Making customers pay for mortgage brokers up front will cause "legitimate competition issues" and the government is right to be cautious about it, the Reserve Bank governor says.
The banking royal commission recommends making customers pay brokers rather than the banks giving them commissions, in order to reduce conflicts of interest about who mortgage brokers really work for.
But Reserve Bank of Australia governor Philip Lowe says the complicated issue needs more work.
"In principle I agree with trailing commissions being banned and the payments being up front," Mr Lowe told the National Press Club in Sydney on Wednesday.
"(But) I think the government is right to be cautious about going the full way and making the borrower pay.
"There are legitimate competition issues and I think it is worth taking the time to work through those."
The coalition government has stopped short of promising to make customers pay mortgage brokers up front, in part because of fears the banks will take all the business.
The big banks enjoyed a stellar day on the stock market on Tuesday as the royal commission's official report recommended fewer changes to the financial industry than expected.
Prime Minister Scott Morrison rejected suggestions the stock market boost showed the royal commission had been too soft on the banks.
"No, I think what it showed was that Commissioner (Kenneth) Hayne has done a very sound and very responsible job," Mr Morrison told reporters in Melbourne.
"He's been able to do it in a way which has minimised disruption to the financial system."
Labor wants parliament to sit for an extra two weeks in March to ensure financial laws can be fixed as soon as possible, but Mr Morrison says there is no need for extra sitting days.
"We're acting on all 76 recommendations, and we're going to do it carefully and we're going to do it in a considered way," he said.
Labor has accused the coalition of not implementing the royal commission report in full, saying the mortgage broker issue just one of a dozen where the government is taking a different tack to the official recommendations.
Under the government's plan, the regulators will not be legally obliged to cooperate with each other, and a recommended ban on hawking products will be watered down.
Labor's financial services spokeswoman Clare O'Neil said the pledge to "take action" was meaningless.
"The fine print shows that in many instance, the Liberals are taking no action at all, or taking action on something entirely different to what Commissioner Hayne recommended," she said.
