The Federal government has grabbed another policy from the ALP Opposition by announcing an inquiry into competition in the country’s financial system.
For more than a year the ALP has been demanding a Royal Commission into banking in particular, but yesterday Federal Treasurer, Scott Morrison announced an inquiry into competition to be held by the Productivity Commission.
In reality the inquiry is into the big four – Westpac, the Commonwealth, ANZ and NAB.
It follows the Financial System Inquiry conducted by former CBA CEO, David Murray three years ago.
The four together control 80% of Australia’s lending market and have posted record profits for years. Westpac, NAB and ANZ all reported a rise in half-yearly cash profits this month. CBA will report limited third-quarter figures on Tuesday.
“The high concentration and degree of vertical integration in some parts of the Australian financial system has the potential to limit the benefits of competition…and should be proactively monitored over time," Treasurer Scott Morrison said in a statement on Monday.
"The Government is committed to ensuring that Australia’s financial system is competitive and innovative. That is why I have tasked the Productivity Commission to hold an inquiry into competition in Australia’s financial system,” he said.
The inquiry will consider the degree of concentration in key segments of the financial system, examine barriers to innovation in the system and look into competition in personal deposits and mortgages for households and small businesses.
The Productivity Commission will start the inquiry on July 1, and the final report is likely to be presented to the government within 12 months of that, Morrison said.
Last year, the Federal government used its one-seat majority in parliament to avoid a sweeping Royal Commission pushed by the ALP into banks but later announced a limited parliamentary inquiry targeting mistreatment of small business customers.
The government also boosted ASIC’s powers, ordered bank chiefs to make annual appearances before parliament’s economics committee and promised a tribunal to examine citizen complaints.
News of the probe came on the day Westpac reported its record interim cash profit of more than $4 billion. Last Thursday the ANZ reported earnings of $3.4 billion.
NAB lifted first-half profit to $3.29 billion, and the Commonwealth Bank, which in February lifted its first-half cash profit 2.1% to $4.9 billion.
That saw the big four banks lift their combined first-half cash profit to $15.6 billion. The CBA reveals its third quarter performance this morning. The big four face additional capital top ups from regulators in Australia and NZ later this year. These could top $4 bllion each.
