The federal Treasurer Scott Morrison used parliament yesterday to fire an extraordinary broadside at Australia’s banking cartel. Conservative governments rarely indulge in the public thrashing of such major supporters of the status quo.
Morrison and the Turnbull government are absolutely furious with the big 4 banks and Macquarie for their brazen pursuit of self-interest at the expense of the nation and people obliged to use them.
The story leads on the front page of the Australian Financial Review:
“(He) attacked the banking sector oligopoly, accusing it of using its pricing power to the detriment of all Australians as it was revealed the first payment for the bank levy would be delayed by three months.
“In a speech that was highly critical of the big four banks, the Treasurer said the levy was introduced to support competition in the banking sector.
“He zeroed in on the cheaper cost of funding, benefits flowing from the internal based modelling and dominant market share as advantages enjoyed by the big four that bolstered their positions against would-be competitors.
“He said concentration of market power in banking had contributed to ‘‘systemic risk’’ and that the government was not prepared to sit back and watch the imbalances further entrench the position of the banks.
‘‘The House of Representatives Economics Committee’s ‘Review of the Four Major Banks’, commissioned by the government last year, concluded that Australia’s banking sector is an oligopoly and that Australia’s largest banks have significant pricing power which they have used to the detriment of everyday Australians. This is not a situation that the government is willing to accept,’’ Mr Morrison said.
The major banks refuse to compete on price or service, either of which could benefit their customers. The only field they are prepared to compete is advertising, which confers no practical or enduring benefit.
They have contested government efforts to reduce systemic risk in the banking system with every tool at their disposal: lobbying, public relations, data manipulation, whispering campaigns and alternative facts.
If the ALP were less hostile to their interests, the banks would have indulged in political funding and a marginal seats campaign as well.
Professor John Freebairn dissects the details of the government’s bank levy here.
Morrison’s speech puts beyond doubt the indignation and exasperation of the Turnbull government. The question remains: What does Morrison intend to do about this?
Is Morrison a modern Trust-buster who will split the banks and turn four oligarchs into eight competitors?
OR can we expect a new government bank, a Post Office bank, to force competition?
Without far-reaching corrective action, the speech is hot air and Morrison a feather duster. His enduring economic legacy and place in history depend on his next steps.