The Treasurer has restated the Rudd Government's opposition to any merger of the Big Four banks.
EVERYONE relax - Wayne Swan has ruled out abolishing the "four pillars". He's thought long and hard about it for, well, about three weeks, and decided there's no case to reconsider the policy that has "served Australia well" for so long.
This is regardless of what happens with St George and Westpac, or as Swan refers to it, the "banking merger now under consideration".
Served us well? It's true, we have four banks that are large in Australian terms. They are stable and manage to do what they are supposed to do fairly well. And if one were to fail, there are three more to pick up the pieces and maintain competition.
But, as Melbourne Business School's Ian Harper says, they are "bonsais" - healthy, but stunted compared with their global peers; unable to grow beyond the artificial limits placed on them.
The Westpac-St George merger proposal reawakened the four-pillars debate on budget eve last month, placing pressure on Swan to reconfirm the Government's stance. He did that yesterday.
The merger does not contravene the policy because St George is not one of the four pillars. But it does undermine it somewhat. It means that one pillar will be considerably taller than the others, and another - ANZ - considerably shorter.
Westpac-St George will remain bigger than the others, because NAB, CBA and ANZ will be unable to merge with each other. A new status quo is created, and protected indefinitely, unless a foreign bank decided to get involved by lobbing a takeover at one of them.
In March, the annual Fujitsu Consulting-JPMorgan Australian Mortgage Industry Report concluded the same thing it did the year before - that Australian mortgage holders are paying too much in fees. About 35% more than they should be, "because of longstanding inefficiencies in the industry".
It also found that banks take too long to process loans, and there is a "shocking amount of manual handling of mortgage applications and associated error rates and rework".
Yes, we still have four big banks. But they are so comfortable in their oligopoly that we just don't have four banks' worth of competition. The problem with four pillars is that it rules out any merger proposals from the outset - stay right where you are, it says, and don't even try it.
It may well be that any Big Four merger would be anti-competitive. But why not give the banks the chance to try? Why not look at proposals on a case by case basis?
Swan's move will be a popular decision. The Big Four banks are seen as evil enough right now, thanks, without two of them ganging up and becoming twice as evil. And we should be grateful that at least the Rudd Government is making an announcement about something it actually has some control over. It can abolish four pillars if it wants to but it can't abolish high petrol prices.
But as far as Swan is concerned, it's the easy way out. Not only has he ruled out change, he's disregarded calls for another thorough look at the banking system 12 years after the Wallis Inquiry.
This suggests that he's worried that anyone who did look seriously at the issue would recommend the policy be scrapped. Just like Wallis did, all those years ago.
Or maybe he just realised that, after petrol and groceries, there are only so many inquiries the public can take.
