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The concentration of competition within financial supply lines that “may not be healthy and may influence behaviour in a certain way” will be a focus of the Financial System Inquiry (FSI), says the inquiry’s chair, David Murray.
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FSI to address competition concerns
02 May 2014
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Speaking at an Australian Business Economists luncheon in Sydney late last week, Mr Murray said it was not surprising that the banking system has become more concentrated since the global financial crisis.
“Start with the 1890s and move forward, it is generally the case that the system concentrates more after a crisis because the weak elements have to be dealt with,” he said.
Some of the submissions to the FSI have argued that it is in the nature of the Australian economy that the banking system is concentrated and “oligopolistic”.
“Many submissions also focused on the concentration here relative to other countries, and whilst it does appear quite concentrated it’s not altogether out of the paddock in similar countries,” said Mr Murray.
There are many aspects within the Australian economy that suggest competition has been "okay", he added.
“But whenever there is concentration, what we try to look for is not just concentration of the players in the industry itself, but the supply lines and activities around each of those players,” Mr Murray said, “and there you can find some concentrations that may not be healthy and may influence behaviour in a certain way.”
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Mr Murray’s concerns about competition were not confined to the banking sector.
Speaking hypothetically about the superannuation system, he asked whether funds managers, “who are not a very large group”, are “acting in a way that’s similar for all of them”.
“[And] whether the advisers are acting in a way that’s all similar for all of them,” said Mr Murray.
“If it’s going down a certain path, where’s the dynamic efficiency that gives rise to a different approach?
“We’re very interested in looking underneath the obvious signs of concentration, and then, of course, whether there is in fact a level playing field,” he said.
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