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Government-Owned Bank Back on Labor’s Agenda

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On August 29th, The Australian newspaper reported that a government-owned bank, created out of Australia Post, may be back on the Labor government’s agenda. This move is seen as a response to the recent closures of numerous bank branches in regional Australia. If this report is accurate, I applaud the Government for this welcome development. 

Years of regulation have not succeeded in forcing the banks to act with honesty, decency, and compassion.  Additional regulation is not the answer, as large banks typically have access to superior legal resources compared to the Government.  The answer lies in establishing a People’s Bank that can provide competition to the Big Four banks oligopoly, or more accurately, the cartel. 

A People’s Bank could rewrite their Banking Code of Practice, restoring protections that successive Liberal Governments have removed—such as face-to-face banking, cash transactions and a guarantee of banking services to prevent the problem of political de-banking. People’s Banks worldwide have proven their ability to be secure and profitable, and to hold commercial banks accountable, as outlined in my speech. 

Transcript

The Australian newspaper reported on 29 August that ‘a government owned bank created out of Australia Post is understood to be back on the Labor government’s agenda’ and that it is ‘seen as a response to the closure of numerous bank branches in regional Australia’. I hope this report is well founded, and, if it is, I applaud the government for this welcome development. 

Years of regulation have failed to force the banks to behave with honesty, decency and compassion. More regulation is not the answer. Big banks will always have better lawyers than the government. The answer is a people’s bank offering competition to the big four bank oligopoly—or, more accurately, cartel. As someone who participated in the inquiry into bank closures in regional Australia, I attest that there is a desperate need for a public bank to revolutionise Australia’s banking system, the way the original Commonwealth Bank did, which the Fisher Labor government established in 1912. 

Today the big four cartel controls 80 per cent of the market and dominates banking. They’re acting together to remove face-to-face banking, which doesn’t stop customers from needing face-to-face services. It just forces customers to travel further. It’s not just in the regions; it’s as difficult for the elderly in the city to travel to the next suburb for their banking as it is for a regional customer to travel to the next town. 

We saw numerous instances of the banks’ dishonesty when closing branches, and we’re seeing it again right now with ANZ’s closure of its Katoomba branch. The ANZ treated Katoomba as a regional branch until it promised to not close the regional branches as a condition of its merger with Suncorp Bank. Lo and behold, suddenly ANZ claims Katoomba is not a regional branch so is proceeding to close it. The big four have concentrated close to 70 per cent of their lending into residential and investor mortgages, with more money fuelling the increase in house prices, while neglecting small business lending and regional communities. 

All four are aggressively pushing customers away from cash and into digital banking and transacting so they can surveil and harvest your data and collect fees on all non-cash transactions. They now gouge Australians out of more than $4 billion per year in transaction fees and surcharges. In short, the big four serve only themselves and use their oligopoly power over a captive market to exploit their customers. 

There’s a dire need for a public bank that can set standards of service and break up the banking cartel. A post office bank is the perfect way to do it, operating under a modified banking code of practice to restore protections to customers that successive Liberal-National governments have removed and guaranteeing cash and banking services, face-to-face banking in a branch, best interests of the customer and protections against politicisation of banking. 

The Commonwealth Bank originally started in post offices in 1912, from which it provided banking services to all parts of Australia, even remote areas. It raised loans for the government at one-tenth the cost of the private banks. In the panic of 1914, it protected deposits in all the banks. It supported Australia’s agricultural production in World War I and funded the emergency purchase of a fleet of ships in the war, which became Australia’s first national shipping line. It made development loans to local councils all across Australia for crucial infrastructure, and it made affordable housing loans to returned soldiers. It accomplished all of this in its first decade, before its political enemies reduced its ability to compete with the private banks, until later when another Labor government unleashed it again in World War II. 

