Government "keen" to increase competition between banks

The federal government has pledged to increase competition among financial institutions in the banking sector in a move that could benefit consumers, it has been reported.

Newspaper the Age says the prime minister, Kevin Rudd, believes increasing competition between Australia's lenders will help to mitigate the effects of the credit crunch and help to drive economic growth during the current global downturn.

It is also part of the government's aim of establishing Australia as a "major financial hub" for the Asia-Pacific region in order to attract investment and financial services firms.

Prime Minister Rudd and the treasurer, Wayne Swan, discussed ways of increasing competition at a meeting earlier this week, the newspaper said.

It added they also examined ways the country's financial services sector could help hard-pressed consumers in the face of the ongoing global downturn.

According to the publication, the ongoing lack of liquidity in credit markets has seen many commercial lenders increase their rates for products such as personal loans and home loans above the 7.25 per cent base rate set by the Reserve Bank.

Mr Swan acknowledged that current conditions have put pressure on the banks themselves - but he encouraged institutions to provide relief to borrowers wherever possible, adding that it makes good commercial sense as customers are more likely to stick with a bank that helped them during difficult times.

Mr Rudd and Mr Swan's meeting comes ahead of a summit with representatives of the country's financial services sector on July 31st, where they will look at ways of developing Australia as a financial services hub.

The strategy is supported by the Australian Bankers' Association, which says building up the country as a centre for investment and trade would help Australians benefit from Asia-Pacific's "fast growing" economies.

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