It's hard to escape the thought that the Productivity Commission's report into competition in the financial services sector is a list of things we all know – but do nothing about.
We all know that the big banks rule the market.
We all know how hard is to switch home loans or even banks; one in two of us have never done the latter, according to the report.
We all know how hard it is to compare home loans. We've all been stuck in the forest of mainly-similar-but-really-slightly-different products that all the banks have, so those comparisons are harder to make than they should be.
We all know you get a better deal when you shop around, and the discounts for new customers are never extended to existing ones.
We all now mortgage brokers will be profiting from our loans years after they've sold them.
We all know the banks' profitability is better than many other Australian industries. And we all know that those profits never seem to go backwards – because we all know the banks just whack their rates up when their costs go up.
We've all seen new competitors come in, have a go, and then retreat, after being unable to pierce the power of the big banks.
And yet we all seem to just accept these things.
We accept that we're probably not getting the best deal. We accept our financial products are costing us more than they should. We accept it's the way things are done here.
But far from simply reinforcing our knowledge, the Productivity Commission does us a service simply by putting hard data to these things which we know to be true.
And it should force all us – consumers, the banks, regulators and politicians – to ask whether we are prepared to accept the status quo of limited competition in arguably the most important section of the economy.
The Productivity Commission's report makes a series of specific recommendations to tackle competition in the short to medium term, the most important of which is perhaps the banning of trailing commissions on mortgages, but the retention of upfront commission so as to buttress the viability of the sector. No doubt every idea will be fought by the sector.
But behind these ideas lies an important question about whether we have placed too much importance on the stability of the financial services sector, and not enough on competition.
The report finds that "since the global financial crisis there has been a focus on requiring prudentially regulated institutions to be unquestionably strong".
This has been consistently reinforced by the Australian Prudential Regulatory Authority, and through work such as David Murray's financial systems inquiry. It is also inherently supported by the Four Pillars policy, with the Productivity Commission attacks.
But this focus has brought with it costs – and not just the $66 to $87 month on that a good chunk of overly loyal home loan borrowers pay each month by not switching out of their expensive loans.
Our big banks have been exposed by the royal commission as having committed a range of misconduct against customers. They've been allowed to get away with creating a "blizzard" of products and buying up the very mortgage broking businesses that once threatened to disrupt them.
Would any of these sins have been prevented with a more competitive market? Who knows, but it's hard to disagree with the Productivity Commission's view that "competition can support stability, checking irresponsible behaviour of providers and improving outcomes for consumers, and must be allowed to flourish".
The Productivity Commission's push for the Australian Competition and Consumer Commission to become the consumer's champion is financial services sector is sensible. As is the idea that all regulatory interventions be considered through the lens of competition.
But the deeper question, to use the commission's words, is how "to ensure that the essential role of competition in economic growth is not eroded by having stability as the default regulatory position, to the exclusion of competition".
Of course, don't hold your breath for this to be tackled.
We all know what we get in this sector.This article was first published by https://www.afr.com/