Public and post banks are very successful around the world. The Japan Post Bank is one of the world’s biggest banks and was the secret to Japan’s postwar economic miracle, funding their government’s investments in infrastructure and industries. France’s post bank, La Banque Postale, started in 2006 and is already Europe’s 18th biggest bank and the biggest lender to local councils in France. Kiwibank started as a post bank in 2002, quickly growing into New Zealand’s fifth largest bank and the only bank that can compete with New Zealand’s big four banks, which Australia’s big four banks own. Its first achievement was injecting competition which stopped all branch closures in New Zealand for seven years. In the global financial crisis, Kiwibank was the only bank to increase lending while the private banks all reduced lending. Listen to this: the Bank of North Dakota, not a postal bank but a brilliant state owned bank, supported North Dakota’s public finances and its farmers for more than a century, making a profit in every year of operation. In the 2008 financial crisis, North Dakota was the only United States state to stay out of crisis. 

I applaud the news that the government is in talks with Australia Post on this solution, and I urge the government to have the vision to create a powerful bank that can once again serve the people of Australia. 

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Australia Post Flies in the Face of a Cashless Agenda

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Australia Post’s Bank@Post is expected to fill the hole left by banks closing branches in many rural and regional towns around Australia. I asked Group CEO and Managing Director, Paul Graham, for his views about how that’s going so far. His forthright response confirmed what bank closures mean in the communities where Australia Post is left to try and pick up the pieces. It is not the automatic solution the banks have suggested during the bank closures inquiry, which I knew from constituent feedback through my office.

Customers, explained Paul Graham, are looking for a broader scope of services than they are equipped to deliver. Small businesses particularly feel that they’re not able to access what they used to through their banking branches. Provision of cash has become an issue. Whilst there are those who say cash is going to die, Mr Graham certainly doesn’t see that in many demographics and areas of Australia.

With support from banks, Australia Post could extend the range of banking services. Whether for small businesses, the provision of cash, or even managing large numbers of gold coins following fundraisers, Australia Post rightly sees its over-the-counter Bank@Post services as essential.

More regional and remote towns are being left without a bank. Coober Pedy is a good example of a cash town given the nature of its work. Australia Post is now flying cash into that town on a weekly basis because the banks have all left.

There is obviously a vacuum left by the bank closures and post offices are well positioned to fill it with the right support.

Transcript

Senator ROBERTS: Thank you for appearing tonight. My questions are fairly short. At the Senate inquiry into regional bank branch closures, I asked Westpac CEO Mr King, ‘How much do you pay Australia Post for a community representation fee?’ The response on notice was: Westpac is happy to provide a specific figure, including the Community Representation Fee, however our contract with Australia Post requires both parties to agree to the release of any commercial details within the contract. Westpac would agree to Australia Post providing these details to the Committee. Are you happy to share those details today or on notice?

Mr Graham: No, we are not. Those are commercially confidential. We have a number of agreements with many banks and institutions. They differ from bank to bank. That would disclose what we believe is
commercially sensitive information.

Senator ROBERTS: Westpac is happy for you to disclose their contract.

Mr Graham: Again, they may be happy but that’s one side of the contract. We have contracts with over 81 financial institutions and would not be comfortable sharing that sensitive information.

Senator ROBERTS: I asked the Commonwealth Bank the same question and also on notice received the same reply, as one would expect from an oligopoly. Are you able to share the Commonwealth Bank’s community representation fee today or on notice?

Mr Graham: No, Senator. We will take the same approach to that. As I say, we have many contracts with many banks. It is commercially sensitive. Disclosing what one bank pays versus what another bank pays would create commercial risk for Australia Post.

Senator ROBERTS: How so? The bank is happy.

Mr Graham: In that we are negotiating with 81 different companies and, if they were aware of what other companies are paying, that would put us under a very difficult commercial situation.

Senator ROBERTS: Show them the high-price contracts.

Mr Graham: It would be good if we could do that, but it’s unfortunate the way that the negotiations would work.

Senator ROBERTS: It would help you if you picked the top one. Are you happy with the fees you’re receiving from your banking partners in Bank@Post for providing their customers with services?

