BANK bashing is a national sport and like all sports there needs to be a scoring system, so the public will award top points to the Turnbull government for giving the five big banks a flogging in the recent budget.
Many will see the six basis points tax hike as a squaring up of the ledger after the guarantee they gave them in the global financial crisis.
With a combined $33-billion profit there is plenty of fat to absorb it, but that will not stop them squealing like stuck pigs.
Farmers are told competition is the tool that drives down prices (except in the recent telecommunications roaming decision, according to the Australian Competition and Consumer Commission), so the Turnbull government’s extra tax on the big five might start to level the playing field for other financial institutions.
Previous government intervention during the global financial crisis (GFC) gave the big five a huge advantage over their much smaller competitors.
This resulted in increased market share.
Since 2000, the big banks’ market share on loans has grown from just under 70 per cent to almost 80pc and from 66pc to 77pc on deposits.
The smaller banks were not given a similar guarantee and the recent Murray inquiry into the banking sector showed the larger banks hold half the capital set aside for emergencies.
The pressure from the Australian public demanding the government establish a Royal Commission into banks was getting increasingly louder and the Turnbull government had to look as though it was not captured by the banks, so the new levy, plus a new dispute resolution system, including stricter rules on data sharing and new powers for the regulator to make bank executives accountable, and the productivity commission review, will all help to mitigate the chances of a Royal Commission.
The interesting step to avoid a Royal commission includes one new body called the Australian Financial Complaints Authority, to replace three former ones.
These were the Financial Ombudsman Service, the Credit and Investments Ombudsman and the Superannuation Complaints Tribunal.
Time will only tell if it is more effective than the three existing bodies.
The budget also announced $1.2 million for a fund to review an open banking system in which customers can request banks share their data, which could assist financial start-ups and help other competitors enter the market and compete against the big five banks. Farmers in Australia need a competitive banking sector and with 80pc of loans there is far too much concentration in the top five big banks, with a poor range of products, very low quality of service, and all at a high price.
Farmers will watch with interest if the government’s moves will work, or if they are delaying an inevitable Royal Commission.
- Mal Peters