It argues that this level of market concentration has a significant impact on consumer choice and competition in the market, as well as on other aspects of the economy.
The article begins by noting that although the number of banks in Australia has steadily declined in recent years, the ‘Big Four’ Banks – ANZ, Commonwealth, NAB, and Westpac – have continued to remain dominant in the market, with a combined market share of roughly 80 percent for home loans and deposits. This is significantly higher compared to other countries such as the US, UK, and Canada which all have far more diversified banking sectors.
The article then examines the potential implications of this market concentration. It discusses the impact on consumer choice and competition in the market, noting that it tends to lead to a lack of innovation, meaning that consumers may not be getting the best possible products or services. It also argues that a lack of diversity in the banking sector could lead to systemic risk for the economy as a whole in a crisis scenario.
The article further notes that the dominance of the Big Four Banks is likely to continue into the future, arguing that there are a number of obstacles preventing smaller banks from competing effectively. These include costly regulatory requirements, the strong brand recognition of the Big Four Banks, and the difficulty for little-known banks to establish customer loyalty.
In conclusion, the article suggests that the dominance of the Big Four Banks is likely to be an ongoing issue in Australia for some time. It argues that this could have significant effects on consumer choice and competition in the market, as well as potentially increasing systemic risk for the larger economy in a crisis situation. It is hoped that policy makers can find ways to create a more competitive banking sector, so that the economy can continue to benefit from healthy competition and innovation.
This article was contributed on Aug 15, 2023