Our big banks look set to be slugged $153 million a year by the Albanese Government to keep the branches of their regional rivals open in the bush. This would provide a lifeline to the 896 bank branches still operating in rural areas.

This new idea replaces the Labor Government’s pre-election offering to bump up the funding for Australian Post to fill the hole left by big banks closing branches in smaller country towns. This was to coincide with big banks being forced to stop closures of bush branches until mid-2027.

“The model would provide a $300,000 subsidy to every regional or remote bank branch,” explained the AFR’s Tim Eyres. “This would be funded by contributions from banks based on the size of their lending.”

The $300,000 figure is seen as a third of the cost of running a regional branch, which employs around 4.4 full-time staff members. Banking experts say the subsidy bankrolled by the big banks would allow their smaller competitors to open branches in country towns currently not serviced by any bank.

This isn’t the first time a levy was proposed by the Government. However, only CBA supported it. So, the Australia Post option and a moratorium was put on the table before the last election. Now, with the Government firmly in control, the levy on big banks has been exhumed and its size will be based on the size of the bank’s loan book.

Eyres reports that the Regional Banking Investment Alliance says some 90 regional banks have closed since February 2022 and 23% of rural branches have gone over the past five years.

Is this a good economic idea?

Many economists would argue that on a hard cold numbers basis, saving regional banks isn’t economically sound. But that ignores the social implications of creating virtual ghost towns in our agricultural sector.
This is a sector that contributes over $100 billion to the country’s GDP annually. The people of the regions deserve to have services that we in the cities take for granted. And the 5,000 people in big banks will breathe a sigh of relief that their jobs look safer, provided the Government turns this Treasury proposal into law.

And then there are fledgling entrepreneurs in the bush, who sometimes need support from a real person (call them a bank manager), who sees the vision of a business builder and then supports them with money and advice.