Craig Kelly (Hughes, Liberal Party) Share this | Hansard source

I rise to speak on theNational Consumer Credit Protection Amendment (Home Loans and Credit Cards) Bill 2011. In his second reading speech on 24 March this year, the Treasurer said:

I announce new reforms to promote a competitive and sustainable banking system to give every Australian a fair go.

What the Treasurer failed to mention in his second reading speech was that one of the reasons we need reform to promote a competitive and sustainable banking system is as a result of the Treasurer's monumental blunder in approving the Westpac takeover of St George Bank in 2008. The Treasurer has no excuse. He was aided and abetted by the flawed and misguided advice from the ACCC, an organisation dangerously ignorant of the risks to our nation's long-term economic prosperity, by allowing markets to degenerate into the state of hyper- concentration. For while the test applied by the ACCC to approve a merger is under section 50 of the Trade Practices Act, it is no more than crystal ball gazing to guess if the merger will result in a substantial lessening of competition. The test that the Treasurer applies to such proposed banking mergers arises under section 63 of the Banking Act 1959, which provides that the Treasurer must take the national interest into account when considering such a merger. Simply, the St George-Westpac merger—the removal of St George Bank as an active and aggressive competitor in the market—was not in the national interest and the Treasurer abrogated his responsibility by allowing this merger. It is worth noting that even former Prime Minister Keating has made it clear that he would have never agreed to this merger, due its detrimental effects on competition. But this misguided decision from the Treasurer should not have come as any surprise, for we have seen time and time again that this government possesses the reverse Midas touch—from Ruddbank to GROCERYchoice, to winding back border protection, to the ceiling insulation scandal, the green loans affair and live cattle exports, everything this government touches turns to mush.

The long-term success of our economy and our future economic prosperity rely on increasing our nation's productivity. As history has taught us time and time again, it is small business that drives innovation and productivity improvements, not the big end of town.    As a former vice-chairman of the General Electric Company once noted:

Not a single distinctively new electric home appliance has ever been created by one of the giant concerns—not the first washing machine, electric range, dryer … razor, lawn mower, freezer, air conditioner, vacuum cleaner, dishwasher, or grill.

These were all created by small and medium sized firms. The success of small business depends upon the ability of small businesses to obtain finance and start-up capital. But when you reduce the number of banks in the market, as the Treasurer did by allowing the St George-Westpac merger, you reduce the number of options for small business to obtain finance and, in doing so, you undermine the long-term economic prosperity of our nation.

The history of business is littered with stories of businesses' successes after being rejected by bank after bank and finally finding a bank that would provide start-up capital and give them a go. I will give just one example. Almost every child in the world has heard of and loves Disneyland. Today, as well as Disneyland in California, there is Disneyworld in Florida and there are Disneylands in Hong Kong, Tokyo and Paris. Over one billion people around the world have visited a Disneyland. Disneyland is one of the great business success stories in history. Yet, when Walt Disney went to the banks to try to get funding for his very first Disneyland, he was rejected by more than 100 banks before finally being accepted. The top executives of the major banks turned Disney down because they thought no-one would come. Just imagine if, at the time, some misguided fool had swallowed, hook, line and sinker, the merger buzzwords of 'synergies', 'greater economies of scale' and 'improved efficiency' and allowed a series of mergers whereby Walt Disney only had four major banks to turn to—the current situation in Australia. The Disneyland that is known and loved throughout the world would never have come into existence.

We will never know what new products, new inventions and new jobs will fail to come into existence, killed before they were born because of the deluded theory which underpinned the Treasurer's allowing the St George-Westpac merger, thereby reducing the number of banks in the market which small business can seek to obtain finance from. We will never be able to compute the price that all of us will pay and how our standard of living will be lower than it would otherwise have been because of the Treasurer mistakenly allowing our banking sector to become more concentrated.

As the Treasurer scratches his head, befuddled as to why productivity in the nation has stagnated under his watch, he need look no further than the damage being done to our small business sector by our overly concentrated banking sector. History has shown time and time again that small business plays the leading role in the experimentation and innovation that lead to technological change and drive productivity growth. If you attack small business, as this Labor government has done time after time, if you make it more difficult for them to obtain finance, as this government has done, you will retard productivity growth.

Over the past few years, we have witnessed an unprecedented increase in concentration in our banking sector. The problem is not only the reduction in the options of small business to obtain finance; it is also the increasing interest rate margins that small businesses pay and the fees and charges that they are being slugged with. Figures from the RBA confirm that the big banks have now become parasitic on the small business sector. The banks are simply gouging small business on interest rate margins.

It is not only interest rate margins that small business are being gouged on. Late last week, we had the RBA release further data exposing how the banks are ripping off business, as these figures showed that the banks had massively increased fees and charges to businesses—by 14 per cent, to hit a record $6.87 billion—and this increase came despite business borrowing actually falling. So the banks are actually loaning less but they are taking more. This is the classic test of an uncompetitive market.

If the Treasurer wants to give every Australian a fairer go in regard to banking, he should be tackling the huge problem in our banking industry, and that is the penalty fees and charges imposed by the big banks. Although there has been a slight recent decline in bank fees charged to consumers, which the banks have made up for by slugging businesses, according to a 2009 report by Fujitsu Consulting, Australian bank customers pay the Western world's highest bank fees. The report's author states:

A lack of competition in Australia meant local banks were collecting $5 billion in fees from consumers, making them the most expensive in the western world.

The report's author goes on:

The average household is, in our view, paying up to $200 more each year than they should thanks to the wide range of fees and charges levied in Australia, and to the lower levels of competition in the market.

The real concern that this government should be tackling is that many of these fees and charges imposed by the banks are possibly unenforceable. It is a well-established legal principle that a contractual term—

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