THYME FINANCIAL GROUP PTY LTD
ABN: 56 605 467 301
0409 157 873 (Cheyne)
0424 757 143 (Nick)
cheyne@thymefinancial.com.au
nick@thymefinancial.com.au
1 February 2016
Price and Prejudice
By Cheyne Ghoughassian
This week’s rates are published at the end of this article.
All hope abandon, ye who enter here.
- from the Divine Comedy by Dante Alighieri.
In the main, financial markets have - over time – developed pricing mechanisms to cater for risk and
service. As we saw in the recent movie “The Big Short” not all of it works well but if you compare it to other
industries (and I will), then it holds up ok.
I moved into my current home over nine years ago. It’s in metropolitan Sydney. One of the first things I
noticed was how slow my internet connection was. So I contacted my ISP, Telstra, and asked why. They told
me that whereas I had cable at my previous home I only had copper wire at my new home (ADSL). Yippee.
Worse, I was 5 kms from the nearest exchange. But, 400 metres away I could see tantalizing cable overhead
but didn’t have overhead wires at my place (all underground).
Nine years later and after complaints to the ombudsman, the CEO and around 12 visits from technicians,
my internet speed is no better. It would’ve cost Telstra less to run cable 400m…but I digress.
Here’s where financial markets have it all over the telco industry. For my internet connection, I pay the
same rate as the person, who lives next door to the exchange for the same package – but clearly I receive a
far inferior product – in case you’re wondering, all other providers are the same or worse.
If I applied for a home loan and I only had 5% deposit, I would be charged more than someone who had
20% deposit – by way of lenders mortgage insurance. Also, more and more lenders are rewarding a lower
LVR with rate reductions. This will invariably lead to early re-financings as lenders’ home prices increase or
their debt levels decrease.
The retail industry is also a good citizen when it comes to price. If you see a chook at your local
supermarket with three days prior to the used by date, it will be priced cheaper than one with seven days
before going off.
Same with fashion, this season’s fashion will be heavily discounted at the end of the season.
So why do some industries still stick to a one price fits all model? Simple, they’re either operating a
monopoly, duopoly or oligopoly.
Let me explain. In Australia, we often look at prices of goods and services in other developed nations and
wonder why we pay a premium. Well, it’s easy, because we have a population that supports only so many
companies in a particular industry. We have roughly the same population of greater Los Angeles but have
the same land mass as all of the US.
However, the worst protagonist of gouging us for higher prices has to be the gas industry. I just checked
what I’m paying now per unit to what I was paying a few short years ago. It’s almost a 300% increase. The
THYME FINANCIAL GROUP PTY LTD
ABN: 56 605 467 301
0409 157 873 (Cheyne)
0424 757 143 (Nick)
cheyne@thymefinancial.com.au
nick@thymefinancial.com.au
gas industry maintains that that’s the price that their customers in Asia are prepared to pay and so must
we. There’s a simple answer to this – substitutes. In the resource industry the big bogey is renewables. That
should be having a significant impact on all energy prices (and it is – see the price of oil). How can gas justify
such an increase?
A good example of how deregulation has slowly unwound monopoly/duopoly positions is in the Airline
industry. It’s still heavily regulated but we now have choice (at least in the international routes) and I can
fly to Europe today for around the same price as I could 25 years ago. Anyone remember the fierce
competition between Qantas and Ansett? Particularly when a third airline, Compass, entered the frey.
So, next time you complain about bank fees, interest rates, petrol prices, airfares etc, remember we live
(and I’m quoting a former Prime Minister here) “at the arse end of the world” with a population of a city
and the land mass of a continent and just cough up.
RATE MOVEMENTS
This Week’s Activity: There was some quiet but significant movement this week. Almost all of the rates
below are from one 3rd tier institution. These rates are offered through brokers only.
Whilst we’re accredited with around 18 lenders across many loan products, we are not accredited with all
lenders and there are only a couple of lenders that we do not deal with.
This week’s best rates* from a variety of lenders is as follows:
Variable
5 years
Owner Occupied
Investment
Commercial
3.99%
4.30%
4.49%
4.59%
Fixed Rates
3 years
2 years
3.99%
3.99%
3.89%
3.89%
1 year
3.79%
3.79%
Varies depending on many factors - call to discuss your
circumstances
Thyme Financial Group
T: 0424 757 143 (Nick)
E: nick@thymefinancial.com.au
0409 157 873 (Cheyne)
cheyne@thymefinancial.com.au
Disclaimer: These rates may change without notice. Thyme Financial Group Pty Ltd does not set these rates. This article is meant
to inform our clients about the movement in rates. Thyme Financial Group is not responsible for any changes in these rates with
or without our knowledge.