This paper analyses the market structure of the banking industry in the Australia with the help of few example of the banks that are working in Australian market to provide financial supports to industry.

Market Structure in Australia

The most of the market structure in Australia is based on the oligopoly system to perform existing business activities. According to Wellmann (2004), the main concept behind an oligopolistic market (also known as an oligopoly) is that a small number of enterprises dominate a large number of others in a specific market or sector by providing comparable products and services. There is little competition in an oligopolistic market since there are just a few companies, which allows each business to function profitably. 

Market Structure Adopted by Banking Industry in Australia

The oligopoly market structure that now exists in Australia is associated with the majority of service industries, including retail and banking, to mention a few examples. The retail sector, on the other hand, operates under a duopoly system, which is a scaled-down counterpart of the oligopoly market structure. In an oligopoly market, a small number of enterprises are controlled by a single person or group (Wellmann, 2004). In contrast, in a monopoly, a single person is in charge of running a firm or a market. When it comes to any business, a monopolistic system encounters fierce rivalry, and it creates a significant barrier to entry for any other company. According to studies, the Australian banking sector is engaged in an oligopolistic struggle, which has resulted in the restriction of any new entrants. As a result of this feature of the market, the banking industry in Australia does not see the entry of the new banking organization.

Monopoly Market Structure

The Australian banking sector is critical to the functioning of the country’s economic and financial system. Aside from standard banking services, banks also offer funds management, business banking, stockbroking, trading in financial markets, insurance, and amongst other activities. The government owns 14 of the 53 banks in Australia (CFI Education Inc., 2021), which makes about a quarter of the total. The Australian banking system is composed of four massive banks: the ANZ Bank, the Commonwealth Bank of Australia, Westpac and the NAB Bank. These banks follow an oligopolistic approach, and they are constantly attempting to maximise their profits by imposing their policies on customers without taking any kind of fear. The majority of the time, it has been seen that oligopolist enterprises generate exceptional profits. With the passage of time, the level of competitiveness in the banking business has increased because each organization targets same customer base in the market for running their daily business activities (fitchratings, 2021). in this regard, all of the banks have formed a cluster in the market to work together to make a profit, which is then divided among them. With the help of such cluster, the working of the banks cannot be judge separately and they make every policy related to the customers with the help of their collective decisions. As a result of this, banks do not face pressure from the customers that they have no other choice rather than these banks to save their money or get other types of the banking services. However, in the fiscal year 2020-2021, the four banks collected AUD38.9 billion in revenue from assets, mutual funds, and other sources (fitchratings, 2021).

According to the evidence, this monopolistic market structure in the banking sector eventually promotes the growth factor of the business as a whole, as well as the growth factor of the nation.

Setting up a banking company requires a significant level of capital investment, which makes it difficult to get into. People put their money into one of Australia’s four biggest banks, which control the lion’s share of the market in which investors put their money.

The Australian Post has been taken over by the government, which is acting in the capacity of the monopolist. The Australian Post service is so quick and effective that it prevents any other newcomer from gaining a foothold in the market (Remeikis, 2021). The Australian Postal Service is a textbook example of a monopoly. The monopolist has complete control over the pricing of the product and has the authority to bring about any changes within the industry. The duration of any monopolistic enterprise, on the other hand, can be predicted.

The postal sector in Australia has been granted authorization to distribute letter posts by the Australian government under the Postal Industry Regulation Act 1989 (the Act). In this case, the government has obtained all of the required authorization to adopt legislation, and it has also been successful in pulling things together effectively by making the postal business more convenient. The government is functioning in the capacity of a monopolist in that it is in control of the costs of the services offered (Australia Government, 2021). With the rise in the cost of mailing a letter increasing by 43 percent, it is becoming more impossible for many individuals to utilise this method of communication.

Present Scenario in Banking Industry in regard to Performance

As per a report presented by few analysts Sanglap and Ahmad (2021), it was predicted that major Australian banks would have a rougher year in 2021 due to reduced operational efficiencies, record low interest rates, high compliance costs, nonbank competition and increased loan loss provisions. According to this report, ABN Amro, CBA, NAB, and Westpac have sold or are selling their wealth management and insurance operations after the Royal Commission disclosed their wrongdoing and consumer rights breaches in February 2019. It means the major player who govern the banking Industry of Australia are engaged in wrongful activities to stop the entry of new financial institution. Because their income now comes from business and mortgage lending in Australia and New Zealand, they no longer have the risk diversification and fee growth advantages they had before to 2019 (Sanglap and Ahmad, 2021). Analysts say regaining profits momentum may take longer while COVID-19 rages on.

Conclusion

Economic competition has resulted in the creation of both positive and negative outcomes. However, in the banking business, the four major banks in Australia have seized control of the nation, and as a consequence, no other banks exist. This is a beneficial development since no fraudulence charges have been made against these banks, indicating that they are reliable. The options available to Australians in this area are restricted, yet they have the security of not losing any money in the process. However, in order to thrive in an oligopoly environment, the retail business must overcome several obstacles.

Despite the fact that the Australian post service is impeccable and provides a good service to the people of Australia, it is a monopoly market structured body that does not have control over its price. Instead, the higher authority manages it, and sometimes they increase the price to an extent that causes people to use the service to face significant difficulties. Citizens of Australia are obligated to utilise the service since they do not have a sufficient number of alternatives. Assignments on Monopoly Market Structure are being created by our marketing specialists from top colleges, allowing us to supply you with the most dependable and finest assignment help service available anywhere.

References

Australia Government. (2021). Competition in the Australian Financial System. Retrieved from https://www.pc.gov.au/inquiries/completed/financial-system

CFI Education Inc. (2021). Overview of Australian Banks.Retrieved from https://corporatefinanceinstitute.com/resources/careers/companies/top-australian-banks/

fitchratings (2021). Australian Bank Earnings Recovery to Extend to 2022, Despite Headwinds. Retrieved from https://www.fitchratings.com/research/banks/australian-bank-earnings-recovery-to-extend-to-2022-despite-headwinds-10-11-2021

Remeikis, A. (2021). Christine Holgate reveals parts of secret review backing more Australia Post privatization. Retrieved from https://www.theguardian.com/business/2021/apr/14/christine-holgate-reveals-parts-of-secret-review-backing-more-australia-post-privatisation

Sanglap, R. and Ahmad, R. (2021). Major Australian banks face tougher 2021 as sharper focus cuts growth avenues.Retrieved from https://www.spglobal.com/marketintelligence/en/news-insights/latest-news-headlines/major-australian-banks-face-tougher-2021-as-sharper-focus-cuts-growth-avenues-62009410

Wellmann, A. (2004). Oligopolies. A Definition of Oligopolistic Markets. GRIN Verlag