Mr Graham: When the Bank@Post agreement was put in place three years ago, the scope of that was for what we would call rudimentary or very basic consumer banking services—the ability to deposit some money and take out some money. It’s fair to say that since that service has been put in place and since we’ve seen an increase in the number of bank closures the pressure that has been placed on our post offices that provide Bank@Post has increased. Customers are looking for a broader scope of services. Small businesses particularly feel that they’re not able to access what they would traditionally access through their banking branches. And the provision of cash has become an issue. Whilst a lot of people say cash is going to die, we certainly don’t see that, particularly in certain demographics and also in certain neighbourhoods where cash is still prevalent.

When we were set up, we were never established, from both a physical and a service perspective, to deal with cash. We’re happy to extend the range of services we provide to our customers at Bank@Post, be it small business or the provision of cash, but we would need that to be funded by the banks. A good example is Coober Pedy. It is a cash town given the nature of its work. We are now flying cash into that town on a weekly basis because there are no banks remaining in Coober Pedy.

Senator ROBERTS: I’m very pleased to hear that you’re supporting cash and keeping it alive. A lot of people are starting to swing back now, because they know it’s essential for freedom. Would Australia Post like to offer a wider range of banking services from an existing partner, such as Suncorp? If so, what services would you like to provide?

Mr Graham: As I referred to in my previous answer, we are seeing an increasing desire by regional towns, particularly when we are the only banking service remaining, to increase the range of services for small business—be that cash floats for the local hairdresser or the local coffee shop. One example recently was a footy team and the Country Women’s Association both ran a gold coin fundraiser over a weekend and our post office was inundated with 1,800 gold coins on the Monday. It was never equipped to handle that type of cash. We see there’s an ability for us to increase the range of services we provide, certainly for small businesses, and for the provision of cash for those small businesses. However, that would need an investment—in some cases in physical infrastructure, for safes and security, and also additional systems and training for our team—which we are prepared to do. That would obviously require support from the banks to enable those services to be extended.

Senator ROBERTS: So you’d welcome something like Suncorp, which is for sale right now? It’s sale to ANZ was blocked.

Mr Graham: We provide services to Suncorp today through Bank@Post—they are a Bank@Post customer—and 81 other financial institutions.

Senator ROBERTS: I’m not asking you to commit to Suncorp or anything like that, but does the concept of having a bank with branches already, albeit not as many as you have, appeal to you?

Mr Graham: That’s a question of policy, which is for the government. We’re very happy to provide our over-the-counter services, which we are well-equipped to do, certainly for basic banking services. But as I said, if we were to extend the range of those services we would need to look at those post offices on a case-by-case basis. A town in the Snowy is another case in point where the last bank left and our post office there does not have disability access, so, again, that challenge comes on Australia Post and we work with the banks to try to solve that. We see over-the-counter services and providing Bank@Post services, particularly in regional and remote areas, as essential services and we continue to be invested in those services.

Senator ROBERTS: Something Christine Holgate did a very fine job of doing was to listen to and address the problems of the LPOs—the licenced post offices. We haven’t heard much from them lately, so that is probably a pretty good sign, but I’d like to know what you think of your relationship with the LPOs. How’s that going? They’re fundamental.

Mr Graham: Yes, they are. They make up more than two-thirds of our branch network. They are partners in our network. We deal with both the key associations. I think our relationship is a very positive one. We are very transparent on what we are doing, the investments we’re making. We’re currently rolling out our PostPlus new point-of-sale system through every post office in the country—the largest single investment that Australia Post has ever made, over $250 million. This will create efficiencies for both our corporate and licenced post offices, and also create a better service experience for our customers.
Our relationship with them is healthy. We certainly listen to them. We spend a lot of time out in their post offices, understanding their needs and their challenges. I also spend a lot of time out; it’s one of the best parts of my job. But we also see, in certain areas, where they are financially challenged because of the reduction in foot traffic, because of the digitisation of services, and, as I mentioned in my opening address, certainly metropolitan areas where there can be significant overlap, we do see cannibalisation of licenced post offices by their fellow licensees in some of those areas. It is a changing financial environment for many of them, and we look to continue to support them where we can. Bank@Post certainly helps, as does the growth we’re seeing in our parcel business, and also investing in new systems which helps them become more efficient and better at serving their customers.

