Författare: John Quiggin Professor School of Economics The University of

Two years after the deal was first announced, Treasurer Jim Chalmers has today given the green light for ANZ to acquire the banking arm of Queensland-based insurer Suncorp.

The A$4.9 billion deal will be the biggest in Australian banking since Westpac’s acquisition of St George in 2008.

It will of course be subject to some important enforceable conditions.

Among them, the combined entity must ensure there will be no net job losses across Australia and no regional branch closures for three years.

ANZ must also “make every effort” to join Australia Post’s banking service “Bank@Post”, which offers cash withdrawals, deposits and balance inquiries at a range of post offices.

It will also be required to make lending commitments worth billions of dollars for a range of energy and infrastructure projects as well as business and housing more generally across Queensland.

But three years isn’t a long time in the grand scheme of things, and this deal will inevitably lead to a reduction in competition in the banking sector.

With Australia’s high industry concentration already in the public spotlight, does this decision reflect an inconsistent approach by the government?

Mixed messages from the government

The ongoing cost-of-living crisis has put Australia’s industry concentration levels firmly in the public eye. Many industries – such as airlines, supermarkets and petrol retailers – have become dominated by a few large players, to the growing unease of the Australian public.

Read more:
Flying under the radar: Australia’s silent and growing competition crisis

The policy response has been inconsistent.

On the one hand, the government has just waved through this merger, despite the Australian Competition and Consumer Commission (ACCC) denying its authorisation last year on competition concerns.

But at the same time, they’ve been waving the big stick at Australia’s supermarket oligopoly, just this week committing to impose huge new fines for mistreatment of suppliers.

The government will impose a mandatory code of conduct on supermarkets in response to concerns about treatment of suppliers.
Joel Carrett/AAP

Pressure from the general public could be contributing to the mixed messages we seem to be receiving. All of this may reflect a breakdown of consensus on competition policy occurring in Australia and around the world.

It’s important to understand how thinking about competition has changed over the years.

For much of the 20th century, particularly in the United States, there was a very strong view that any reduction in competition was inherently undesirable, the so-called “trust-busting” movement, which began with the Sherman Antitrust Act of 1890.

But this was challenged by the “Chicago Revolution”, which emerged from the University of Chicago in the 1970s. This saw a range of influential scholars argue there wasn’t much to worry about – that mergers promoted efficiency in various ways, and it was too hard to establish monopoly power without a government doing so for you.

The general result was a much more permissive attitude to mergers than there had been in the past.

Chicago thought remains influential in our approach to mergers today, but there has been a strong counter-reaction, particularly in the wake of the global financial crisis which undercut belief in the virtues of deregulated markets.

In an opinion piece published soon after Labor took office, Assistant Minister for Competition Andrew Leigh invoked the Sherman Act as a model for dealing with increasingly concentrated markets.

Yet the legislation underpinning our process remains influenced by the Chicago school of thought.

If the ACCC doesn’t like a merger, it can be appealed to the Australian Competition Tribunal. If the tribunal finds there isn’t a huge reduction in competition and there may be some efficiencies, it is likely to wave it through.

Decisions by the ACCC can be appealed to the Australian Competition Tribunal.
T. Schneider/Shutterstock

However, governments are much more likely to intervene when market power becomes politically sensitive.

Banks have managed to keep out of the spotlight somewhat since the fallout from the banking royal commission, so the ANZ-Suncorp merger may attract relatively little attention.

In contrast, the two big supermarkets are currently “on the nose” politically and seen to clearly dominate their industry. This is most likely what has emboldened the government to lean on them more directly.

Is post office banking an effective answer to branch closures?

One of the most interesting things about this announcement is the requirement for ANZ to seek to join Australia Post’s banking service.

All of Australia’s banks are facing broader structural pressures to close regional branches. The big shift in how banking is done – more online services and reduced use of cash, leading to fewer physical branches – is only likely to continue.

According to the Australian Prudential Regulatory Authority, almost 800 branch services have closed in regional areas between June 2017 and June 2023.

