Anna Bligh interview on 2GB Afternoons with Michael McLaren

Michael McLaren (Host): Well, here we are at the Easter Show, the great celebration of country life in the city, but it’s also an important platform this to better understand the challenges that the regions face. Now, yesterday, we looked at the floods. Today, I want to look at the banks. Now in the regions, there is a feeling out there that it is getting harder and harder to go to the bank in many towns now physical banking is something that just does not exist. And of course, in many of these parts of the nation, banking is needed. It’s essential. It might be the countryside, but there’s still businesses. You’ve still got to trade and you still got to transact offers. Our farmers now have complex banking needs to continue to grow the fruit and the vegetables or to the farm the cattle that we have to keep Australia going. Now, there is a lot happening in this space that many of the banks may be pulling out, Bank@Post is ramping up. It’s not a one size fits all story, but we’ve got to shine a light here. And there are more issues than just physical branches. The person who I guess, is responsible for all of this, or oversees all of this, not for much longer, because she’s about to head out the door of this role. But the CEO of the Australian Banking Association is Anna Bligh, and she’s been generous enough to give us some time. Anna, I appreciate it. Thank you for being there.

Anna Bligh (Guest):  Good afternoon. Lovely to talk to you, Michael.

Michael McLaren: Banking is essential in the city. It’s essential everywhere. It’s essential in the bush. But as recent parliamentary inquiries found out, I think something like 600 bank branches around Australia have vanished effectively over the last couple of years. There’s a moratorium now on those, all the banks have agreed until 2027 to just put the kybosh on the closures. But beyond 27 there’s obviously concern we going to see increasing losses of physical branches. Can you put anyone’s mind at ease over that?

Anna Bligh: Thanks for the opportunity, Michael. What I can tell you is that Australian Banking, and the way that Australian do their banking business, is undergoing probably the biggest transformation in the history of the country, and that is changing pretty much everything. It’s changing how we pay for things, how we pay bills, how we transfer money to our family, and what we need or don’t need in a branch anymore. So probably the biggest activity that most Australians use branches for throughout the history of banking, has been going and depositing or withdrawing cash. We are, as Australian using less and less and less cash. In 2007 about 70 per cent of everything we paid for we used real cash. These days it’s about 10 per cent and the Reserve Bank estimates that’s going to be 4 per cent in by about 2030 so that has massive implications for what our branches are doing. If people aren’t coming in anymore to withdraw or deposit cash, then that really changes. You know what a branch is and what it might look like in the future. So, you’re right, four major banks have put a moratorium until 2027 and part of the reason for that is to sit down with the Government, with Australia Post and to think that what is it that people still need face-to-face services for? Because increasingly, it’s not cash, and what might be a better way to make sure that people can access those services? And it’s not just cash. We’re changing a lot of things in particularly the last 10 years. I think many people will be surprised to know that 75 per cent of all home loans in Australia are now written by a mortgage broker, and those people come to your house. You don’t have to go to a branch. They’ll come and sit at your kitchen table. So, you know, the old models of doing things are breaking, and we’ve got to find different and better ways to make sure that, you know, Australians, wherever they live, can continue to get the banking services they need.

Michael McLaren: Well, this is all very true. The old models are the old models, and they only remain relevant as long as they remain relevant. So, I mean, I’m not here saying that we have to keep everything the way it was in 1912 because that’s the way it always has been. Things have to change, and the banks have costs that they’ve got to incur when it comes to storing and moving cash and the rest of it. People understand that, but, but equally, in a city sense, if the bank branch at say Five Dock closes down, it’s okay, because there’ll be one at Leichardt. And if that closes down, it’s not too bad because you can go to Rozelle or whatever, in the countryside, if the bank branch at Mudgee closes down, well, it could be a very, very, very long drive indeed to the next one if you do need that physical person to person, mano-a-mano banking experience. And so there’s that, and of course, in some of these towns, the bank really was the beating heart, the linchpin around which the rest of the community was built. When the bank goes and you’ve seen this over the years in your former role as heading up Queensland, when the bank leaves the town, then some of the other shops leave the town, and bit by bit, the town dies. There’s a cultural aspect to this in the countryside, which is a little different to the city, isn’t there?

Anna Bligh: Look, you’re absolutely right about that. And Michael, I think it’s fair to say that  in the 1990s and maybe early 2000s some banks were closing branches because population in the town was dropping, and they couldn’t keep the branch going, because the town was, in fact, dying. If you actually look at some of the places now where we’ve seen branch closures, they are more often than not, major regional centres which have got population growth and they’re booming, but the people who are living there aren’t using bank branches anymore. They are paying for things electronically, they’re using their phone to buy their groceries. Increasingly, banks are using other kinds of technology. Those people who are getting a mortgage through their bank instead of a mortgage broker, more often than not, they’re doing it now on a video conference at a time of their choosing from the comfort of their lounge room. So it is an interesting time, banks have got one foot in the way we used to do things, but they’ve also got to be investing in the way that more and more customers are doing things, because the more customers jump into the digital world, the more banks have to invest to keep them safe there. And so, you know, putting your money and your investment in the best place to look after your customers is not an entirely clear thing at the moment. So interestingly, we had Westpac this week was out in regional Australia, announcing that they’ve opened three new regional service centres. So, they’re not quite like the old branch that you once knew, but it is a face-to-face experience. So these are physical buildings in the main street. They’ve got real bankers sitting inside, but you can’t get cash over the counter. The smart ATM is in the building, but there is someone there to help you.

