through the $10billion mark for the first

time last year, according to the latest

Reserve Bank Bulletin.

Fee income grew by 8 per cent in

2006-07, the fastest rate for five years.

Growth in bank fees had slowed in

recent years following a period from

1999-2000 to 2003-04 when they rose by

an average of more than 12 per cent a

year.

And despite the strength and

profitability of the business sector,

households represent a growing share of

bank fee income.

That share has increased from 33 per

cent in 2000 to 42 per cent in 2007.

Reserve Bank statistics show that,

although the growth in both business and

household fees has slowed in the past four

years, the growth in business fees has

been far more modest than growth from

households.

The bulletin shows the biggest component

of household bank fees is interest

on deposit accounts, although these fees

grew at a relatively slow rate of 5 per cent

in 2007.

This compares with housing loan fee

income which is up 8 per cent, personal

loans up 14 per cent and credit cards, 12

per cent.

The Reserve said the most recent rise in

credit-card fees was the result of an

increase in the number of cards and some

increase in annual fees on some cards.

Overall, it attributed the increase in

credit-card fees to greater use of cards

rather than higher unit charges.

However, a 170 per cent increase in

credit-card fee income over the past five

years was primarily the result of higher

unit fees for costs such as annual fees,

over-limit and late-payment fees and

foreign currency conversion.

The recent moderation in the rise of

bank credit-card fees was in large part

because of the spread of lower interest,

no-frills cards.

While the latest figures are likely to add

to the fee controversy, the Reserve Bank

found growth in fee income was slowing.

It said in 2007 the growth in fee income

was primarily because of greater use of

banking services rather than higher unit

charges.

However, the figures issued yesterday

do not cover the past few months, when

banks have come under increased

financial pressure as a result of the sub-

prime loan market meltdown in the

United States.

As interest rates rise, the banking

market in Australia has become even

more competitive but to what extent this

is being reflected in bank fees is not yet

known.

Chief executive of the Australian

Bankers Association David Bell told The

Canberra Times that what was driving the

increase in bank fees in 2007 was the

strong increase in economic conditions.

''If you compare household fees paid to

the increase in the number of

transactions over the past three years, it

reveals households have on average paid

6.4 per cent more compared to an 8 per

cent average increase in the number of

transactions,'' Mr Bell said.

He also said that in effect the cost per

banking transaction was falling.

Mr Bell backed a call by federal

Treasurer Wayne Swan for consumers to

shop around for the best deal they could

obtain, including bank fees.

The number of low-fee, or fee-free,

accounts has increased in the past seven

years from 7 per cent of the household

market to 30 per cent.

After discussions with the Australian

Council of Social Service last year, there

was also more information being provided

about account structures, including

fees and penalties.

He said that typically, if a customer was

entitled to a Commonwealth concession

card, then they could also obtain a low-

fee account.

He said bank margins had shrunk over

the past 15 years from an average of 4 per

cent over the cost of funds to about 2 per

cent and banks had moved to a user-pays

structure which more closely reflected the

costs of managing accounts.