08 Jun Question IndividualAssignment
Question
IndividualAssignment
Short AnswerQuestions–basedonEconomicTheory
Thisassignmentcountsfor20%ofyourtotalmarks
DueFriday2thJune,Week11by5pm(AEST Australianeasternstandardtime)
on the portalunder“AssessmentsandRevisions”Instructions
• Dothisassignmentindividually.
• Youmayneedtodo researchof yourownaswellasreadingthearticles provided.Marksareawardedforthis.
• Addresseachquestiondirectly.Youdo notneedto presentanswersin essay or reportform.
• Makesureyouexplainyourdiagramsandanswerallpartsofeachquestion.
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Part1: FirmPerspective[25marks]
Usethefollowingarticleand yourownresearchtoanswerthefollowingquestions:
Competitivedynamicsinthe bankingsector
TheTreasurypresentationearlierintheweektotheSenateinquiryoncompetitionin the banking sectordrewattentionto anumberof significantdevelopmentswhichhave,collectively,alteredthe competitivedynamicsof theretailbankingsectorin recent years.
…therehas been furtherconsolidationinthe Australianbankingsectorsincetheglobalfinancial crisis.
Aconsequenceof thesefactorsis thatthefourmajorbankshaveexpandedtheircollectivemarket shareacrossarangeof loananddepositproducts.
Thisis illustratedinthehomeloanmarket(Chart5). The shareof totalhousingloancreditforthefive largestbanks—thefourmajorbanks(CommonwealthBank,NAB,ANZandWestpac)plus St George — has increasedfrom around60 percentbeforetheonsetof the GFCin mid-2007to around
73percent.
Chart5: Majorbanks (Wespac,CommonwealthBank,NAB,ANZ)gainmarketshare
Source:RBA.
…TheGovernmentis seekingto enhancecompetitivepressuresintheprovisionof retailbanking products,includinghomeloans,withthepackageofmeasuresannouncedontheweekend.This includes:
• banningexitfeesonnewhomeloans;
• examiningprovidingacapacityforconsumersto transferdepositsandmortgagesbetweenbanks;
• enhancingdisclosureof homeloanproducts;
• supportingcreditunionsandbuildingsocieties;
• empoweringthe ACCCto investigateandprosecute anti-competitivepricesignalling;
• fast-trackingreformstocreditcards;
• monitoringandpossiblyenhancingATMreforms;
and
• acommunityawarenessandeducationprogram designedtomakeconsumersbetterinformed.
Source:http://www.treasury.gov.au/PublicationsAndMedia/Publications/2011/Economic-Roundup-Issue-
1/Report/The-Australian-banking-system-challenges-in-the-post-global-financial-crisis-environment
1. Basedonthearticleaboveanswerthefollowingquestions.
a)Whattypeof marketdoAustralianBanksoperatein?HowhastheGlobal FinancialCrisisaffectedcompetitionin thismarket?Explainyouranswer.7 marks
b)Assumethebiggestfourbanksin Australiadecidedtocolludeandagreeto chargea highpriceonbankingproducts.Graphicallydemonstratetheprice andoutputin thismarketandexplainyourdiagram.8marks
c)Howandwhyisthe governmentseekingtoincreasecompetitionin the bankingsector?Explainyouranswerwithreferencetothediagramyou constructedinpartb).5marks
2.Brieflydescribewhattriggersentryin a perfectlycompetitivemarketandthe processthatendsfurthere
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