Economics for Business Course 2022

Running Head: ECONOMICS FOR BUSINESS
Economics for Business
Name of the Student
Name of the University
Course ID

ECONOMICS FOR BUSINESS1
Executive Summary
The banking industry in Australia us one of the most successful businesses in Australia
which is mostly dominated by four major banks. These banks have dominated the economy by
working as a cartel arrangement which happens in an Oligopoly markets. The banks kept a high
rate of interest and did not allow entry of small or new firms to open up and regulate in the
market. The power of the banks highly affected the economy with adverse effects as it blew the
potential resources and triggered a wide range of disruption in the financial sectors. Eventually,
there grew multiple scandals in the banking sector that led to fall in economic growth.
The Australian government has formed an organization called Royal Commission to stop the
fraud offences that started growing. They were able to expose the disruptions and has been
effective in solving a few cases. However, criticism was faced by the commission as it was
unable to solve most of the problems and charged money for provision of such services.

ECONOMICS FOR BUSINESS2
Table of Contents
Introduction......................................................................................................................................2
Industry Background.......................................................................................................................3
Market structure...............................................................................................................................5
The industry’s associated issue........................................................................................................6
Impacts of the issue on the industry and on the Australia economy...............................................7
Government policy........................................................................................................................10
Conclusion.....................................................................................................................................11
Reference List................................................................................................................................11
Introduction
Australia is mostly dominated by four major banks. They are banks namely
Commonwealth Bank of Australia, New Zealand Banking Group (ANZ), Australia and Westpac

ECONOMICS FOR BUSINESS3
Banking Corporation and National Australia Bank (NAB). Each of them has quality ratings in
the world.There a many big financial institutions like building societies, credit unions, mutual
banks, yet the market is mostly shadowed by those four banks. Few among them have a presence
of retail banks (Joshi et al. 2013).
Although there are few smaller banks throughout the country, Australia is mostly centred
with the four reputed banks. The productivity commission estimated these banks to pass huge
costs, by setting high price in order to upgrade the net revenue instead of carrying the burden of
lowering the market share at every stage of the business cycle. Lack of competition in the major
banks creates dead weight loss (Hargovan 2018). This high concentration makes firms makes the
institutions to enact as a single firm with similar rate of interest.
The Royal Commission into Misconduct in the Banking, Superannuation and Financial
Services Industry is an Australian firm that is started by the government of Australia to inspect
and account for any dereliction in the banking operations (Lodhia 2015). The firm is commonly
known as Banking Royal Commission and Hayne Royal Commission. The royal commission
was formed on 14 December 2017, followed by the Royal Commissions Act of 1902 who was
engaged in looking after the matters regarding public concern.
Industry Background
The financial structure of Australia has undergone great deal of changes in the past two
decades due to policy changes. However, trade finance liquidity is a worldwide concern. Since,
the banking sector in Australia is clear and dependable, there occurs practicable and formative
separation from the system of America. Historically, Australian banks did not operate under the
confinement that bounded banks of United States operations during 1933 and the annulment of