Dale Webster exposes the “big four” retreat from regional Australia, leaving cashed-up and bankless towns watching their money go round and round.
Five Australian towns that were, until recently, set apart by one dubious achievement shared by no others: they had all lost a full hand of the “big four” banks – Australia and New Zealand Banking Group Limited (ANZ), Commonwealth Bank, National Australia Bank (N.A.B.) and Westpac – since the 1970s.
The days when all four branches were still open in these places was a time when banks were major employers in a town and the managers were treated like kings because of the power they then had to make decisions locally that could make or break a business.
By the end of 1975 however, changes were brewing that would set the scene for a new banking landscape.
Economically, the country under the Whitlam Government was in disarray with inflation and unemployment at post-war highs. The banks took a hit when instructed by the Reserve Bank Of Australia (RBA) to moderate lending in a bid to rein in the effect this was having on the Australian dollar, a move according to ANZ alone led to a cut in loan approvals by nearly a third.
Looking at ways to gain ground, the banks began to change their business models by centralising management at area levels. The world was also on the brink of the technological revolution and soon cash payrolls were being transferred to electronic payment systems that could also be managed off-site.
When Australian Treasurer Paul Keating‘s “recession we had to have” arrived in 1990, the “big four” were handed the justification they were looking for to shore up their financial positions even further through the “rationalisation” of their country branch networks.
The cuts were callous, swift and unpopular, with community distress so great by the time the closures were reaching a crescendo towards the end of the decade, that two government inquiries into the banks’ behaviour were held.
These led to some protections being put in place to ensure towns still had access to all-important cash services – but nothing strong enough to stop the dismantling of the regional bank network.
The “big four” – joined by other minor corporates – have continued their retreat from regional Australia, leaving behind them the stigma that the loss of a bank is a sign of a dying economy. But if these towns have one clear message for the corporate giants that gave up on them, it’s this: Not. Dead. Yet.
Casterton is a service centre of 1,668 people situated on a busy highway between Hamilton and Mount Gambier across the South Australian border.
The town supports strong agricultural, timber and transport industries, has two primary schools and a secondary college, a hospital and an airport. With the exception of 2020-21- due to COVID19 – it has, for the past 25 years, welcomed thousands of visitors in June to its “Kelpie Muster” – an event that brings an estimated $1.6 million into the local economy annually.
While the population showed a decline at the last census in 2016, anecdotal evidence suggests that could be turning around with many new arrivals since then and property sales experiencing a spike in the past 12 months.
For Councillor Stephens, the vibrancy of the local economy just makes the loss of four major banks since 1975 all the more bewildering:
Casterton has the N.A.B. to thank for its bankless state after it closed its doors in the town for the last time on 26 July 2018.
Commonwealth Bank had pulled out a year earlier in June 2017; ANZ in 2012 and Westpac in 1992, leaving four imposing bank buildings standing stripped and locked along Casterton’s main thoroughfare.
This is now a common sight across large swathes of regional Australia but the dismantling of the branch network has gone on with little scrutiny outside sporadic media interest due to the government database that monitors service levels – set up in such a way that it can’t be used to identify bank footprints.
The Australian Prudential Regulation Authority’s (APRA) “Authorised Deposit-taking Institutions Points of Presence” database also does not differentiate between metropolitan areas and some of the more densely populated regional communities such as the Gold, Central and Sunshine coasts, and regional cities such as Geelong, Newcastle and Wollongong.
Darwin and Hobart are not classified as capital cities and some towns, such as Casterton, can’t be found because they have been grouped into regions.
To really get into the guts of what is happening in regional Australia, a different approach is needed.
Local government definitions of rural and urban boundaries provide a more accurate and psychologically sympathetic delineation between city and country that – with a bit of elbow grease – can be used in conjunction with banking records to compare numbers from the point where banks turned from opening new branches to closing them, with what is left now.
This allows the shrinkage of the regional network to be measured and answers some of the questions that have been hanging unanswered for decades:
According to the branch lists of the “big four” founding banks at the peak of the modern network, there were (minus some double-ups due to mergers around this period) 2,802 banks in 1,126 regional locations in Australia in 1975.
Of those, just 1,070 remained open by March 2022 – a cut of 62% of the network or a loss of 1,732 banks in 1,003 regional towns, cities and coastal communities in just over 45 years.
ANZ now has the smallest regional bank network in Australia with just 192 of its original 615 branches outside metropolitan cities still open – a cut of 69%.
Westpac has the second smallest regional footprint after slashing 70.5% of non-metropolitan branches, leaving it with 229 from its original 777.
National Australia Bank has 314 regional branches still open but has closed 446 – or 59% of its original regional network of 760.
