Federal Treasurer Wayne Swan says the government is taking action to ensure the major banks stay competitive.Mr Swan’s comments follow recent interest rate hikes by the major commercial banks independently of the Reserve Bank.

Commonwealth Bank chief Ralph Norris also warned last week that further hikes to mortgage rates were likely because of the global credit crunch.

Mr Swan said the increases were a decision for the banks but the government was taking action to encourage competition.

An example is the government’s bank-switching package that will allow unhappy borrowers to switch banks in search of a better deal, he said.

“There is a balance that they (banks) have to find between the needs of their shareholders on the one hand and customers who have been hit for six by a large number of rate rises in recent times and the banks ought to take those decisions very carefully,” Mr Swan told the Ten Network.

“The government does have an eagle eye on competition in the banking sector.

“It is very important that we put them under competitive pressure and part of that competitive pressure that needs to be there is a fair dinkum bank switching package.