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Four Pillars means for the purpose of this submission to the Nick Xenophon Team:
the banks that the Four Pillars own or are merged with, that collectively account for around 80 per cent of the Australian Credit Card market. The Four Pillars enjoy unique oligopoly advantages/benefits not evident in any other Western banking economy. Prior to the 2008 GFC, the Four Pillars enjoyed a smaller market share and experienced greater competition. In 2008 - (i) Westpac merged with St. George Bank which owned Bank SA; (ii) CBA acquired Bankwest under "Project Magellan" for $2.1b after the collapse of Bankwest's parent company, HBOS, whereupon Bankwest became illiquid; and (iii) several foreign banks closed their Australian operations. In a normal mature market, businesses are 'price takers'. They have little power over what they charge, and rely on product differentiation and superior customer service. The only businesses that can fix prices are monopolies or oligopolies, where a few very large suppliers act in unison. The Four Pillars which control 80% circa of deposits and lending in Australia display the behaviour of oligopolies, particularly with regard to passing on reductions in the Overnight Cash Rate by being reluctant to reduce Credit Card Purchase and Cash Advance interest rates: * Oligopolists tend to adopt a similar price, for similar products. * If price is to be raised, the firms find it best to do so around the same time. * Oligopolists avoid price wars – the spread between the Overnight Cash Rate and Credit Card Purchase and Cash Advance interest rates has never been wider. * Sales competition, not price competition is their focus. |
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