Thousands of Australia Post branches offer ‘Bank@Post’ services, which can include withdrawals, deposits and balance enquiries.
ChameleonsEye/Shutterstock

Using Australia Post as a service location for the major banks has emerged as the key public policy response to branch closures. Australia Post, which has a community service obligation, is being used to pick up the pieces where the banks left off.

The alternative recently proposed by a Senate committee – using the post office as the basis of a new public bank – has not attracted much political support.

We’re unlikely to see reform anytime soon

More broadly across the Australian public, the view that there isn’t enough business competition and that the big players don’t have don’t have our interests at heart seems widely held.

But this largely isn’t reflected in any new legislation. As on many other issues, the Albanese government has established a review, but it is unlikely to report within the term of the current parliament.

For the moment, the mixed messages are only likely to continue. Läs mer…

Opposition Leader Peter Dutton’s plan to build seven nuclear power plants in Australia has attracted plenty of critical attention. But there’s a striking feature which has received relatively little discussion or criticism: the nuclear plants would be publicly owned and operated, similar to the National Broadband Network (NBN).

On the contrary, it received enthusiastic endorsement from free-market advocates such as The Australian’s Judith Sloan, who observed: “It’s how the French nuclear plants were first constructed.” It is also the way Australia built its biggest single piece of energy infrastructure, the Snowy Mountains Scheme.

But there’s a fundamental problem here. Over the last three or four decades the federal public service has been hollowed out in the name of “new public management”. This became very clear during the COVID pandemic, when state governments – who have preserved their ability to act far better – ran most of the response. There is a very real question over whether we have the governmental capacity to achieve net zero.

The Snowy scheme took concerted effort from federal and state governments over decades.
Lasse Jesper Pedersen/Shutterstock

From NBN to National Nuclear Network?

Dutton’s acknowledgement of the publicly owned NBN as a model worth using is a welcome advance on the view of Malcolm Turnbull, one of his predecessors as Liberal leader.

A decade ago, then-prime minister Turnbull embarked on a disastrous “mixed mode” redesign of the NBN. This reflected his belief – expressed publicly after leaving office – that a publicly owned broadband network should never have existed.

Labor is in no position to oppose Dutton’s calls for public ownership. State Labor governments in Victoria and New South Wales have re-established publicly owned electricity enterprises, while South Australia’s Labor government has floated the same idea.

Whatever technological choices we make, it is clear our days of relying on the private sector to provide vital infrastructure are coming to an end. The question now is whether the public sector can recover to take the lead.

The National Energy Market, for instance, was meant to promote competition and drive electricity prices down. It has failed to do so, resulting in a string of government interventions, some more successful than others.

Arguably the biggest failed intervention was the now-defunct Energy Security Board, a politically driven response to South Australia’s statewide blackout in 2016.

The board sought to patch up the National Energy Market with a capacity market, which was immediately dubbed “CoalKeeper” due to incentives for old coal plants to keep going, as well as new grid access charges, promptly dubbed “Solar Stopper” due to discouraging new investment in solar. Energy experts did not favour this approach.

What proved more successful as a response to South Australia’s big blackout was the decision by the state government to fund the Horndale big battery, which was, when built in 2017, the world’s largest utility-scale battery storage.

The publicly-owned NBN became a political football.
STRINGER Image/Shutterstock

Should new power be private or publicly owned?

Both major parties are flagging more intervention. The federal government has stopped waiting for markets to provide clean energy in favour of seeking tenders for new renewables through a capacity investment scheme. The scheme received 40 gigawatts worth of bids from renewable developers, far beyond the goal of 6GW.

This shift has come in response to developments bogging down, hampered by inadequate regulation and local opposition driven by a combination of genuine concerns about environmental impacts and culture-war driven science denialism.

Labor’s current renewables-led strategy requires 10,000 kilometres of new publicly built transmission lines, to meet our net zero goals. We’d need even more transmission if we are to become a major exporter of clean energy, either as electricity or in products such as green hydrogen and ammonia.

On the Coalition side, no private firm is likely to accept the risks involved in creating a nuclear power industry from scratch. Government would have to lead.

As Nationals leader David Littleproud has now acknowledged in relation to finding sites for nuclear plants, the national need for clean energy is too important to allow “not in my backyard” opponents – some with only a tenuous connection to the area in question – to slow or stop government plans.

