Following reports over the weekend, the Treasurer has confirmed that the Productivity Commission will examine competition in Australia’s financial system. This includes a consideration of vertical and horizontal integration and access to banking services for small business.
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. Competition is central to the Government’s plans to support innovation and economic growth, and deliver better outcomes for consumers and small businesses.
This delivers on the Turnbull Government’s commitment to task the Productivity Commission to review the state of competition in the financial system, made as part of the Government’s response to the Financial System Inquiry.
The Productivity Commission will look at how to improve consumer outcomes, the productivity and international competitiveness of the financial system and economy more broadly, and support financial system innovation, while balancing financial stability objectives.
In doing so it will consider the level of contestability and concentration in key segments of the financial system, including the degree of vertical and horizontal integration. It will also examine competition in the provision of personal deposit accounts and mortgages and services and finance to small and medium businesses.
The Government encourages all parties with an interest in competition in the financial system to consider making a submission to the Commission.
The Inquiry will commence on 1 July 2017 and is due to report to the Government by 1 July 2018.
Further information and the terms of reference will be available on the Commission’s website.
The Customer Owned Banking Association welcomed the news.
The customer owned banking sector welcomes today’s announcement by the Treasurer of a Productivity Commission (PC) inquiry into the state of competition in the financial system.
“The enduring solution to concerns about the banking market is action to promote sustainable competition so that poor conduct is swiftly punished by loss of market share,” said COBA CEO Mark Degotardi.
“Customer owned banking institutions – mutual banks, credit unions and building societies – are eager to build on their 4-million strong customer base, but we need a fairer regulatory framework.
“Fast-tracking this PC inquiry was our top policy priority for the 2017-18 Budget so we are delighted it has been unveiled a day early.
“Consumers stand to gain from a more competitive banking market where all competitors have a fair go.
“Currently, major banks benefit from unfair regulatory capital settings and a free subsidy from taxpayers in the form of an implicit guarantee that significantly lowers their cost of funding.
“These problems can be addressed by the PC as well as measures to empower consumers to more easily find the best deal for them on a savings account, credit card or home loan.
“This PC inquiry was recommended by the Financial System Inquiry because the current regulatory framework suffers from ‘complacency’ about competition.
“COBA believes one way to tackle this problem is to give the powerful banking regulator APRA an explicit ‘secondary competition mandate’ and an obligation to report annually against this mandate.
“We look forward to engaging with the PC inquiry, particularly on removing barriers to innovation and competition.”
