Australia Post could be challenge to the Big Four Banks

[Solly]

"ONE of Australia's major economic forecasters says Australia Post should be made a bank so it can challenge the "Big Four"."

See the article by Glenn Milne and Nick Gardner here;

http://www.news.com.au/heraldsun/story/0,21985,25321008-664,00.html

Do you think that it is a good idea for the Government to run a bank?

I think it's a bit "Back to the Future".

 

[Nyden]

This sort of rubbish belongs on ACA. Banks are there to make a profit, not help battlers, of whom are only trying to financially profit as well (such as by owning a house, or perhaps even multiple thereof).

Lock in a fixed rate, and laugh at the banks. Rates go down, boo hoo, the big mean banks aren't letting me off my fixed rate, time to go on Today Tonight with the skewed camera angles, and black and white footage.

Interest rates are lower than they've been in 50 years, and people are still complaining?! If people can't bloody afford a house, don't buy one.

Sorry to have gone somewhat off-topic. It is very sad to see capitalism being questioned so often lately, though.

Heck, since we're at it - I'm upset at how expensive plumbers are. Let's nationalise a whole lot of plumbing agencies, and we'll pay them minimum wage for their services.

 

[kincella]

I like the idea of state banks.....basic rates for depositors and borrowers...
no deriviatives or fancy credit....a set interest rate....remains unchanged...at a low rate for a full year...not changed monthly etc
if people want fancy they go back to the others

 

[enigmatic]

If they do that kincella then the "Big 4" would be the "Little 4" and wouldnt be able to lend any were near as much out as they currently do..

Do people not realise that these Banks are a business and like most businesses they need to make maxium profit.. you never run a business to make 80% maxium profit it would be pointless

The banks need money to lend money, they take from anyone that borrows money and uses that extra money to lend to the ever increasing population..
Imagine how many Young couples would not be able to own there own home because suddenly the bank wont lend to them as they dont have the coin..

How about it you think of it this way you give the bank your small 20,000 dollars and you will expect 3-4% interest maybe more.. the bank gives you 400,000 and people complain that they are charging them 5%..
who is taking on the bigger risk you or the bank..

 

[kincella]

the banks have a monopoly...there is no real competition....and its not so much the interest rates...its all the other charges....they can make plenty of profit...pay the depositor 4% and charge the borrower 5% they make 1% on massive numbers....
the banks problem is the huge multi million dollar salaries to the top boys

 

[enigmatic]

A monopoly Implies that they have a majority of the market..
Examples
Microsoft
Google

I think you would find that the Big 4 are 4 seperate Pillars of our major banking sector and I think you would find that all 4 would prefer to take a larger share of the market from the other.. Highly unlikely that one of the 4 banks is a Monopoly and even less likely is they would work together and a Quadopoly ..

There are many other options then the big four some even Cheaper.. If there are cheaper options then People have there free will to use them instead..
Heck I used to use a Non Big 4 bank for the past 20 odd years when it got swallowed up by one of the Big 4..

Still a Cheaper option then the Big 4 so where is the problem..

And about the top boys getting million dollar salaries that is only a problem if your not getting the multi million dollar salaries.. I personally like the idea heck it gives me something to aim for..

If you limit the top salaries you will reduce productivity.. heck if Im getting 4million and the cap is 4million do you think I will try and out do myself each year Unlikely

 

[Smurf1976]

I like the idea of state banks.....basic rates for depositors and borrowers...
no deriviatives or fancy credit....a set interest rate....remains unchanged...at a low rate for a full year...not changed monthly etc
if people want fancy they go back to the others

If interest rates were set annualy then that effectively removes the ability of the Reserve Bank to do its job when there's an unexpected economic event.

It's like setting the heater on the 1st of June then not being able to turn it off during Summer. Monetary policy, and heaters, need to be able to respond more quickly than that.

I note that the Big 4 banks do indeed offer fixed rates on both deposits and loans for those willing to accept the associated terms. Don't go variable unless you're happy to speculate - and speculation is just what most are doing with such loans / deposits.

