Crikey has long whinged about the oligopoly profits enjoyed by Australian banks and, post-HIH, insurance companies. But it could be worse – you could be trying to do business with them in Papua New Guinea. It seems the insurers are getting away with anti-competitive behaviour there that wouldn’t be tolerated in Australia, while the banking club is making the most of a reduced competition in PNG.
Heavens knows, PNG has its problems. But its current treasurer, Bart Philemon, and the central bank have been given big ticks for their performance over the past few years in bringing inflation under control, cleaning up the financial system and improving fiscal discipline. But the former executive director at the International Monetary Fund representing PNG (and Australia and a dozen other regional countries) yesterday fingered the general insurance sector and lack of competition among banks as two areas that still required work.
Greg Taylor knows more than a little about what goes on in PNG. After his IMF role, he chaired the prime minister’s Superannuation Task Force in 2001 that helped reform what had been a business prone to scandal and corruption. (And I’m still waiting for any Australian agency to take action over the Aussie end of the highly dubious trade in a certain Cairns office building…) Since 2003 Taylor has been a director of the Public Sector Superannuation Fund.
At an ANU/Lowy Institute conference on PNG yesterday, Taylor accused the general insurers of running a cartel in PNG, resulting in inflated premiums. And while applauding the Bank of PNG for weeding out undesirable financial institutions, he said there was a downside to the reduced competition among remaining banks, citing extremely wide spreads on foreign exchange transactions as an example.
With all the talk by Australian insurance companies and banks about social responsibility, it would be a grubby thing indeed to find they were ripping off a country that can’t afford it.