The Australian government has begun implementing a series of reforms in its banking and financial system which could lead to the establishment of six foreign banks here.
Such a move would be contrary to the official policy of the governing Labor Party, but Prime Minister Bob Hawke and federal treasurer Paul Keating are pushing hard to have foreign banks allowed in. The Labor government has so far proved itself to be far more market-oriented than the previous Liberal government, despite a platform which appears to favor government regulation and control of financial and other enterprises.
The latest decision of the government lifts restrictions on the present trading banks in Australia. Controls prohibiting trading banks from offering interest on deposits over $50,000 for less than 14 days and deposits under $50, 000 for less than 30 days are to be removed Aug. 1.
This means the trading (commercial) banks will be able to offer interest on checking accounts, as well as more attractive terms for fixed deposits. Savings banks are also to be allowed to offer checking accounts to their customers.
The government is also granting more foreign exchange licenses, in the wake of its decision last year to allow the Australian currency to float freely. The government's decisions are in line with a report it commissioned last year on how to implement a freer banking system. A key recommendation was that the government should allow more banks to operate in Australia, including up to six in which foreign banks could own a half interest.
At present, there are just four major banking groups operating throughout Australia, including the government-owned Commonwealth Bank. The Labor Party has traditionally been antagonistic toward the banks, and 35 years ago a previous Labor government tried to nationalize them. However the Australian constitution prevented the government from taking over the banks, and the private banks later provided a substantial amount of money to help the Labor Party's opponents in the next election campaign when the Labor government was defeated.
Some of the banks have continued to support Labor's opponents, and the prime minister, in arguing for the admission of foreign banks to Australia, says that the Labor Party has no political reason for trying to protect the domestic privately owned banks.
Recently the government has approved legislation to boost the capital of the government's bank and improve its competitiveness, to persuade its supporters that the Commonwealth Bank would not suffer from the entry of foreign banks.
At a recent press conference, Treasurer Keating said that the decisions to lift controls in the banking system emphasized the need to allow foreign banks into Australia.
He pointed out that there had been mergers among the biggest Australian banks in recent years. ''Considering the enhanced climate in which they will be operating after the removal of controls there is a case for more players in the banking system,'' he said.
''That's why I've said there should be more banking licenses issued.''
He tried to defuse fears of foreign bank entry by pointing out that the foreign banks already operated in Australia as merchant banks, or in providing other financial services to selected customers. The argument was over whether these banks should have full domestic banking licenses.
He said, ''They are here doing the cream of business - what we want them to do is the domestic business where they can help to provide funds to small business, farmers and individuals.
''In my view, the most effective competition available involves the entry of foreign banks to the domestic market.''
However, Mr. Keating would not commit the government to deciding on the entry of foreign banks before the Labor Party holds its national conference in July.
At present the Labor Party's platform appears to rule out the admission of foreign banks into Australia, and this line is being strongly supported by the left wing of the Labor Party.
Prime minister Hawke has been holding talks with the left wing to head off any public brawl over the issue and to have it resolved at the conference, where Hawke and Keating expect to be able to persuade the party to accept a change to its platform.