Commonwealth Bank is the only one of the “big four” that still has more regional branches open than it has closed, with 335 of its original 650 remaining open, a 48.5% reduction. It should be noted, however, that the Commonwealth’s most recent closures in places such as The Entrance, Port Fairy, St Marys and Ballan have left these towns with no corporate banking services at all.
Many of the original banks were in whistle-stop towns and consisted of not much more than a cash collection point, but others serviced communities that were vibrant enough to support multiple banks. The worst-affected towns are the ones that have lost all major banking services.
Until 2020, it was relatively uncommon for a town that once had all of the “big four” banks to have lost all branches. But in the space of a year, that number has grown from five to 14, signalling a disturbing gathering of pace in corporate banking’s retreat from regional Australia.
Another 58 towns have lost three “big four” banks; 173 have lost two and towns that had just one of the “big four” banks make up the remainder (495).
Some of these places still have one of the older minor bank brands represented, but these institutions have also been cutting their networks.
Despite describing itself as one of Australia’s ‘leading‘ regional banks, Bank of Queensland has just 17 corporate branches left in regional Australia, down from 44 in 1999. (Earlier figures unavailable.) The peak of the network is likely to be higher due to new branches being opened in later years. However, many of these have since been closed, making the bank’s history in regional areas difficult to quantify.
What is known, is that Bank of Queensland provides banking services to only two towns (Blackall and Maleny) that would be without otherwise, after losing one or more “big four” banks. The other 15 are in well-serviced locations.
Of the branches listed in 1999, 19 have been sold to private owners and are being operated as franchises under an owner-manager model introduced in the early 2000s. The bank continues to sell its corporate network, with three regional branches passing into private hands in the past year. (One of these was at Beerwah, which lost all three of its corporate banks in the space of months.)
BankSA (now owned by Westpac) had a regional network of 79 branches in 1975, which has now shrunk to 39. Included in that number are five towns the “big four” have never serviced and another 13 that have been abandoned by them.
Bankwest (now owned by Commonwealth Bank) is the last corporate bank standing in nine towns that have lost “big four” banks. It has closed 11 of its original regional network of 50, but still services one town that has never had a “big four” bank: Jurien Bay.
Of the newer corporate banks, a check of their networks reveals that despite enjoying a reputation for caring more about regional Australia than the major players, they have rarely invested their own money by putting branches into towns that have lost their banks or never had one.
Bendigo and Adelaide Bank (Bendigo Bank) has 78 regional branches in its network. Five of these are in towns that are now without a big four bank (Bannockburn, Korumburra, Malanda, Mossman and Yarram) but the remainder are in bigger centres where “the Bendigo” is not the only banking presence.
It has had a branch in one town that has never had a bank – Kuranda in Queensland – but this was closed in early 2019 – one among 20 regional branches closed by Bendigo Bank since 2017, including one at the end of 2020 in Queenscliff. The popular Victorian tourism destination had already lost three “big four” banks and the move left the town with no banking services.
The bank opted instead to keep open a branch 14 kilometres away at Ocean Grove, which is also serviced by ANZ, Commonwealth, N.A.B. and Westpac. No reason has been given for why the Queenscliff branch was selected for closure over one in a town that could be described as having an over-supply of banking options – with a bank spokesman saying only that decisions on branch closures are “made on a case-by-case basis and take into account a variety of considerations”.
Of the other minor corporate banks that are represented in regional Australia, Auswide (16 branches) has just one branch in a town that has lost “big four” banking services – Cooroy in Queensland.
St George (57), Suncorp (34) and Bank of Melbourne (ten) have no branches in towns without other banks, with Suncorp closing at least 30 regional branches; St George 15 and Bank of Melbourne 11 in recent years.
So, with the minor corporate cavalry clearly not coming, towns abandoned by the “big four” have either had to stump up a considerable amount of their own money to back a franchise bank (community-owned), mutual bank (member-owned) or go without banking services altogether.
The national picture shows:
- of 135 towns that once had one or more major banks, these towns now only have a franchise and/or mutual bank;
- of 32 towns that once had one or more major banks, these towns now have only a minor corporate bank and, in a few cases, a community-funded option;
- of 573 towns that once had one or more major banks, these towns have no form of a bank at all; and
- of 135 of the towns that have no banks at all, these towns have lost two or more “big four” banks.
Cash management is the biggest issue a town faces when it loses its last bank.
Unfortunately, the APRA database also can’t be relied on for an accurate picture of regional Australians’ access to cash services, which is a critical factor recognised under a “branch closure protocol” overseen by the Australian Bankers Association (ABA).