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Will Australia Post apologise to Christine Holgate?

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A damning 255 page report has slammed the board of Australia Post and found that Christine Holgate did not breach any policies. We know from the small businesses that operate licensed post offices that Christine Holgate was well respected and had a reputation for actually getting problems fixed. I questioned Australia Post at Senate Estimates.

Transcript

[Malcolm Roberts] Disappointing to note that the CEO of Australia Post, the former CEO of Australia Post, Christine Holgate, has taken up a new role rather than pursuing a return to work in Australia Post. I’ll explain more about why it’s disappointing in a minute. In denying Ms. Holgate “her legal principles of procedural fairness and natural justice,” can Australia Post employees, licensees, and customers expect the same treatment as she got?

Senator, I’d prefer not to comment on matters dealing with the board and that have been very well dealt with, with the inquiry and the 255 page reading that we’ve received yesterday. But I think those matters should be kept entirely separate from the matters that happen on a day to day basis at Australia Post. I think that they’re very different matters-

[Malcolm Roberts] I can imagine you-

Those matters have been well covered.

[Malcolm Roberts] I can imagine you are advocating that, but the description of your board chairman’s behaviour in giving evidence to both Senate estimates and committee’s subsequent inquiry has shown him to, at best, have an appalling memory, and, at worst, at being deliberately evasive and misleading. I’ll just relate a personal example, personal interactions with the LPOs, because this issue about what happened to Christine Holgate goes well beyond Ms. Holgate. It goes to the goes to Australia Post. The ministers have done enormous damage, I believe, to Australia Post and to the LPOs. Now I’ve been pursuing issues for the LPOs strongly and vigorously. We’ve gone out into the regions and we’ve listened to people in the city LPOs, and they have told us, for years, that their needs have not been met. They’ve not been listened to. They’ve been abused. They’ve been trod on. So prior to Ms. Holgate becoming the CEO, that’s the way the LPOs are treated. And what stunned me, was the LPOs is just swung straight in behind Ms. Holgate. Very, very strongly behind her. And they said that, she actually told me later, that due to my questions in Senate estimates, she said, “There’s a problem here.” And she went out and listened. And the LPOs were very, very grateful for that. And they swung in right behind her. Angela Cramp from the LPOs, very strong advocate. The LPO is we’re writing letters to us, saying how much they appreciate Ms. Holgate. They’ve never had that kind of support and now they’ve lost it. And the way she’s been dismissed has left a lot of people wondering what’s going on in Australia Post. That’s why it’s so important.

Senator, if I could try and separate those issues and matters that have been dealt with well by the inquiry in the former CEO. But I could give you my, having grown up on a farm myself, and coming from regional Western Australia, and joining Australia Post because of its far reach into regional and rural Australia, I appreciate, as does Ms. Sheffield, who looks after community and consumers and all of the LPOs, how important the LPOs are to Australia Post. We are absolutely committed to the LPOs. And as Ms. Sheffield said, the first round of payment reform was what 55 million increase in additional payments. So there is a significant amount of support within Australia Post here at this desk today and back in the offices right across Australia Post. So, we do appreciate everything the LPOs do. They’re a very important part of the Australia Post. And will be for a long time to come out, I hope.

[Malcolm Roberts] But we’ll be assessing it by listening to the LPOs, as to what happens, because they are Australia Post in many communities. And they’re the community, they’re the heart of many communities. So-

Senator, and just take that on board. When I sat down with the chair of the Australia Post Advisory eh-

[Ms. Sheffield] APLAC.

APLAC. I always get the acronym wrong. Outside his LPO and discussed matters, and we are listening to LPOs every day. It’s very important.

[Malcolm Roberts] Well, I just had a text message from Angela Cramp. And she’s saying, “He has had no contact with LPOs since he took over the role. He’s not responded to anyone.”

From Ms. Cramp-

[Malcolm Roberts] To me.

Directed at me?

[Malcolm Roberts] Yes.

