RBA chief says big banks "not excessively profitable"; thinks stellar rise of Australian dollar "a bit odd"

The governor of the Reserve Bank says the Australian banking sector is not too profitable.

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Appearing before the House of Representatives Standing Committee on Economics, RBA governor Glenn Stevens said that if he had to choose between unprofitable and profitable banks he would chose the latter.

"You only have to look at the dimension of the banking problems in Europe to see we don't want banks that can't earn a good return," Mr Stevens said.

"Are they too profitable? Our assessment is if you look at the rates of return on equity at our banks over a lengthy period of time they're actually broadly in line with the listed company sector in general."

The big four banks have recently come under scrutiny for raising their variable mortgage rates outside the Reserve Bank's official cycle while at the same time posting record profits.

The banks have blamed weak lending growth and rising funding costs for their rate rises as the eurozone's sovereign debt problems slow economic growth around the world.

Mr Stevens also told the committee he had no plans to intervene in currency markets to reduce the strength of the Australian dollar.

The manufacturing and export sectors have come under pressure as the dollar holds at historically high levels.

Thousands of jobs have been slashed in those industries as a result, but Mr Stevens does not believe intervention would be effective at this stage.

He said Australia's natural resources and its proximity to Asia were behind the currency's strong rise.

"I'm not saying we'd never do it, but we have not done so to date," Mr Stevens said.

"We do continue to ask ourselves whether what's happening in the currency markets makes sense.

"The most recent bout of strength is happening at a time when the terms of trade have actually peaked and started to come down. That is a bit odd, but we'll see what happens."