 

[Buster]

G'Day Smurf (and fellow ASF'ers)

I note that the Big 4 banks do indeed offer fixed rates on both deposits and loans for those willing to accept the associated terms. Don't go variable unless you're happy to speculate - and speculation is just what most are doing with such loans / deposits.

I may be missing the point, but I thought that the intent of the article, and this thread, was the angst caused by the 'Big 4' not passing on the full RBA interest cut..

I'd doubt anyone would have any sympathy for those that chose to fix earlier and 'want' the cut passed on (as another poster suggested..), But I do, and I'd tip most others do also, expect the banks to pass on the cut to those with variable loans..

Couldn't imagine the banks failing to pass on the rises to variable lenders.. Nah, we're happy with the 16%, we won't raise it to 18.. Although I would have appreciated it all those years ago..

This article is a rehash of what was bandied around the last time they didn't pass on the full cut, it's simply jawboning intended to put some more pressure on the banks by taking out the 'scary' stick.. ' You guys behave, or we'll let others jump into your sandpit'.. I doubt that it'll ever happen though.. The Government and ACCC has it's hands too full giving it to TLS to take on any other entity, like the Banks, oil companies or big retailers..

Regards,

Buster

 

[Julia]

Well, to all the people who are anti the banks for not passing on rate cut, I'd say, just get real. They are independent businesses not welfare organisations.

Mr Swan is fond of telling everyone that we have banks that are amongst the most stable and profitable in the world, seeming to almost take a personal pride in saying this as often as possible.

So, just leave them to continue being profitable, Swannie, or you might not be able to make such a claim in future.

And how about a bit of recognition for those who aren't living on credit and who are pretty happy the rate drop hasn't so far been passed on. Savers have seen their interest income halve in recent months. I'm just a bit over the focus always being entirely on those who owe money.

 

[Happy]

I like the idea of state banks.....basic rates for depositors and borrowers...
no deriviatives or fancy credit....a set interest rate....remains unchanged...at a low rate for a full year...not changed monthly etc
if people want fancy they go back to the others

I liked the story about non-profit bank that helped women in 3rd world country to get their own job, be it sewing machine, goat or two, stove to cook meals for sale.

It was what they really needed, to get on their own feet and be able to put food on the table.

Probably in this country we are more sophisticated, but I don't see any reason for banks to make every year 5% or 10% more mrofit than year before.

I would rather see bank more like service not as source of profit, would like doctors to adopt the same principle and reduce their hunger for gap payments.

 

[enigmatic]

let say the bank starts off with 1billion dollars.. if it is non profit organisation isnt it limiting itself to a fix number of people it can help..
surely there should be a price to borrowing money.

And i Agree with julia as I have a Fair chunk of my Hard earned cash in a term deposit what about those of us who have saved our hard earned cash..

Surely the Banking system should be focused towards those of us who buy what we can afford rather then those that borrow more then they can afford.

to be honest anyone that bought a house a few months before the rates started dropping should be thanking the banks for the amount they have pased through so quickly..

I'm sure there estimates for profit growth have been severally reduced had they not kept some of the rate cut.. with job security low you will find that they are handing out less loans.. they may be making $450 more a month of a borrow now however they are having less and less borrowers...
IMO

I guess in the end if your not happy squirell away your money under your bed until you get enough to buy your house then pay in cold hard cash.

 

[tech/a]

I like the idea of state banks.....basic rates for depositors and borrowers...
no deriviatives or fancy credit....a set interest rate....remains unchanged...at a low rate for a full year...not changed monthly etc
if people want fancy they go back to the others

State Bank Adelaide
Basically bankrupted the State.

Read this http://www.adelaide.edu.au/news/news372.html

Sound familiar---and seems the big 4 have learnt---where as overseas banks needed to learn.

Yeh great idea banks run by buffoons.

As Julia says the ONLY reason we are as relatively un affected is because our big 4 are profitable.

 

[theasxgorilla]

The banks need money to lend money, they take from anyone that borrows money and uses that extra money to lend to the ever increasing population..
Imagine how many Young couples would not be able to own there own home because suddenly the bank wont lend to them as they dont have the coin..

Ho ho ho...I almost believed you.

Imagine what it would do to house prices.