If government is to lead, it must have the capacity

What Dutton’s nuclear gambit shows us is that, surprisingly, Australia’s two major political parties are in strong alignment on the need to rebuild state capacity.

Whether it’s Labor working to get transmission lines and offshore wind up and running or the Coalition working to create a nuclear industry from scratch, it will take a strong government with the capacity to articulate a plan, and the legal, financial and human resources to make it a reality.

All of these requirements were met when we constructed the Snowy Mountains Scheme, a decades-long federal government initiative undertaken in cooperation with Victoria and NSW.

Are they still in place? Not yet. Government capacity to act has been eroded over decades of neoliberalism. Particularly at the national level, public service expertise has been hollowed out and replaced by reliance on private consulting firms.

To rebuild the federal government’s capacity to act will require recreating the public service as a career which attracts the best and brightest graduates – many of whom currently end up in the financial sector.

The private sector still plays a central role in the construction of infrastructure, as was the case with the Snowy Scheme. But it’s up to governments to take the lead in finance and planning.

This poses particular challenges for the Liberal Party, which has long favoured the interests of businesses small and large, and has been historically opposed to public ownership. But from the late 1990s until relatively recently, Labor was also keen on privatisation.

The French Prime Minister Georges Clemenceau once observed that “war is too important to be left to generals”. As we are discovering to our cost, infrastructure investment is similarly too important to be left to private investors. Läs mer…

In 1971 on a family holiday, my father drove us to look at a huge concrete slab at Jervis Bay, on the South Coast of New South Wales. Still visible today, it was the foundation for what would have been Australia’s first nuclear power plant. The project had just been cancelled by then-prime minister Billy McMahon who had recently replaced John Gorton. A Treasury analysis showed coal-fired power was much cheaper.

That long-ago episode is still relevant to Australia’s policy choices. Today, Opposition leader Peter Dutton revealed seven sites across Australia where the Coalition, if elected, would build nuclear power stations. Unsurprisingly, the plan has already run into opposition from state politicians, both Labor and the LNP.

The announcement answers a few basic questions about the Coalition’s nuclear plans. For example, Dutton said the plants would be Commonwealth-owned, and built at the site of decommissioned coal plants. But central issues remain unaddressed. Exactly what kind of reactors will be built? Who will build them? And how much they will cost?

As the Jervis Bay experience shows, nuclear energy can be a hard sell in Australia. Times have obviously changed since the 1970s, but significant political and economic barriers remain – and the problem of cost is still unsolved.

What the Coalition has revealed

The seven sites for nuclear power plants mooted by the Coalition are:

Tarong and Callide in Queensland
Liddell and Mount Piper in NSW
Port Augusta in South Australia
Loy Yang in Victoria
Muja in Western Australia.

At a press conference in Sydney, Dutton said:

We know the government has [a] renewables only policy which is not fit for purpose. No other country in the world can keep the lights on 24/7 with the renewables only policy.

We want to utilise existing assets that we have got […] new poles and wires that are used at the moment on the coal-fired power station sites can be utilised to distribute the energy generated from the latest generation nuclear reactors.

Under the Coalition plan, the federal government would own and pay for the plants. In this respect, Dutton is following the precedent set by the Snowy Scheme – and more recently, by the National Broadband Network.

This is a welcome acknowledgement of the reality that, whatever technology we adopt, private investment is likely insufficient to manage the transition away from coal and gas in the electricity sector – let alone the massive electrification in other sectors needed to meet Australia’s 2050 emissions targets.

Dutton says he remains committed to the 2050 target for now, despite flagging the Coalition will abandon Australia’s 2030 emissions goal.

The Coalition says it will develop two “establishment projects” using either small modular reactors or larger plants. It claims the small reactors will start producing electricity by 2035, and the larger plants by 2037.

These timeframes are at odds with analysis by the CSIRO, which recently found reactors could not be operational in Australia until 2040 at the earliest.

The same report found construction of a large-scale nuclear power facility would cost at least A$8.6 billion, and possibly up to $17 billion. It said the electricity produced would be about 50% more costly than renewable energy.

