The creation of a government-owned bank within Australia Post could improve community banking services across the country while also aiding Australia’s recovery from the coronavirus pandemic, according to a new report.
The discussion paper published by Per Capita for the Communications, Electrical and Plumbing Union (CEPU) found that establishing “PostBank” could boost the economy, build trust in the public sector, “reinvigorate” regional Australia, and more.
“As we rebuild our economy and society from the shock of the COVID-19 pandemic and address the urgent challenge of climate change, trusted public institutions, with a mandate to serve public, rather than commercial, interests will be fundamental to restoring the trust of citizens in the foundations of our democratic nation,” it said.
“The potential of an ambitious, reform-oriented public bank in 21st century Australia is enormous. By taking a bold step to establish such a service within the existing infrastructure and footprint of Australia Post, government could not only underpin the long-term viability of one of our most trusted public institutions, but begin to restore the trust of Australians in our financial and economic system.”
The paper looked at examples of banking services offered through postal networks in other countries, and suggested business models and funding options for creating a PostBank in Australia.
It noted Australia Post as a bank was suggested by six prominent economists in 2009, and again by the Communication Workers Union in 2013. Expanding its retail outlets to become bank branches “would go a long way to addressing concerns raised about regional and remote banking in the Banking Royal Commission’s interim and final reports”, the report said.
The paper concluded that establishing such a service would be achievable and relatively low-risk. It proposed a phased approach, starting with the opening of basic savings and transaction accounts, followed by credit cards and personal loans. Mortgages for owner occupied and small investor real estate would come next, followed by commercial lending with an initial focus on agricultural and other regional and rural business lending.
“This phased approach would allow a steady, staged rollout of new services with profits and capital from one stage funding the rollout of the next phase, thus minimising initial capital requirements,” the report said.
The federal government could give PostBank an initial injection of capital to provide the liquidity needed to begin offering banking services, the report said. Based on domestic and international banking experience, “this initial investment by the federal government would attract a return far beyond the borrowing costs”.
Alternatively, public institutions, including state and local governments, could agree to bank with PostBank, which would provide it with “very substantial liquidity” while saving public money that is currently spent contracting private banks.
“State, territory and federal governments could provide the initial funds necessary to train existing staff, recruit banking staff and build or acquire the necessary physical infrastructure to set up the bank. This could be a way for state governments to purchase equity in PostBank,” the report noted.
“Shared ownership by state and federal governments would increase the commitment to public banking and provide a much-needed new revenue source for state and territory governments. It may also protect PostBank from privatisation or capture by the financial industry should a federal government be elected that is poorly disposed to public banking.”
Emma Dawson, executive director of Per Capita and a co-author of the report, noted the paper considered the findings of the Banking Royal Commission.
“For far too long, many Australians have put up with a banking system that doesn’t work for them. The Banking Royal Commission found many Australians do not have adequate access to basic financial services, and that even those who do are often ill-served by our existing financial institutions. That’s where Australia Post could step in,” she said.
“If Australia Post was granted a banking license, it could improve community banking services across the country by setting new standards that other banks will have to meet if they are to compete. It would also provide stability to Australia’s economy in times of volatility, such as those we’re experiencing during the global coronavirus pandemic.”
Utilising Australia Post’s national network of post offices could also help ensure the continuation of postal services in remote and regional communities, according to CEPU national president Shane Murphy.
“Banks have been steadily closing branches across the country, but particularly in regional and remote areas, for some years. Now it’s time to reverse this trend and help rebuild. Government investment in PostBank could turbo-charge regional recovery from the COVID crisis, and restore services, skills and jobs that have been lost in regional and remote communities,” he said.
“By operating within the existing infrastructure footprint of Australia Post outlets nation-wide, PostBank could contribute to the ongoing viability of quality local postal services in remote and regional communities.”