Friday 7th October 2016 - 4:12 pm

Banking woes:we’ve been here before

by Alan Thornhill

Our big four banks have a privileged position in the Australian economy.

It allows them to charge 18 per cent on credit card debt, when some banks overseas are offering similar products on ionterest free deals, just to get the business.

And 2 per cent is considered to be an acceptable commercial rate.

Economists have a name for such situations.

They call them oligopolies.

Years ago. when I was studying economics at university, a fellow student pronounced that word as it rhymed with “roly poly.”

The correct pronunciation is much closer to that of another word economists love.

That, of course, is “monopoly.”

This is appropriate because an oligopoly is nothing more than a shared monopoly.

So who pays for the extra-ordinary privileges that Australia’s banks have now?

You do, of course.

And who’s to blame?

In a superb series of talks, that a senior Financial Review writer, Trevor Sykes, produced for the ABC, he came up with an answer that will surprise many.

Alan Bond,

Along with other large scale speculators, such as Robert Holmes a Court, Bond owed billions to Australia’s banks, when the global financial crisis arrived with a major stock market crash in October, 1987

As Kerry Brien recalls in his book Keating, Australia emerged from this crisis with a brand new Reserve Bank and a promise of better behaviour from Australis’s commercial banks, who admitted back they had, previously, lent recklessly at times.

But that was almost 30 years ago.

There has been some deterioration since then, though, and government MPs are now pushing for stronger competition in Australia’s banking sector.

There has been little sign of that yet, though,


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Alan Thornhill

Alan Thornhill is a parliamentary press gallery journalist.
Private Briefing is updated daily with Australian personal finance news, analysis, and commentary.

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