In Tom Price, a small town in the Pilbara, there is not a single bank branch. In fact there is not a branch in its entire shire, an area that produces 2 per cent of Australia’s annual economic output.
For the small businesses in the town they face a six hour drive on a partly unsealed road to the nearest bank branch to deposit their takings. So most pack up suitcases of cash every few weeks and fly to Perth to make the deposits.
This was the most stark example of the consequences of the banks deserting rural Australia over the past few decades but similar stories were relayed all over the state to a Senate inquiry I chaired over the past 18 months. We held 13 hearings in all Australian states.
There are 596 Australian towns that once had a major bank branch but now have none. These towns are often left devastated as people take their banking, and their other shopping and business to other towns.
There have been big changes in how we all do our banking and there are fewer people visiting a branch now that you can do your basic banking on the internet. Some of these things have been positive. People on farms can now do banking from home and Australia Post now offers banking services in many small towns that never had a bank branch.
Change has not been the major problem though. It has been the banks thoughtless and heartless approach to the changes. For example, the major banks had committed to prepare impact statements before closing branches. Our committee uncovered one of these statements which was three pages long and included just one bit of information about the local community. The address of the local post office where banking could be done.
Given that the banks have barely paid lip service to the commitments they made to previous inquiries on bank closures, our committee determined that it was time for a different approach.
We have recommended that the Banking Code of Conduct be made mandatory and that a regulator stop any branches from closing until they are satisfied that a bank has complied with the code. The banks are billion dollar organisations. The least they can do is to talk to local people about the impact of a branch closing and consider reasonable ways to ameliorate the impact of any closure.
We can’t just stop more branches from closing though. Given how many bank branches have closed (more than 2000 over the past six years) there is a desperate need to rebuild financial services in the bush.
Our inquiry recommends that we establish, in effect, a new universal services obligation on the banks, just like applies to Telstra, but for financial services. We recommended that a small increase in the Major Bank Levy (which is charged to all the major banks) could fund the establishment of new, community branches. There are over 300 community branches across the countries, and these are started with contributions from the locals. The new fund could help reduce the start-up costs of such branches and bring back more financial services to rural communities.
We also recommended that the banking services available at Australia Post be expanded. Such as enabling Australia Post branches to lift their limits on deposits helping small businesses, like those in Tom Price, avoid costly trips to the nearest branch.
Over the longer term, the Government should look at allowing Australia Post to offer its own accounts and financial services. Australia Post branches are themselves at risk and expanding to financial services could be a lifeline that keeps them open.
But whatever is decided going forward, we should not trust the banks to make things better. They have had their chance and been found wanting. It is time for a much more proactive approach to guarantee financial services in rural Australia.
