The Federal Government licences and regulates the telecommunications
and banking sector in similar ways. Treasurer Peter Costello, in
particular, through his control of competition policy and The Banking
Act, has enormous power to make and break companies in these sectors,
but seems to be taking divergent approaches.

By preserving the Four Pillars policy on bank ownership, successive Governments have decided that the sort of market
power and industry domination enjoyed by Telstra is not desirable for
bank consumers.

However, thanks in part to a cosy cartel on fee gouging, the Big
Four banks have all hit new record highs this week and their
collective market capitalisation topped $207 billion yesterday – more
than four times the relatively puny Telstra market cap which slumped
below $48 billion after yesterday’s 6c decline to $3.85 a share.

The market is clearly spooked by the political beating that Telstra is
constantly copping from all sides of politics and fears that it will
only get worse once the government sells its residual 51.8% stake. If
the Government is happy to destroy value whilst still owning a
controlling stake, what will they do when there is no vested interest?

There was a time when Telstra was seemingly unstoppable and the Big
Four banks were perceived to have limited growth opportunities. As the
global telco boom rolled on in late 1999, Telstra shares went
through the $9 mark and the company briefly enjoyed a market
capitalisation of more than $100 billion. At the same time, the Big
Four banks were together capitalised at about $115 billion.

Fast forward six years and NAB and CBA are both $10 billion-plus more
valuable than Telstra, ANZ is just $700 million shy of Telstra’s $47.7
billion market capitalisation and Westpac is within $5 billion.

So why are all the politicians jumping up and down about a company
which is suffering declining profits and margins, yet completely
ignoring what the economics clearly demonstrate is an outrageous cartel
gouging the bejeezers out of Australian banking consumers?

Maybe it’s the $15 million-plus that licenced banks have donated to
political parties since the nadir of 1992 when Westpac and ANZ almost
went broke and the Big Four were only worth about $20 billion.

The government is certainly in on the giggle because with pre-tax
profits projected to hit almost $20 billion this year, the ATO will
scoop up about $6 billion in company tax receipts from the Big Four and cop none of the

The big question is whether there is any fee increase or gouge that
would be big enough to trigger action from that complicit triumvirate
of bank cartel condoners – Peter Costello, Graeme Samuel and Ian
Macfarlane. Given that Samuel is on the Crikey Revised Wealth (CRW)
list, it would be nice to know if his family has any exposure to bank
stocks, although we’re not for a moment suggesting this has caused his
failure to act.

We know the Queensland Labor Party has made many millions out of its
shareholding in the Commonwealth Bank, but if anyone can explain the
political and regulatory tolerance of all this bank gouging, please
email [email protected] because it is just baffling.