Labor Faces Test On Banks Deal

The Age

Tuesday May 13, 2008

Scott Murdoch

But there is little to indicate the planned merger will not go ahead.

THE Labor Government's credentials on big business will face the most significant test yet, when it comes to giving final approval for Westpac to merge with junior rival St George.

Treasurer Wayne Swan must approve the merger and ACCC chief Graeme Samuel will examine details to ensure competition is not jeopardised.

On the face of it, with not all details yet published, the deal looks relatively straightforward.

There is little on the surface that would give Swan, and Samuel for that matter, impetus to block the proposed merger.

But the Government has to ensure that for customers, the level of service (particularly in regional areas) and competition remain strong. Otherwise it - and maybe the bank itself - will face a consumer backlash. There is nothing like bank rage to fire up the electorate.

Swan, so far, has been friendly with the banks and the top end of town. From all of the anecdotal evidence, he is perhaps a far more consultative Treasurer than his predecessor.

Swan was soft on the banks when NAB opened the floodgates in January and started raising lending rates independently of the Reserve Bank. His first response was effectively to concede.

But then move after move by the banks prompted a tougher reaction and policy was drafted to inject more competition into the banking sector and make it easier for consumers to shift accounts.

But this merger poses a much greater political test for the Government.

During the campaign, Swan and Rudd were keen to have big business onside. Julia Gillard was relentless in her consultation with big business - particularly the miners - during the campaign to ensure workplace relations would not be markedly different under Labor.

At the same time, almost everything Labor has done so far has been pitched to the working families. The budget tonight could show whether Labor really is keen on keeping closer ties with the top end of town.

Swan's reaction to the $70 billion Westpac deal has been conservative, to put it kindly.

"We will be looking at the details of any proposal that comes from these discussions," he said yesterday . "There are a number of regulatory steps that would need to be followed before any merger could go ahead."

Swan has vociferously opposed abolition of the four pillars policy, despite strong advocacy by the banking sector.

Significantly, Westpac's former head, David Morgan, has been most keen to see the policy scrapped. Just a few months after his departure, replacement Gail Kelly is now doing what she can within the corporate boundaries that govern the banks.

"Set against banking consolidation worldwide and the globalisation of services, the policy is an anachronism, a woolly mammoth dug from the Siberian tundra and shipped still frozen to Australia as a structure for banking," Morgan told a business conference last year.

There is no chance that Swan and Rudd will change the four pillars policy now - if anything, the Westpac and St George tie-up strengthens it.

smurdoch@fairfax.com.au

© 2008 The Age

Back to News Index | Back to Home