This measure was one of the few protections along with the APRA database that the Hawker Committee’s investigation into regional banking in 1999 was able to put in place to ensure customers would not be left without some form of over-the-counter service that allowed access to cash deposit and withdrawal facilities.
As such, to be classified as a bank “branch” under federal legislation, a banking outlet must accept cash and other deposits (including business deposits) and provide change.
Despite never having met this requirement, however, Rural Bank (under Bendigo and Adelaide Bank since 2019) and Rabobank have been counted as full-service retail banks in more than 340 regional sites across regional Australia since being listed in the APRA database – which in Rural Bank’s case was nearly 20 years ago.
Rabobank is also recorded twice (as a foreign bank and branch) in the 54 regional towns in which it has a presence, while the Westpac network has included mortgage brokers that have links to the bank.
Anyone looking at the 2020 database to find out how many banks in Hamilton, Victoria, for example, would see that the town has been listed as having nine full-service bank branches – but that includes two Rabobanks and a Rural Bank/Bendigo and Adelaide Bank. The 2019 data also included a Westpac/Bank of Melbourne branch that had been closed since 2018, making the actual number of banks where cash could be deposited and withdrawn nearly half that listed by APRA.
When a town gets down to its last bank, as Casterton did a couple of years ago, this sort of error becomes particularly significant. For busy, small businesses like the local bakery, access to cash services is critical and the closure of the town’s last bank has created a daily headache of where to get change from and how to manage takings.
Paul and Heidi Herbert (Casterton bakery)
The bakery operated as “cash-only” for more than 30 years until N.A.B. left and Electronic Funds Transfer at Point of Sale (EFTPOS) was introduced.
According to owner Heidi Herbert, cash payments still make up more than two-thirds of their daily transactions:
Despite the importance of cash services, a fall in the amount of cash being transacted at a branch is never given as a reason for closure by banks, with the most common reason cited being customers moving to digital banking and a decline in the number of over-the-counter transactions.
But while cashless payments are increasing and a future without physical money is being seriously discussed by economists, Australia is a long stretch from being a cashless society with more than $90 billion in banknotes in circulation in Australia – and that number is growing from year to year.
The worrying thing for the Government is that it has little idea where much of it is.
In the RBA 2018 discussion paper ‘Where’s the Money? An Investigation into the Whereabouts and Uses of Australian Banknotes’, the authors took their best-educated guesses at where the outstanding cash ($76 billion at the time) might have been. They concluded that legitimate transactions accounted for 15-35% of banknote use; 4-8% was in the shadow economy; 50-75% was being hoarded and 5-10% had been lost or destroyed.
Putting dollar amounts around these figures, that’s up to $26.6 billion moving around in legitimate, day-to-day exchanges of cash – up to $57 billion is sitting waiting to be used (hoarding); up to $6.1 billion is being spent but not declared for tax purposes (shadow) and up to $7.6 billion is missing (lost/destroyed).
The “shadow” amount was broken up into legal transactions that are concealed (3-5%/up to $3.8 billion) and illegal activities, such as the purchase or sale of drugs, (1-2 %/up to $1.5 billion).
There is a caveat included with these figures, though.
According to the afore-mentioned RBA discussion paper:
It indicates that trying to put numbers around what Australia’s banknotes are being used for is a bit like shooting fish in a barrel. And even though the report is titled ‘Where’s the Money?’, no light is shed on where Australia’s cash is physically sitting.
Banks are only required to report consolidated cash holdings from across their networks, so even if the researchers had access to more detailed data (which the RBA will not confirm), the information would have had to remain confidential.
One of the few publicly-available clues to how much money may still be circulating in towns that have lost all their banks comes from the community banking model developed by Bendigo Bank in the 1990s.
Because banks are locally-owned companies with shareholders, they are required to publish their financial records annually. Like any other bank, this includes reporting their cash holdings but because they are reporting on just one geographical area and not consolidating figures from across a network, it is a reflection of the cash requirements of just that community.
Of the towns that have lost three or four “big” banks, 15 that now have community banks have reported cash levels of up to $300,000 on hand and an equal amount on call for immediate withdrawal.
On average, around $100,000 in cash is sitting in these banks for everyday financial activity – cash floats, business deposits, personal spending and cashing cheques.
So what happens in similar-sized towns, with comparable demographics, that do not have a bank?
For Casterton businesswoman Diane Taylor, the answer is obvious:
Mrs Taylor is one of the newer residents of Casterton after moving from Western Australia with her husband four years ago. She runs a wellness centre that offers everything from facials and beauty treatments to Reiki and crystal healing.