 

[Smurf1976]

State Bank Adelaide
Basically bankrupted the State.

State Bank Victoria - much the same end result as in SA

Tasmania Bank - Hastily merged with another local bank amidst what was very widely assumed to be an otherwise imminent demise.

As for the orignal issue about passing on interest rates, I need to point out that the RBA's overnight cash rate isn't the only relevant figure since that's not the sole source of bank funding for loans.

 

[Trevor_S]

the banks have a monopoly...there is no real competition....

That's a nonsense, there is a plethora of competition, it's just more expensive and less convenient.. It's more expensive for a reason, economy of scale does matter (to a point, get too big and you can suffer from bureaucratic bloat, this is eminently obvious in Government as well as big business)

and its not so much the interest rates...its all the other charges....they can make plenty of profit...pay the depositor 4% and charge the borrower 5% they make 1% on massive numbers....

This would only work if there was no competition, after all when "Bank X" up the road offers 5% on deposits and people start withdrawing from the bank offering 4% and moving up the road ? and the bank up the road then charges 6% to those they loan to , after all there is no money at the bank that offers 4% deposits, so everyone has to go up the road to the one lending at 6%, as all the deposits have moved up the road and the bank offering 4% has gone bankrupt !

the banks problem is the huge multi million dollar salaries to the top boys

What nonsense, do the math... 20,000 workers at $1000 extra a year is ? vs say 10 workers at $1,000,000 extra a year is ? I am not debating that executives are overpaid, they are, grossly. I personally think any employee (after all that's what janitor or a CEO is) should be capped at 10x the median salary. I feel it's a nonsense that the owners of a business can't set the wages of it's senior staff.

We want profitable banks, to have them otherwise would see them disappear from the market. Profitable banks will lend money ! If they become too profitable, competition will arrive to feast on the easy pickings. Governments job is to ensure competition is allowed to start and is not smothered or preyed upon not stick their incompetent oar into the water.

It seems to me those complaining about the greed of the banks are also complaining out of greed, they want more money themselves.

 

[Happy]

..

What nonsense, do the math... 20,000 workers at $1000 extra a year is ? vs say 10 workers at $1,000,000 extra a year is ?

..

Every little bit counts.

Saved surplus over many years could insulate them against what it happening now.

Simple maths too.

 

[xyzedarteerf]

apparently they make fun of Asian's at Australia Post.

the chick's kinda cute though

 

[Trevor_S]

Every little bit counts.

I agree, which is why I said they are overpaid. It's just not the reason they don't pass on interest rate cuts, as implied.

Saved surplus over many years could insulate them against what it happening now.

Indeed. In fact that save ideology could be applied to the rest of society and there would be no debt crisis or no need for the old age pension However, the banks "seem" to be doing okay.

I do think the main danger to the banks is the extraordinary housing bubble in Australia.

I have to que for ages at the Post Office, I can't think of anything worse then them being a bank... shudder In fact I am surprised they don't float the bloody thing and open postage to competition before sending letters becomes a relic from the past.

 

[doctorj]

If everyone agrees that we need banks, we like our banks to be safe and reliable institutions, why are we worried about them not passing on the interest rates (and perhaps making more profit)?

Everyone here has some understanding of investing or trading. (Good) Traders and investors measure returns per unit of risk - banks are the same. When the risk goes, up so should their returns - in this case, the spreads they charge on their loans need to widen. The economy is clearly deteriorating and therefore the risk the banks won't receive their payments is increasing.

You'd have to really question a bank that isn't looking to increase its spreads. Either its managed poorly and you should be making off like a bandit with your deposits ASAP, or they have a fairly conservative loan book to begin with.

The post office clearly shouldn't be a bank - Governments (and clearly the post office) don't have the expertise to be a bank. In reality, it would just be a means of subsidising loans and to shift bad debts and probably inefficient opex , to the state and in turn the tax payer. As some posters have noted, this generally ends in catastrophic failure. Aside from a solid branch network and existing cash-handling capacity, post offices have nothing to offer as a viable alternative to real banking.

Loans need to consider credit risk in pricing and like it or not, if you're a borrower, you're much riskier to the bank than you were 2 years ago. You need to pay for that.