Michael McLaren: We don’t have much time. Just want to whip through one or two quick other things in the region. One of the issues that’s been raised with me with banking, whether there’s a branch or not, is that there seems to be an attitude from headquarters in the city where activism is involved in the lending process. By that, I mean particularly some of the big industries in the region are mining industries, some of them fossil fuels, but also some of the agricultural industries. The Commonwealth Bank, for example, last year, decided that they would become the first major bank to walk away essentially from funding fossil fuel companies without genuine emission plans. So if the company couldn’t show some sort of commitment to Paris, the bank wouldn’t lend. Now, if that company is viable and the project is viable. Shouldn’t there almost be an onus on the bank to lend? I mean, when, when the politics gets involved in the lending process, we start to blur the lines a bit, don’t we?

Anna Bligh: Michael, you’ll appreciate that every bank has to have their own commercial decisions about the amount of risk in their banking book, and banks make an assessment about various industries and how much exposure they will have. So, it’s not good for a bank to have, you know, full exposure to only one part of the economy. And when Australia signed up to Paris, and we did do that as a country, it did put an obligation across the economy for people to consider the risk, for example, of investing in a fossil fuel investment, if that investment may not have a long life…

Michael McLaren: Are wereally dealing with risk? Or is this more ideology? Put it this way, I think most people, whether they agree with Paris or not, whether they want fossil fuels or not, understand that globally, and a lot of these are exported commodities, as you know, globally, there’s insatiable appetite for these for a very, very long time to come. So are we using excuses here to effectively de-bank some sections of the economy that that some people may not like, even if they’re viable projects.

Anna Bligh: I don’t think our banks are sitting around thinking about who they like or don’t like when they make lending decisions, and some of these decisions are hundreds of millions of dollars. What I can say in the agriculture sector, we’ve seen across the entire banking sector, agricultural lending grow at a faster rate in the last few years than we’ve seen for a long time, and that’s a very healthy thing for the agricultural sector of our economy. But banks will make their own decisions, and they’ll be very public about it, whether or not they and how they are going to continue or not investing in some parts of the fossil fuel economy. You’ll get other people in the community will say they shouldn’t be lending at all in that sector. I think banks are trying to find the right path that helps make sure that they play their role in Australia meeting their Paris targets. So, banks have still got a lot of money invested in all parts of the Australian economy, including in fossil fuels. In many cases, but over time, Australia has said we’re going to gradually move out of those. So how do banks think about that, and how do they then make good risk assessments? And I think it’s important that they’re transparent about that, and that’s why we are seeing some of these decisions.

Michael McLaren: Fine. Okay, just finally, we mentioned Bank@Post. Overseas, some of the postal services, formerly they were government, postal services have effectively now become a bank in their own right. I mean, as you understand, competition is what drives the best outcome for consumers. We have four main banks, we’ve got some smaller players. Is it time that we give a bit of consideration to turning Australia Post over into the fifth major bank. After all, they’ve got the physical real estate, they’ve got the staff. They need a banking license if it, if it was, if it was viable, is it something we should look at?

Anna Bligh:Well, there’s certainly been consideration of this, I think, by a couple of parliamentary inquiries in those countries where the bank is at the post office. They never had the equivalent, or in most cases, didn’t that we had in Australia, and that is the Commonwealth Bank that was publicly owned until it was floated some time ago. It is not an easy business to set up a new bank. In fact, we haven’t really seen very many new banks set up in Australia and meet all the requirements of a banking license for decades. Michael, so it’s not an easy thing to do. The question is, do we need another publicly funded, taxpayer supported bank? One thing I would say is that if you think about the regional Australia, they often have smaller building societies, credit unions that are very much about being a local presence in town. I think if you put a taxpayer funded, subsidised bank in the post office, you pretty quickly see those, little mutuals encounter real problems, as well as some of the smaller banks that provide diversity and choices to Australian consumers. So that’ll be one thing I think that should be taken into account.

Michael McLaren:Well, we’ll see, time will tell. I mean, it’s worked overseas, so I just wonder if it maybe could work here. As I said, particularly for the regions, they’ve got the physical infrastructure in situ, so they’d have a head start over some, let’s say, overseas entity trying to come in and start. I appreciate your time. Have a great Easter.

Ends

Anna Bligh