Australia Post to Fill Void Made By Bank Branch Closures

AusPost may be in a position to fulfil a number of services traditionally offered by banks.

A general view of an Australia Post outlet in Sydney, Australia, on Oct. 28, 2020. Ryan Pierse/Getty Images

Australia Post may be poised to replace retail banking services that are swiftly becoming scarce.

At a Senate inquiry on Dec. 1, Australia Post maintained its ambitions to fill the void left by the nation’s prominent commercial banks in providing retail services.

“Australia Post stands ready to provide these services, and we would welcome the opportunity to work with the banks to consider how we could do this in a financially sustainable way,” a spokesperson for Australia Post told the inquiry.

A submission to the inquiry from the LPO Group—an organisation representing post office licensees—has urged the government to expand the reach of Bank@Post, an Australia Post service that allows customers to conduct basic retail banking activities like depositing cash, withdrawing funds, and checking account balances.

“It (AusPost) is often cited where there is a bank closure that most services are still available online,” the submission said.

“Our experience in regional and rural areas is that it is a fanciful notion that everyone has access to the internet and can access online services.”

Thousands of Branch Closures Across Australia

According to the inquiry, over 2,100 Australian bank branches have closed across the nation since 2017, a 39 percent reduction in major cities.

Regional areas are experiencing a particularly stark drop-off. According to data from the Australian Prudential Regulation Authority (APRA), of the 420 branches closed across the country from the start of the year to the end of June, 122 were in remote towns.

Residents of rural areas are still heavily reliant on brick-and-mortar banking services, given that cash is more prevalent for use in everyday transactions.

Analysis conducted by AreaSearch—a location advisory service—of 3,197 bank branches nationwide found that the average branch services 8,200 customers per branch, while regional branches on average serve 4,600.

This is a significantly high figure once you account for the population disparities between Australia’s major metropolitan areas and regional towns.

Senators vs. Banks

Officials from Treasury and the Reserve Bank of Australia (RBA) came under intense questioning from senators Gerard Rennick, Matt Canavan, and Malcolm Roberts on the role of government departments in maintaining regional bank branches.

Mr. Rennick wanted to know why banks aren’t being forced to uphold essential services in spite of significant public funding.

“How is it that the taxpayer has to stump up this sort of money to the banks and yet there is no obligation imposed upon them by the government to meet their social license of providing essential services to all Australians?” Mr. Rennick asked.

“Many people would like to believe we live in a capitalist society whereby people risk their own capital. I note that the banks have had a very generous funding facility from the RBA/Treasury.”

Australia’s commercial banks are, in essence, publicly funded, mainly through open market operations. When the government wants to expand the money supply, it does so by selling government bonds to commercial banks, which are then purchased by the RBA with newly printed money.

When new money is injected into the banking system and thus the economy, it places upward pressure on prices, meaning everyday consumers essentially pick up the tab through inflation.

As part of a policy response to the COVID-19 pandemic, the Morrison Government established a term funding facility (TFF) in late 2020 to offer low-cost funding to commercial banks.

This allowed commercial banks to access cheap credit from the RBA to stimulate the economy during a period of economic downturn, although the efficacy of the scheme was negated by COVID-19 mandates that imposed restrictions on small business operations and consumer spending.

This allowed commercial banks to weather the negative economic effects spurred by the pandemic.

Since then, interest rates have risen considerably to suppress inflation, partly created by cheap credit offered during the pandemic. As a result, the profitability of Australia’s biggest commercial banks from lending is considerably high.

According to a report from PricewaterhouseCoopers (PwC) published a year after the beginning of rate hikes last year, the nation’s major banks delivered record cash earnings of $17.1 billion in the first half of 2023, and are currently on track to continue the trend at the end of the year.

Westpac has reported net profits of $7.2 billion for the 2022-23 financial year, a 26 percent jump from last year as a result of steep increases in interest rates over the past 18 months. The bank has also delivered a considerable increase in dividends paid to shareholders of 28 percent during the 2021-22 financial year.

In August, the Commonwealth Bank reported a record $10.6 billion in profits in the 2022-23 financial year, 6 percent higher than in the 2021-22 financial year amid steeply rising interest rates.