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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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Media Release: Suncorp Deal a Wasted Chance for People’s Bank

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The ACCC ruled last year that allowing ANZ to buy Suncorp would reduce banking competition. Today, the Australian Competition Tribunal disagreed and allowed the merger.

The Tribunal’s decision is a wasted opportunity when Suncorp should have been bought and turned into a People’s Bank. There is some logic to the Tribunal’s decision. Australian banks are, at best, a cartel and at worst, a monopoly – one bank with many logos. In short, there must be competition before that competition can be lessened. Our banks do not compete – they work together.

This is a result of the same foreign merchant banks holding controlling shareholdings in all of Australia’s major banks. In turn, the banks behave in exactly the same way, offering almost identical risk management, products, fees and charges.

Banks are working in collusion to close bank branches and eliminate cash, to force everyday Australian consumers into more electronic banking services, from which banks profit.

Banks are acting together to de-bank competitors like crypto exchanges and bullion dealers, using their market power to squash their competitors. The result is obscene profits ($35 billion last year), much of which is sent as dividends to foreign merchant banks.

This is what the Tribunal has decided is an acceptable way to run banking in Australia.

Last year I proposed using the Future Fund to buy Suncorp for their asking price of $5 billion and then turn it into a people’s bank, one that would operate with their customers’ interests at heart, in a fair, ethical and honest manner.

One Nation will continue to campaign for a people’s bank and I call on Treasurer Jim Chalmers to use his powers to direct the ACCC to investigate collusion, common ownership and restrictive trade practices being conducted by the Big 4 banks.

It’s time to force real competition between the banks and establish a People’s Bank.

Media-ReleaseDownload
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Time to Burst the Bankers’ Club Bubble

At a recent Senate Banking Inquiry I spoke with Michael Lawrence, Chief Executive Officer of the Customer Owned Banks Association.

I know that many of our supporters hold the belief that more regulation will bring the banks under control. The truth is that the banks will always have smarter lawyers than the government. Regulation becomes a barrier to entry of new or small players wanting to compete with the big banks. At the same time, the big banks do whatever they want with only the occasional penalty that is clearly not enough to stop them.

The answer to this dilemma is a Government-owned bank that provides the existing banks with real competition by running the bank for the benefit of the customers and shareholders equally, rather than entirely for the benefit of shareholders, as the banks are doing at the moment. The difference will be especially noticeable in the areas of customer service and ethics.

Suncorp is the 6th largest bank in Australia. It is on the market for a bargain price of $4.9 billion. My proposal is for the government to buy Suncorp Bank outright using the Future Fund and re-purpose it to provide the full range of banking services through Bank@Post.

This would offer real competition to the big banks. By running the Post Office Bank using a modified Code of Practice it guarantees the customer a bank that will not behave like greedy, immoral, profiteering crony capitalists.

That would be a refreshing change.

Transcript

Senator Roberts: Thank you, Mr Lawrence and Ms Elliott, for returning today. You made some comments about regulation, Mr Lawrence. Would less regulation lead to more competition and better service?

Mr Lawrence: We don’t advocate for less regulation, because we need to be regulated in the same manner as any bank. What we ask is that it be targeted at the objective. It needs to take into consideration business models. It needs to take into consideration the size and the complexity, rather than a broadbrush—Senator ROBERTS: Are the big four banks hiding behind excessive regulation that is really a barrier to entry for your smaller banks?

Mr Lawrence: I can’t speak for the big four banks. What I can say—

Senator Roberts: I am asking you for your opinion on the regulation of the big four banks, not to speak for the big four banks.

Mr Lawrence: The big four banks are facing the same regulation, but it gets magnified because of their size and complexity. They do have more resources to put towards that regulation and compliance. As I said, it comes back to the size of ours. You only have to go back to October 2021. In one month, we had design and distribution obligations land, we had open banking time lines to be met and we had three recommendations of the royal commission. If you are a customer-owned bank with 20, 50, 100 or 1,000 staff, that’s a significant amount of regulation that takes you away from focusing on your customer. It’s that proportionality.

Senator Roberts: Did you see my questioning of the CommBank chief executive, Mr Comyn, this morning?

Mr Lawrence: Yes, I did.

Senator Roberts: I put it to him that the regulations are a barrier to entry for anyone outside the big four banks.

Mr Lawrence: My opinion is that the complexity of regulation that we have today would be deemed to be somewhat of a barrier for new entrants.

Senator Roberts: I go to your letter which accompanied your submission. You say:

Solutions that help, not hurt
Two policy solutions canvassed by stakeholders—a Government-owned bank and a community service obligation—would be anti-competitive interventions detrimental to our sector’s ability to provide services for regional communities.

On page 10 of your submission you say:
The attractiveness of an Australia Post Bank with an explicit government guarantee for customer deposits would almost certainly reduce deposit flows to privately owned banks…

Are you aware that all bank deposits of COBA members are already covered by the government’s Financial Claims Scheme bank guarantee?

Mr Lawrence: Yes, they are covered.

Senator Roberts: Yes. It says so on your website. Are your words, then, an acknowledgement that the Financial Claims Scheme is underfunded and never likely to be used?

Mr Lawrence: I am aware of the Financial Claims Scheme. Do I think it will ever be used? I think if you look at the people who are funding it, they are not necessarily the ones that are at risk. It could well be used.

Senator Roberts: Could you explain that?

Mr Lawrence: I don’t have the list of everyone who is funding the Financial Claims Scheme, but there are organisations that aren’t as heavily regulated that could be the recipient.

Senator Roberts: Of the Financial Claims Scheme guarantee money?

Mr Lawrence: Not of the deposit guarantee, if that’s what you are referring to.

Senator Roberts: Yes; not of that?

Mr Lawrence: Not of that. To have a guarantee on deposits, you have to be an authorised deposit-taking institution, and therefore you are fully regulated.

Senator Roberts: The proposal One Nation has raised is to ask the Future Fund to purchase Suncorp bank and operate the bank commercially, under a modified Banking Code of Practice that guarantees face-to-face service, cash availability and the provision of service guarantee—a code you would be free to use as well. Then Suncorp could expand its services through Bank@Post. I note your objections to a government-owned bank and to Australia Post becoming a bank. Which, if any, of these objections would relate to the Suncorp proposal that I just outlined?

Mr Lawrence: We haven’t taken a position on the Suncorp merger, if that’s your question.

Senator Roberts: No. My proposal is for the Future Fund to purchase Suncorp bank and to operate the bank commercially, under a modified Banking Code of Practice.

Mr Lawrence: The question to us is?

Senator Roberts: Have you got any objections to that?

Ms Elliott: It is something we would need to consider. We have fantastic banks in Queensland ready to serve the public. We wouldn’t be looking for a government-backed intervention that would be to the detriment of the existing competitive market that involves customer-owned banks.

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Time to Give Our Banking Cartel Some Real Competition

My latest article in The Spectator …

No amount of regulation has been able to force our banks to behave ethically because the banks will always have smarter lawyers than the government. The only way to restore fair banking practice is free market competition.

Suncorp Bank is on the market and the ACCC refused ANZ permission to buy it. The Future Fund should step in, buy Suncorp and turn it into a people’s bank. Suncorp should then be run in a way that guarantees cash, face-to-face banking services through a branch or Australia Post outlet, prohibits de-banking and decides loan applications on financial merit alone, rather than ESG and other political measures.

Read Full Article Here
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