On Wednesday, Dutton refused to provide a price tag for the Coalition policy. But he claimed it would be a “fraction” of Labor’s renewable energy policy.

Dutton claims the Coalition’s nuclear plan will cost far less than Labor’s renewable energy policy.
Mick Tsikas/AAP

Lessons from Jervis Bay

Dutton this week ruled out Jervis Bay as a nuclear reactor location, should the Coalition win the next federal election. But the 1970s experience still holds valuable lessons.

The Jervis Bay territory was ruled directly by the federal government – circumventing any potential state opposition. The Coalition faces a different battle with regards to its proposed sites.

Queensland LNP Leader David Crisafulli on Wednesday said he did not support Dutton’s plan for a nuclear power station in Central Queensland, and has previously ruled out lifting a state ban on nuclear power if elected in October.

NSW Labor Premier Chris Minns says building a nuclear reactor in the Hunter Valley is impossible under existing laws, and would disrupt the renewable energy transition.

Dutton pledged to work with state premiers to resolve such issues, and suggested financial incentives would be offered.

Queensland LNP leader David Crisafulli says he would not lift a ban on nuclear in that state, if elected.
Darren England/AAP

It’s unclear whether existing coal plant owners, including state-owned generators, will be willing to sell the sites to the federal government. However, Dutton said on Wednesday that, according to legal advice, the government could compulsorily acquire the sites if needed.

When Jervis Bay was on the table as a nuclear site, there was no question the federal government would build, own and operate it. The idea that something as crucial as a nuclear power plant might be entrusted to a state government, let alone a foreign corporation, was never entertained.

The national government was at the postwar height of its power and confidence. It employed the best and brightest, and was expanding the scope and scale of its activity. The Snowy Mountains Scheme, a massive engineering endeavour built under the Commonwealth’s defence power, was nearing completion.

Dutton says the government will own the proposed nuclear plants, but form partnerships with nuclear companies to build and operate them. But which companies?

Internationally, about 60 nuclear plants are under construction, mostly in Asia. The vast majority are Chinese and Russian designs, built by Chinese and Russian firms. Presumably, for national security reasons, that is not an option for Australia.

The only real contenders for large modern projects in Australia are South Korea’s KEPCO, and Electricity de France (EDF).

KEPCO built four plants at Barakah, in the United Arab Emirates, between 2009 and 2024. But no new orders for KEPCO plants outside South Korea have been announced since 2009.

EDF is building a reactor at Flamanville in France and two at Hinkley Point in the United Kingdom. The projects have suffered massive delays and cost overruns. The UK government is also struggling to organise finance for an additional EDF reactor proposed at the existing Sizewell plant.

Like the Snowy Hydro scheme, the Coalition says its nuclear plants would be Commonwealth-owned.
Alex Ellinghausen via AAP

And what about the so-called small modular reactors suggested by Dutton? This term is applied to two types of technology.

First, there are reactors of less than 100 megawatt capacity, which would be built in a factory and shipped to the required site where they would be installed as individual modules.

The most promising contender was the NuScale Voygr design, however its pilot project has been abandoned. Similarly, Rolls Royce has spiked its plans for a factory in Wales that would have progressed technology used in small modular reactors.

The term is also applied to cut-down versions of existing large-scale designs: reactors of 300 to 500 megawatt capacity compared to the traditional 1,000 to 1,500 megawatts. These are “modular” only in the sense that most parts are built in factories and assembled onsite.

The government of Ontario in Canada has announced plans for four such reactors to be built by GE-Hitachi, but no final commitment has been made.

Meanwhile, the climate crisis continues

As the next federal election rolls closer, Dutton will come under pressure to reveal crucial details underpinning the Coalition’s nuclear plan – most importantly, how much it will cost.

Nothing announced by Dutton today changes the fact that nuclear energy is, according to reams of expert analysis, economically unfeasible in Australia. This is as true today as it was in the 1970s.

Meanwhile, the climate crisis continues to worsen. Solar panels, wind turbines and energy storage must be rolled out as rapidly as possible – and we must not allow Dutton’s policy detour to distract from the task. Läs mer…