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1 INTRODUCTION

The Campbell report (1981) recommended deregulating the Australian financial services industry. The Governor of the Reserve Bank of Australia, Mr. R.A. Johnstone claimed in May 1985 “We now have a virtually fully deregulated financial system.” (Harper, Ian R. 1996)
The Oxford dictionary defines Great as “Very Satisfactory”, and Success as “Obtainment of objective”.
This essay will present evidence and economic theory, to demonstrate deregulation did not “obtain its objectives very satisfactorily”.

2 PROVIDING GREATER COMPETITION IN THE AUSTRALIAN BANKING AND FINANCE SECTOR.

Deregulation did not decrease the market share of the big four. National Australia Bank, Commonwealth Bank, ANZ Bank and WestPac and their subsidiaries now “control over 50% of the financial service market” (Bora & Lewis 1997).
Deregulation allowed banks to merge and acquire smaller Non Banking Financial Institutions. “Banks have expanded at the expense of NBFI’s, in particular building societies, merchant banks and finance companies.” (Bora & Lewis 1997).
An Oligopoly has resulted, in which tacit collusion occurs where “firms set the same price as an established market leader” (Sloman & Sutcliffe 1998) rather than compete. A member of the (1997) Wallis committee stated “The financial system is a bit anti competitive” (Coopers & Lybrand 1997). Profits soared after deregulation, “The banks are earning above industry standards” (Burton, Tom. 1997), this shows deregulation has maximised profit not competition.

3 INCREASE THE EFFICIENCY OF THE AUSTRALIAN BANKING AND FINANCIAL SECTOR THROUGH DEREGULATION.

The RBA stated “The primary arbiter of efficiency is competition” (Harper, Ian R 1996). As demonstrated, deregulation failed to provide real competition and therefore lower prices for consumers. “Fifteen years after deregulation, Australia’s $40 billion finance sector is...