A report by the Reserve Bank of Australia last year said banks had maintained their profitability by cutting costs rather than by raising fees, but it conceded customers with low balances and a lot of transactions could be worse off. Technology and deregulation have certainly been driving the banks' behaviour in the past 20 years, though whether depositors have been better off versus other bank customers is debatable. There have certainly been new entrants to the banking business since 1983 when the Federal Government accepted the Campbell inquiry's recommendations to float the exchange rate, remove controls on bank lending and increase competition by allowing in foreign banks. But by 1997 banks had still increased their share of deposit-taking at the expense of other financial institutions. Though 26 foreign banks entered the Australian market between 1980 and 1995 and the number of domestic banks remained virtually unchanged, the number of building societies and credit unions more than halved because of takeovers.
Mortgages are certainly where the banks face their hottest competition.
He also warned the bank had to be much more efficient because the falling Australian dollar made it easier for foreign banks to take over Australian banks. He warned that foreign banks would be far less sentimental than the locals about issues such as staffing levels, branches and fees. But neither he nor the ANZ's chief executive, John McFarlane, have had any approaches and it seems unlikely that any Federal government would approve of such a move in the current political environment.