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Banking industry

Labor's Plan to Save Regional Banking Services

Strategic Insights

— 1 min read

A proposed plan by the federal Labor Party to preserve banking services in rural Australia has sparked heated debate, with the Australian Bankers Association labeling it "unnecessary, unwise and discriminatory." The policy, unveiled by shadow treasurer Gareth Evans, would see banks contribute up to $20 million to a special fund to help new players set up banking services in regional areas. Evans claims the policy is driven by demand from the bush for better banking services and not a quick fix to win regional votes.

Key Takeaways:

  • The Australian Bankers Association (ABA) has criticized the Labor Party's plan, labeling it "unnecessary, unwise and discriminatory."
  • The plan would force banks to contribute up to $20 million to a special fund to help new players set up banking services in regional areas.
  • The Australian Competition and Consumer Commission would monitor bank fees and charges under the proposed plan.
  • 102 country communities have lost their last bank branch over the past three years, and a further 201 rural towns with just one branch are under threat.
  • Colonial and Bendigo Bank have initiated community banking projects, and Westpac has forged a partnership with the Tasmanian Government.
  • The independent Australian Prudential Regulatory Authority would administer the $15-20 million fund.
  • Banks would not be required to provide banking services in regional areas under the plan, but would be asked to tender for a one-off subsidy of $50,000 to help pay for start-up costs.

Statistics:

  • 102 country communities have lost their last bank branch over the past three years.
  • 201 rural towns with just one branch are under threat.
  • Residents in towns without a bank spend an average of $320 less per month.
  • The Reserve Bank estimates that the Wallis reforms to the financial system have cost major lenders $235 million per year in lost interest.
  • Labor's proposed $15 million to $20 million contribution from banks would be up to 10-15% of the Reserve Bank's estimated annual loss in interest.

Sources:

  • [Phillip Hudson and Jill Ferguson, "Bank to be forced to contribute to new fund for regional communities" (source unknown)]
  • [Australian Bankers Association (ABA) statement]
  • [National Farmers Federation statement]

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