How Australia's banking system was transformed from serving people to serving profits
Few policy decisions have had more profound effects on everyday Australians than the deregulation and privatization of our banking system. Once designed to serve the public, our banks now prioritize shareholder returns above all else, leading to record profits while community branches close and fees multiply.
I believe it's essential to understand how this transformation happened, which politicians were responsible, and the consequences we're still living with today. Most critically, these changes were not driven by either Labor or Liberal ideology alone, but by a bipartisan embrace of financial sector interests over public service.
This timeline tracks the evolution of Australia's banking system, highlighting key decisions that transformed publicly-owned institutions into today's profit-maximizing giants.
The Commonwealth Bank was established in 1911 with a clear mission articulated by the Labor government:
"Our chief aim is not to make profits, but to insure safety and security to depositors."
Today's reality shows how dramatically this mission has been abandoned:
This transformation reflects a fundamental shift in how our banking system operates, and the impact has been felt by every Australian.
The Hawke-Keating government dismantled Australia's regulated financial system, floating the dollar and allowing foreign bank entry.
Key Decision-Maker: Treasurer Paul Keating, supported by Treasury officials (many of whom later took executive positions in private banks)
Impact: Creation of a predominantly market-driven financial system with reduced government oversight
Alternative approach: Maintain prudent regulations while modernizing the financial system, as countries like Canada did successfully.
The Labor government sold the people's bank in three stages, completing the privatization that the Liberal Party had long advocated for.
Key Decision-Maker: Prime Minister Paul Keating, with minimal Cabinet or Caucus consultation
Impact: Elimination of the government-owned competitor that had set standards for the industry
Alternative approach: Maintain majority government ownership while allowing partial private investment, preserving the bank's public service mission.
Policy preventing mergers among the four major banks, but failing to address their growing market dominance.
Key Decision-Makers: Treasurer Paul Keating (1990), maintained by successive governments
Impact: Created an oligopoly where banks compete minimally while dominating 80% of the market
Alternative approach: Foster genuine competition through stronger regional banks and maintaining a public competitor.
Despite the Martin Committee's warnings in 1991, both major parties failed to implement strong consumer protections following deregulation.
Key Decision-Makers: Successive Labor and Coalition governments that repeatedly prioritized bank interests over consumers
Impact: Widespread exploitation of customers revealed in the 2017-19 Banking Royal Commission
Alternative approach: Implement robust consumer protection laws alongside deregulation, as the original parliamentary inquiry recommended.
"The Commonwealth Bank was sold for one reason, one reason only, to make money to put into the Budget."— Robert Ray, former Labor Minister
"Treasury had an agenda, always has and always will have."— David Morgan, senior Treasury official turned Westpac executive
"The first ninety percent of Cabinet know about a revenue decision is at 6:15pm at the briefing."— Robert Ray, former Labor Cabinet Minister, on how the Commonwealth Bank privatization was decided
"The banks taking such risks for market share. They didn't know how to risk-assess and nobody knew how incompetent they were."— Tony Cole, Treasury Secretary, on the aftermath of deregulation
This dramatic transformation wasn't an accident or an inevitable consequence of technology—it was the direct result of policy decisions that prioritized bank profitability over consumer interests and public service.
The conventional story about banking deregulation typically portrays it as either a necessary modernization (the Coalition view) or an unfortunately necessary compromise (the Labor view). The truth is more revealing—and more disturbing:
Banking deregulation stands as a perfect case study of how both major parties can be captured by the same interests, leaving ordinary Australians without genuine representation on crucial economic issues.
Your representative, should advocate for:
Most importantly, be a voice for ordinary Australians against the entrenched financial interests that have captured both major parties. The banking system should serve the public, not the other way around.