Australian banks top global list as Labor persists in demands for a royal commission

AUSTRALIAN banks — which this week withheld interest rate relief from borrowers — are officially the most profitable in the world.

AUSTRALIAN banks, which this week withheld interest rate relief from borrowers, are the most profitable in the world.

An analysis by The Australia Institute was revealed today as Labor likened Malcolm Turnbull to an ambulance waiting for disasters rather than preventing them as it mocked his “wet lettuce” swipes at banking chiefs.

Labor wants a royal commission into the finance sector, the Prime Minister has responded by promising to summon banking executives to Canberra once a year for questioning in a committee.

“Australian banks enjoyed a privileged place in Australia’s economy,” The Australia Institute executive director Ben Oquist told news.com.au.

“Their profits equate to a staggering 2.9 per cent of GDP, making Australian banks effectively the most profitable in the world.”

Bank profits as a share of national gross domestic profit. Source: The Australia Institute

That means 2.9 per cent of every $100 earned in Australia ends up as bank pre-tax profit, compared to the US and UK at $1.2 and 90 cents per cent respectively.

China is the highest after Australia at $2.80, Sweden $2.60 and Canada $2.30.

The Australia Institute also pointed to public money being used to secure the banking sector.

“Excessive profits provide a drag on the economy and hurt consumers who pay higher margins on bank products. The Reserve Bank found the big four banks enjoy an implicit government subsidy worth up to $4 billion dollars a year,” said Mr Oquist.

“These super high profits combined with this taxpayer subsidy means extra scrutiny and potential additional regulation on the banks is not only warranted but required.”

The Prime Minister has respond to outrage after banks declined to pass on to borrowers the full cut in official interest rates announced on Tuesday.

Banks have rejected a full inquiry as unnecessary, damaging to faith in the sector, and potentially spooking investors.

But Mr Turnbull said the banking bosses would be called before a parliamentary committee once a year to explain their policies.

Opposition Leader Bill Shorten said this would not be enough and said, “The banks have pocketed $1 billion and laughed at Mr Turnbull.”

Mr Shorten said the annual appearance of executives from the Big Four — Commonwealth, Westpac, ANZ, NAB — confirmed Mr Turnbull realised an inquiry beyond the policing of the Australian Securities and Investments Commission was needed.

“We do believe there is a problem, a widespread culture where it seems to be profit at all points and not enough consideration for the community at large,” he told reporters.

“You either wait, like the ambulance at the bottom of the cliff every time there is a disaster … and every time there is a disaster we say that won’t happen again and the next time there is a problem we express surprise.”