Q+A: Are Australia's banks getting a bad rap?
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Welcome to Fearing Greed Q&A, where we ask and answer questions about business, investing, economics, politics, and more. I'm Sean Aylmer. We talk plenty about the banks on this podcast. After all, the big four and Macquarie are five of the 10 largest listed companies on the ASX. And while in years gone by, bank bashing was almost a national pastime, a new report suggests it's time to change the perception of our banks, instead viewing them as one of the country's most important pieces of economic infrastructure, supporting everything from home ownership and small business lending through to retirement savings. Simon Birmingham is CEO of the Australian Banking Association. Simon, welcome to Fear and Greed Q&A.
Hello, Sean. It's great to be with you and particularly with your listeners.
Why do you describe banking as essential infrastructure?
Because the banking industry is essential to essentially every part of our economy and its operations. That credit, which equals lending, doesn't occur without a strong, profitable, viable banking industry. And that credit is essential, whether you are somebody looking to buy your first or subsequent homes, or whether you are looking to start and grow a small business, or whether you're indeed a larger corporate investor. And at all levels, we see bank lending, bank credit as being absolutely essential, just of course, as is the role of banks in our payment system, which none of us ever think about. We just go and we tap our cards and double-click our phones and expect everything to magically happen, and happily it does.
But the reality is that there is huge investment that underpins that, investment that tries to minimise fraud and scams and protects your money and provides next to real-time balancing of accounts across those businesses and how you're spending your money. And all of that goes to the productivity, life, economic growth of our economy.
Okay. The flip side, in a sense, is that we all have to use a bank account. It's very difficult to operate in an economy if you do not have a bank account. And personally, I think that's a great thing. I'm wondering the sort of the social role of banks and the infrastructure role and the fact that I think the report says 65% of people own the banks via investing or superannuation or whatnot. Do the banks just get a bad rap generally?
Sean, you mentioned a period of fashionable bank bashing. It was also a period of real discovery of genuine problems. And as a banking industry, we shouldn't forget that. The Royal Commission uncovered practices that needed to change. And that's important to know, not forget, and ensure that those lessons are continually understood by those running and operating our banks today. But we also need to make sure we're actually keeping the balance on these things right and genuine. And the reality is banks are important to our economy, as I said before, but they're also, yes, really critical to households. What we've seen over the last decade or so is that Australian households have come to own more of our banks and has grown from sort of around the mid-50 percentage range as to how much of our banks are owned by households either directly or through their super funds up to 65%.
And at the same time, the value of those banks have grown. So actually, the wealth of Australian households over 15 years, in real terms, has grown from $240 billion to $470 billion in terms of their ownership and their investment in banks. And that's money that goes to your retirement savings, my retirement savings, and the retirement savings of many, many millions. In fact, likely most of Australians, at least through their super funds, if not directly.
So shifting away from investors and customers, your report says competition has saved mortgage holders up to $2,000 a year through refinancing. Is banking more competitive than Australians realise?
Banking has really gotten much more competitive and we've seen that at a range of different metrics. In terms of people swapping mortgages, 640,000 people refinanced their mortgage last year.
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