Despite some reservations about how her more unusual services would be received in the rural community, she had more than 1,000 clients through her doors in her first three months of trade and it hasn’t let up since.
The comments are in stark contrast to urban and metropolitan chatter where the term “cashless society” is being thrown about more and more.
Speculation over whether this is possible, even inevitable – accelerated with the arrival of digital technology – has now stepped up a gear as a result of an increase in cashless payments due to COVID19.
The arguments “for” going cashless mainly come from financial and regulatory sectors, with the Commonwealth and Westpac banks both releasing reports that include claims Australia could be “cash-free” within one to six years from now.
But while banks might like to think that cash might soon be a thing of the past for them, the accuracy of the forecasts is only as good as the information they are based on.
The data Commonwealth Bank refers to in its’Turning point: calling time on cash’ report is from the RBA – which can only report on transactions it knows about – and projections by an international market research company based on just mobile payment methods.
The ‘Westpac Cash Free Report’ regularly quoted as predicting a cashless Australia by 2022 was based on a 2015 survey of just 1,137 smartphone users to promote a new phone-banking app. According to the bank, only an unidentified number of the group had an expectation that Australia would be cash-free by 2022.
Despite the lack of hard evidence that cash is no longer being used, RBA Governor Philip Lowe told the Australian Payments Summit in Sydney at the end of 2018 that we are headed for a “near-cashless” future where cash was a “niche” payment instrument.
Questions of whether it is a case of the tail wagging the dog when it comes to the banking sector driving the conversation about Australia becoming a cashless society are further raised by a recent attempt by the Federal Government to make cash transactions of more than $10,000 illegal. (The Bill did not make it through the Senate.)
If cash was truly on the way out, why would what can only be an attempt to rein in the shadow economy that accounting firm KPMG has estimated is costing about $5 billion per annum in lost revenue, be necessary?
On “the money”
Whether it is better to be or not to be a cashless economy is the double-edged sword of fiscal management every world government is now facing. But if countries can keep their cash out of the shadows there are good economic reasons for it to remain in circulation. Banks are taxed on their cash holdings so there is money to be made if cash is kept in financial institutions rather than under mattresses.
Then there’s “seigniorage”, the profit made by a government by issuing currency.
Also to consider are the unwanted and unintended economic impacts of the removal of cash, as evidenced in history.
In his book The War Against Cash: The plot to empty your wallet and own your financial future – and why you must fight it British author Ross Clark outlines what has happened in the past when cash has been in short supply or not available, including the development of “commodity currencies” – whereby an item of equal value is swapped for another – and alternative currencies, such as gold or a currency from another country that still issues cash.
One of the examples Clark gives of how a decision to go cash-free has gone badly wrong is the ‘disastrous Indian demonetisation of 2016’.
The aim of the exercise was to reduce corruption and tax evasion. But in less than ten weeks, the chaos it created led to the World Bank downgrading its forecast for India’s economic growth from 7.6% to 7%, showing the impact a have-and-have-not society can have on spending.
India is pushing on with its plans to go cashless but the risks of black money emerging at a much higher rate than before is one of the unintended consequences with which the country is now grappling.
Even Sweden – the “poster child” for going cashless with four out of five purchases now made electronically – is starting to see the negative impacts of what has largely been reported as a smooth and popular transition away from banknotes.
Peebles also notes:
These are the same issues communities in regional Australia have been reporting to government inquiries since the bank network began to recede in the 1990s, but, with Australia 17 times the size of Sweden and a third of the population living outside the capital cities, on a far greater scale.
Australia’s chief advocate for National Seniors, Ian Henschke, told media not long ago that there were about half a million Australians who still used passbooks to do their banking.
It is not an issue confined to the elderly, however, with telecommunications advocacy group Better Internet for Rural, Regional and Remote Australia (BIRRR) saying the take-up of things like internet banking was significantly affected by the lack of digital literacy and understanding of the services available across all age groups.
Connectivity, according to BIRRR, is not the issue it once was in rural areas due to improvements in satellite technology in recent years, but the transactions are not free and there is still the issue of the equipment needed to conduct a cashless payment being reliant on a power supply.
The gravity of this was most recently illustrated during the 2019/20 bushfire crisis, when communities along the NSW south coast, North East Victoria and Gippsland were without access to electronic banking for weeks due to a combination of power failures (any equipment connected via the National Broadband Network (NBN) will not work during a power outage) and mobile networks being down.
The technology needed for electronic banking is also failing at increasing rates.
RBA figures show bank outages due to software failures and other faults rose markedly in 2018-2019 and even higher again in 2019-2020, leading to customers being unable to access their money either electronically or physically at branches for extended periods of time.
