Overseas holidays for Australians could become cheaper if a consumer watchdog inquiry into exorbitant foreign transaction fees is successful.

The Australian Competition and Consumer Commission will look at “excessive” charges for currency conversions and overseas use of credit cards.

The treasurer, Josh Frydenberg, said millions of Australians were paying too much to the banks and shelling out $2bn a year in foreign transaction fees.

“We want to stop the rip-off,” Frydenberg said in Sydney.

The ACCC will also look at charges for transferring money overseas and on prepaid travel cards.

A customer of an Australian bank who travels overseas and spends $5,000 on their credit card incurs about $140 in foreign exchange transaction fees.

If a customer was to transfer $1,000 overseas, it would cost an Australian on average about $80 in fees and exchange rate mark-ups, compared with about $60 for someone in the United States.

“When you look around the world people pay less in the United States, in Europe, and the question must be asked why isn’t that the case here in Australia”, Frydenberg said.

The World Bank says Australia is the third most expensive G20 country for consumers and small businesses to send money from.

“We will be examining why major companies in Australia, including the big four banks, seem to be able to consistently charge high prices,” the chairman of the ACCC, Rod Sims, said.

The shadow assistant treasurer, Andrew Leigh, said it was three years since Labor first highlighted the cost of foreign money exchanges.

“While Labor welcomes the announcement that the government will adopt Labor’s calls for a fairer system, we fear the ACCC inquiry announced today is too little, too late,” Leigh said. “Excessive and confusing fees have made it too pricey to transfer money for far too long.”

The ACCC is due to report to the government by May.



