A new report from the Australia Institute underlines the need for banks to think about more than just a massively increasing bottom line, the Finance Sector Union said.

The report shows that since deregulation in 1983, banks have eliminated almost all competition in the lending market.  Before deregulation, banks controlled 50 per cent.  Today, they control 90 per cent.

Bank profits—a whopping $23 billion before tax in 2009—are about two per cent of GDP.  That’s almost three times as much as in the 1980s.

“Finance workers welcome this shocking report,” said Leon Carter, National Secretary of the FSU.  “It’s more evidence of the stranglehold major banks have over Australian families, whom banks load up with more debt then use as a cash cow as interest rates rise.”

Mr Carter said it’s time the Rudd Government required more give and take from the major banks, like a social contract.  It would help restore the Reserve Bank’s role in setting interest rates, and de-link finance workers’ salaries from peddling more debt that Australians can’t afford.

“During the financial crisis, Australian banks did well by Australia.  The domestic market offset losses experienced overseas,” he said.  “Australia deserves to do well by its banks, too, with more responsible lending, higher investments in job training and closer adherence to RBA decisions.”

He said the best time to write new rules is when banks are highly profitable, instead of slapdash responses like those seen in Britain and the United States.

While the FSU welcomed much of the Australia Institute’s analysis, it said the answer to evermore powerful and profitable banks is more rules, not more banks.  Mr Carter said while New Zealand’s state-owned Kiwibank, is a success it responded to unique circumstances across the Tasman.

“Before Kiwibank, New Zealand was the largest country without a major domestic bank,” he said.  “The biggest five banks were all owned by Australia’s big four.  ANZ alone owned two of them, while Kiwis themselves owned none.  So it made sense to have a larger domestic player in the market.”

But Mr Carter said one more Australian-owned bank won’t solve Australia’s problems.

“Australia doesn’t necessarily need more banks, what we need are more rules,” he said.  “Adding one more bank to operate in the marketplace this report describes can’t fix the problems the report outlines. 

“At the end of the day, only political will in Canberra can make banks operate in Australia’s interests, not solely their own.”

ENDS
Media: Leanne Shingles, 0423.821.773
Spokesperson: Leon Carter, 0409.946.597

The Australia Institute: www.tai.org.au