Network failures that affect more than one bank are not monitored by the RBA. But scenes of customers forced to abandon shopping trolleys full of groceries at supermarkets when electronic payment is not possible, have been enthusiastically reported in the media on a regular basis. (What news outlet doesn’t love an angry mob?)
If there is a lesson here, it is that only cash can keep the wheels of the economy turning when digital currency can’t be accessed either due to technical failure or knowledge barriers.
The problem is that banks are so far advanced down the digitised road that even access to cash is affected if the computer systems go down, as seen in March 2018 when ANZ had no option but to shut the doors of its branches nationwide for three hours due to a massive communications failure. During that period, customers lost access to all but $200 of their funds while the bank attempted to fix what it later put down to “a technical error or fault”.
For a small window of time, those affected experienced what it is like for people without the skill or will to use digital services to not have a bank where they live – and it put the wind up them.
But is the further rationalisation of bank networks inevitable?
Branch closures are being reported in significant numbers across Europe, the U.S., Australia and New Zealand but there is a notable exception to the trend, with official figures in Canada showing the country has very close to the same number of bank branches it did around two decades ago.
While there has been a slight rise and fall in the intervening years – and the closure of a bank supporting a regional town of 2,500 people in July is concerning for the future – a Canadian Banking Association (CBA) spokesman confirmed that barring some temporary closures due to the pandemic in 2020, branch numbers in the country have remained consistent.
He puts the continued presence of banks down to a strategy that places importance on personal interaction with customers as a way of growing business during a period of technological change.
Said the spokesman:
Could this just be bank spin? A recent article published by Bloomberg – ‘Branches still pay off for Canada’s Banks Even in the App Era’ – reports some serious profits being made by Canadian banks taking the approach described by the CBA, suggesting it is a claim that can be backed up by figures.
There are more than 500 towns across regional Australia that once had economies busy enough to warrant one, two, three or four major banks that have been left with nothing except – if they are lucky – their local post office or an agency in a shop to do their banking.
Just over 100 others are one city-boardroom decision away from joining them as executives chasing profits pick off the “low-hanging fruit” in their branch networks.
It makes for a lot of wide-open road between banks. It also makes putting cash into the safekeeping of a bank one of the most difficult, expensive and time-consuming management options available if you have to travel to a bigger regional centre to do it.
The big banks can talk up a “cashless society” all they want, but the reality is, physical currency is not going away any time soon.
The RBA’s last (2019) consumer survey shows that despite being in decline, cash payments still make up a quarter of all personal transactions. And while those figures took a big hit with many businesses moving to cashless payments in response to COVID-19, the central bank has twice had to print more high denomination banknotes due to the pandemic sparking a run on the withdrawal of personal savings from banks.
There is now more cash floating around Australia than at any time in our history. Even its value as a percentage of gross domestic product growth is at an all-time high of 4.9%.
Just think about that for a moment.
In taking a more realistic view that cash will always have a place and any attempt to remove it from circulation will a) cause ongoing welfare issues and b) drive the black economy further underground, the question that needs to be asked by policymakers is whether the Government could have more to gain than lose by stepping in to save regional Australia’s remaining banks?
This is something the United Kingdom is grappling with. The loss of more than 3,300 bank branches in five years has led to a push by one MP in 2020 to give veto powers to local councils to stop “last bank” branches leaving regional towns before another bank can be brought in.
The UK’s Financial Conduct Authority has also released guidelines effective from September 2020 that clearly set out its expectations for behaviour when banks are considering closing branches or removing cash access points.
In the meantime, towns and villages that have already lost all bank branches are being serviced by banks in trucks – such is still the need for cash in these communities.
In Sweden, the Riksdag has just made it mandatory for the country’s six largest banks, which had gone cashless, to reintroduce cash services in response to the serious impact the change has had on the economy and community welfare.
So returning to the RBA’s unanswered question, Where is the money?
Most likely where it has always been, with rural communities doing what they do best: just getting on with the job.
Says Casterton Councillor Karen Stephens:
The researchers behind the ‘Where’s the Money?’ report declined an invitation to be interviewed for this piece, with a Reserve Bank Of Australia spokeswoman saying only that:
APRA says information in its Authorised Deposit-taking Institutions Point of Presence database is provided by the institutions listed and comes already classified into service channels.
It does not verify the data before publishing.
This article won the Melbourne Press Club 2021 Regional and Rural Journalism Quill.
Dale Webster is an inaugural recipient of a Walkley Foundation Grant for Freelance Journalism on Regional Australia. She publishes independently through her own title, The Regional. You can follow Dale on Twitter @TheRegional_au.