees, the consultant and his wife have access to four teenage children and each pay $80 a fortnight maintenance to their former spouses.
They have a $3,500 personal loan for their wedding expenses - with repayments of $91 a month at 11.45 per cent interest, although a personal loan taken out now would be at 14.75 per cent.
A $2,100 medical loan for the consultant's wife's teeth is repaid $20 a fortnight at 7.4 per cent interest.
The only incentive for Kim Stanley to remain working in the ANZ's lending section in the city is the opportunity for a cheap home loan.
If that were to disappear, he would probably move to merchant banking or the insurance industry.
Private banks, she says, will be hard pressed to attract staff unless pay is restructured because of dwindling fringe benefits and present low pay scales.
Ms Stanley, 23, earns $17,500 a year and wants to get married next April. She could qualify for a loan after working seven years at ANZ - one year longer than the qualifying period.
But the impost of possible further rises in home loan interest rates -beyond 7.5 per cent - would be beyond her means and require her to have a higher home deposit before taking a mortgage of $50,000 ($4,000 below the ANZ staff limit).
Ms Stanley, who lives at Rooty Hill, ideally wants to move to the Central Coast - the only area she sees homes in her price range.
Barry O'Connell, a 45-year-old commercial banking officer just below management level at the ANZ, paid off his Toongabbie home soon after buying it in 1968 for $12,000 during the cheap housing boom.
He said the FBT had no immediate effects on him because his bank altered its staff lending policy in 1979.
New staff, however, were particularly touched by the ANZ's drive to cut costs because their repayments were based on 12.6 per cent a year interest rates compared to 8.1 per cent for employees with first home loans presently underway.
All banks offer different employee fringe benefits, which has made it difficult for the ABEU to run across-the-board campaign against the FBT.
Mr O'Connell, for example, has a $15,000 mortgage for an extension at the back of his home to create more living space for his wife and two children.
But the ANZ does not offer a second loan at concessional rates to employees so his $100 a fortnight repayments are based at the previous public rate of 13.5 per cent a year interest. The ANZ also acknowledges normal credit card interest rates for its employees, whereas other banks have special rates.
Earning $24,000 a year, Mr O'Connell's financial commitments are not high apart from monthly Bankcard bills. But management level or not, he says it is a case of "making do".
One of the hardest hit by the FBT changes is a 40-year-old bank collector who works in the National Bank's city offices and prefers to go unnamed because of the sensitive nature of his job.
He earns $20,800 a year. Already his family has suffered a $3,000 cut to living standards because of increased interest rates affecting his home loan and credit cards.
The bank collector has a $37,000 mortgage on a three-bedroom brick veneer home at Engadine with repayments of $131 a week.
He bought the house five years ago for $85,000 and now expects it would be worth more than $100,000.
But he is worried that the 7.4 per cent interest rate he pays on his mortgage could go up to 13.5 per cent. His income would take a "deep nose dive" by increasing his repayments to $240 a fortnight.
As it is, he is left with $400 a fortnight for himself, his wife and two children to live on after repayments are deducted.
The consultant has a $50,000 mortgage at 7.5 per cent interest on the house at Castle Hill.
A BANKER'S PERSONAL LEDGER
Amount Account Rates Repayments
$1,000 Bankcard 8.11.85 7.5%
20.1.86 9.6%
18.8.86 13.8%
1.12.86 10.2% $50 a month
$1,700 Mastercard 18.7.86 7.2%
18.8.86 13.8%
1.12.86 10.2% $85 a month
$50,000 Housing
loan Oct 85 6.5%
Nov 85 7.0%
May 86 7.5% $216 a fortnight
$12,600 Car loan 1.5% $65 a fortnight
$3,500 Personal loan
for wedding 11.5% $91 a month
$2,100 Dental loan
for wife 7.5% $20 a fortnight
This is total loan repayments for a Westpac investment consultant using staff benefits following the introduction of the FBT. Total outgoings to the bank are $877 or 36 per cent a month of his salary.
© 1986 Sydney Morning Herald
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