ABA CEO Simon Birmingham. Introduction: How Banks Power the Australian Economy

Our piece of work that has been released today, Mandala providing the intellectual backdrop and analysis to support us in this, the essential infrastructure in relation to the Australian Banking industry, and what it means in the Australian economy, and critically, we want and encourage that we use this as a tool. Banks, our partners, our friends elsewhere, because it touches on the suite of things that the banking industry contributes to our country, touches critically in terms of the economic benefit and value given.

We’ve heard much about risk and resilience today, and the two do have to go together. How we manage risk to achieve resilience, and of course, a resilient financial services industry is a crucial part of our national resilience. But so too a strong economy and a well performing banking system that contributes to the creation of bigger businesses, of more jobs, of household wealth and prosperity, that is also essential to the resilience of our country, and what we can see is that in the analysis provided by Mandala, every time a bank invests $1 of their profits back into retained earnings to enable more capital to be released into the economy, $4.70 of extra economic activity is spawned across the Australian economy. That’s activity that is supporting those jobs, supporting taxes.

When you look at the top 50 companies across the corporate landscape as corporate taxpayers in Australia, it’s banks who stand out as overall paying the highest rates and making that fundamental contribution in terms of providing enough tax revenue into the way we look at the provision of teachers or provision of our Pharmaceutical Benefits Scheme, all of it potentially being funded just by bank-generated taxes that are paid. Critically, the point I made earlier, when we think about who owns banks and their benefits from banks, attached relationship between shareholders and households, they’re not strangers, actually shareholders and households are siblings. They are one in the same. They are interconnected, and that has only grown over a period of time. That actually more Australians have more equity in Australia’s banks today than they did 10 or 15 years ago. That growth of ownership, thanks to the growth in our superannuation pool and in retirement savings overall and direct investments, means that households hold close to two thirds of the equity in Australia’s banks and achieve the greatest benefit, then, in relation to the returns and dividends that flow through, and the underpinning of their potential future retirement savings.

So, these are critical messages, but equally critical in this analysis is the demonstration of responsibility of making sure that hardship services are delivered, and the scale of those hardship services, of response in times of emergency and the delivery of those emergency responses. We have much to be proud of as an industry, much to continue to focus on to get right, and to make sure that the regulatory settings that we must comply with, we exceed and excel in doing so to get that right, but also to get the growth matrix right, so that as an industry we can continue to create even more of those returns, more tax paid, more economic return and dividends, more jobs underpinned, because it shows that much we do, we are an essential piece of the infrastructure to be able to keep doing that in the future.

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