A Report On The Australian Banking Industry

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The Australian banking industry resembles an oligopoly with a few players playing a key part. This is evident from the share of top 5 banks in total housing loans standing at almost 73%, and it has risen over time from 60%. This shows that loans are more concentrated with top 5 banks now.
The global financial crisis has led to a more concentrated market with lesser competition , lesser number of banks with housing loans and a consequent increase in share of total housing loans with the top 5 banks mentioned in the article.
Experts point out that, ‘The pricing power of the four major banks reflects the strength of their brands and their dominant market positions. The big banks charge more for loans and less for deposits than smaller banks, hence their average interest margin is 2.2 per cent, compared with the 1.8 per cent margin of the regional banks.’
More evidence comes from a PWC report that states that’ concentration levels have increased since the onset of GFC’. The rise in HHI is proof of rising oligopolistic tendencies in this sector after 2008. b. A cartel is an example of collusive oligopoly- OPEC is a real life example. collusion will imply that all firms operate as a monopoly, leading to a price of Po and quantity Qo as shown. This is found where MR= MC. Firms make abnormal profits that are sustainable in long run.
As compared to perfect competition Qc > Qo and price is lower at Pc.

Competition reduces the deadweight loss or loss of economic
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