I haven’t had direct contact with Ms. Cramp. As I said, I sat down with the chairman of APLAC, and I’m out in post offices, corporate and LPOs alike. So, as Ms. Sheffield, on a regular basis.

[Malcolm Roberts] We hope it doesn’t go back to the way it was pre-Holgate.

Can I also add to that, Senator? We have worked very hard to build those relationships with licensees. We understand and value licensees incredibly. This week, we had an APLAC board where we brought everyone together, which Angela Cramp is a National Director on. We, you know, we’ve just finished six weeks of road shows, where all licensees were invited to the communities and we will be coming, well hopefully, COVID permitting, in Woolongong next week for, you know, to ensure that we hear from our licensees because we agree with you. We have to listen. There is a lot of change happening in our community. There’s a lot of change to their business, and there’s a lot of change that needs to be there to support them. And whether it’s in looking at what products they’re offering, outlets, payments, lots of consultation, and we really do value the input that they have, in both associations, both LPOG and POALL provide a lot of input and provide, not just to myself, but to teams of people at Australia Post that really are there to do the best. And we don’t want anything to go back. It won’t go back. This payment reform is written. It’s an agreement. It is there to stay, and the next phase will be an agreement. So, really it is, it is there to really support them and help them to grow. Because we know when LPOs thrive, Australia Post thrives. And that’s why we created the payment reforms so that they’re not, it’s not a cost, it’s actually a cost of sale. It’s based on growth. So as e-commerce grows, they grow, because they get a greater share of parcel revenue, which they never got before. So the whole basis of how that set up, actually, is there to drive their growth and ensure that their businesses grow.

[Malcolm Roberts] Right. And as you said, it didn’t happen before. Thanks to Ms. Holgate, it has happened. So we’ll be watching very, very closely because we don’t want to see it go back to the previous days. Will you be implementing Senator Pauline Hanson’s recommendations as part of the committee’s recommendation and report that came down yesterday that the Australia Post chair, Mr. Lucio Di Bartolomeo, be removed from the board, given the scathing conclusions and comments about his behaviour?

Senator, thank you very much for that question. I don’t think it’s the responsibility of the acting group chief executive to comment on the chair. The chair has put a statement out yesterday afternoon saying he’s committed to continuing to lead Australia Post. So, but it’s not for the acting management, and as acting CEO to comment on, on that.

[Malcolm Roberts] I’ve had other questions on services so I’ll put them on notice.

That’d be great.

[Malcolm Roberts] Thank you very much.

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Does Australia Post care about Mum and Dad LPOs?

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Licensed Post Offices (LPOs) provide important services especially in regional towns. Unfortunately, they’ve been overlooked in a number of the changes to the way Australia Post operates.

Transcript

[Malcolm Roberts]

Thank you chair. And thank you all for attending today. Is Australia Post considering selling off its profitable parcel post business? And please advise what discussions, reviews and planning has and will occur in relation to the parcel post business?

Senator, that would be a matter for government. So we’ll have to defer to…

[Lucio Di Bartolomeo]

If I could just respond from the chair’s and board’s perspective. There has been no discussion, no plans, no undertakings to prioritise any aspects of Australia Post business. Certainly in the time that I’ve been there. And while we’re on that time, Can I correct the figure that I gave earlier? I was appointed on the 22nd of November not the 14th of November.

[Woman]

Thank you.

[Lucio Di Bartolomeo]

The 14th was the date that the press release was put out. I apologise for that.

[Malcolm Roberts]

So you can rule out that there’ll be a sale of the parcel post?

[Lucio Di Bartolomeo]

Correct. Correct.

I mean, I…

[Woman]

So can I.

[Malcolm Roberts]

Thank you.

Does Australia Post consider it has a responsibility to provide a possible, a profitable business model for licensees of community post offices?

[Lucio Di Bartolomeo]

We certainly believe we have a responsibility to maintain viable partners in all the business that we undertake. Both at the contractor level and at the LPO level, yes.

[Malcolm Roberts]

So you will look at their services through their eyes.

[Lucio Di Bartolomeo]

Absolutely.

