PETER MARTIN – Economics Correspondent SMH
The so-called people’s bank would be similar to New Zealand’s successful Kiwibank, which was set up to break the dominance of the Australian-owned majors.
Since the financial crisis began the Big Four have increased their share of the mortgage market from 80 per cent to 92 per cent and taken over non-bank lenders such as RAMS and second-order banks including St George and BankWest.
People’s bank to break the Big Four
July 8, 2009
EXCLUSIVE
THE growing power of the Big Four banks has been targeted by a coalition of
six influential economists, who have petitioned the Prime Minister and the
Treasurer to set up an inquiry into Australia’s financial system.
They have suggested the Government set up a “basic bank” so Australians can
deposit money with Australia Post and have it managed by the Future Fund.
The so-called people’s bank would be similar to New Zealand’s successful
Kiwibank, which was set up to break the dominance of the Australian-owned
majors.
Since the financial crisis began the Big Four have increased their share of
the mortgage market from 80 per cent to 92 per cent and taken over non-bank
lenders such as RAMS and second-order banks including St George and
BankWest.
The open letter expresses concern at how the banks are using their
privileged access to government guarantees, saying they are “rushing
offshore” to expand even though Australians are “repeatedly told that our
banks were lucky not to have had substantial overseas exposures”.
The banks have been under fire for failing to pass on to mortgage holders
the full cuts made by the Reserve Bank. Yesterday the Reserve left its
official cash rate unchanged at 3 per cent.
The open letter is signed by economists who have advised both sides of
politics, including Christopher Joye, chairman of the former prime minister
John Howard’s 2003 Home Ownership Task Force, and Nicholas Gruen, chairman
of the Government 2.0 Task Force for the Finance Minister, Lindsay Tanner.
The letter was delivered to the office of the Treasurer, Wayne Swan, late
yesterday, and gained support from the ACTU president, Sharan Burrow, and
the shadow treasurer, Joe Hockey.
But a spokesman for Mr Swan appeared to reject it, saying Australia’s
financial system had performed “very well” during the crisis compared with
others and the Government was “not contemplating” a systemic review.
Dr Joye, who runs the research and investment firm Rismark, said Mr Swan’s
response was an example of the complacency the open letter warned against.
“Everybody knows that providence has played a part in Australia’s ability to
skate through this crisis. When a coalition of top academic economists calls
for a review to evaluate improvements to Australia’s decades-old regulatory
system, politicians should listen,” he said.
The letter says Australia would “do well not to discount the possibility
that a roll of the dice left us without more significant system failures”
and adds that “in future, we may not be so lucky”.
It was also signed by Joshua Gans, a professor at Melbourne Business School,
Stephen King, a Monash University professor and former ACCC commissioner,
John Quiggin, a professor at Queensland University, and Sam Wylie, a
management consultant.
The letter refers to two inquiries into Australia’s financial system – the
Wallis inquiry of 1997 and the Campbell inquiry of 1981 – and says much of
what they brought in is now out of date. It says a new inquiry would examine
whether the banks should pay a “systemic capital charge” to account for
risks in their business and whether they should have to accumulate capital
in good times.
Peter Martin Economics Correspondent
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