[Malcolm Roberts]

The chair of Australia Post commissioned a review by the Boston Consulting Group to inform the board and the CEO. Why were the most heavily invested stakeholder group, the licensees, not engaged and or included in the sharing of the outcomes, recommendations for that review.

[Lucio Di Bartolomeo]

Senator, if I could just correct one point. The Australia Post board did not engage BCG. This was an independent investigation by our shareholders, shareholder ministers and we supported the investigation. But we did not engage nor ultimately conclude any position on that review.

[Malcolm Roberts]

From whom do I request to get a copy? Because it’s been out since I guess… Sorry.

[Woman]

We’ve already taken public interest immunity on that report, Senator Roberts. The cabinet’s explicitly considered the executive summary of their BCG report. The full report though, as a usual practise, was also available to cabinet and I consider by a number of ministers. But the report’s expected to be given further cabinet consideration in the context of ensuring that Australia Post has a sustainable future.

[Malcolm Roberts]

Could you please advise the status and next steps being taken by Australia Post with licenced post offices, LPOs, to progress payment reforms.

[Lucio Di Bartolomeo]

Senator, thank you very much for the question. I may just defer to Ms. Sheffield, who heads up our community and consumer area and ask her to come to the desk. And outline we are about to kick off on the payment review process . So, Ms. Sheffield.

[Nicole Sheffield]

Thank you Mr. Boys. Thank you, Senator. Nicole Sheffield executive general manager, community and consumer. Thank you Senator for that question. We work very closely with our licensees, our licensee partners and associations. The payment reform itself, we have had one consultation with LPOG. And we have a first consultation with POAAL, the other group later this week. Once we understand the principles and agree what are the areas that we will be looking at, then we we’ll make for some recommendations. And start working that including, as per the first lot of payment reform, looking at those payments per outlet. Because when you have so many outlets, 2,580, there are a lot of impacts. So when you make any changes to payments there’s going to be some impacts that we want to make sure that we understand across the entire network. So that requires a lot of modelling, a lot of consultation. As you know, the first payment reform was very successful and introduced $50 million worth of extra payments in the last two years to licensees. And that was all about ensuring that they were paid for parcels and for scanning. The second lot of payment reform is going to focus on community representation, and the very important role that they play in that. But also looking at our identity services and financial services. I feel very confident that before the end of this financial year we should have some really good parameters to move forward.

[Malcolm Roberts]

So it has a budget. Thank you for that. And it’ll save me, giving my preamble for the next question. Has a budget allocation been made for phase two reform implementation, which we understand is expected to begin shortly. And what is the budget allocation for phase two? When do you anticipate it will be commenced and then implemented?

[Nicole Sheffield]

So budgets at the moment have not been concluded for next financial year. So we’re in the process of discussing within the organisation, all of that. But I can tell you confidently Senator, there will be budget allocation. We’ve been discussing this and just like anything we will put aside the required amounts. And that’s part of the reason we’ve started the discussion so early this year to make sure that we allocate the appropriate amount.

[Malcolm Roberts]

And that would come with extensive consultation with the LPOs?

[Nicole Sheffield]

Absolutely.

[Malcolm Roberts]

Okay. In order to achieve sustainability for LPOs, does the significant change in volume between letters and parcel post require a review of the financial relationship between licence, with licenced post offices. Especially if, yeah, that’s all I need to say.

[Nicole Sheffield]

Yeah. Look, we’re always ensuring the viability of our licenced post office partners. We know how important they are for us to deliver our community service obligation. But actually they’re, you know, the face to our community to regional and rural Australia. Their viability is critical. And just as we’ve seen, COVID has created an e-commerce boom that none of us expected. We hoped, but none of us expected that it’s changed the financial model completely for our post offices. Because all of a sudden their revenue drivers are significantly more coming from parcels than we’ve ever seen. And so it really is constantly working with them looking at what products, services they are offering to their communities. What arrangements that we have, what opportunities we can have to introduce new products and services that will drive transactions and foot traffic for them. And I think it’s something that we’ll just constantly need to be looking at and working with them to look at what we can do to grow.

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