There will be no "people's bank"!

The Federal Government has stated that there has been no consideration given to setting up a "peoples bank" to rival the big four banks.

The Sydney Morning Herald has reported that six influential economists have written to the Prime Minister and the Treasurer asking them to set up an inquiry into the nation's financial system. The economists suggested in an open letter that the Government should set up a "basic bank" to be managed by the Future Fund and Australians would be able to deposit money through Australia Post.

Since the economic downturn began the big four banks have increased their share of the mortgage market from 80 to 92 per cent and have taken St.George and BankWest.

The economists also expressed their short comings about the way the banks were using their privileged access to Government guarantees.

Home Affairs Minister Brendan O'Connor told Sky News that they believed the banks had worked extremely well in the economic environment. Helen Coonan opposition finance spokeswoman told Sky News that if consumers could be given a better deal it would be worthwhile considering.

Craig Emerson Small Business Minister felt that there had to be a reason why Australia had no state owned bank after having had 11 in 1990.

A Credit Union industry body has come out and said that banking institutions and credit unions agree that there should be a "people's bank".

Louis Petschler CEO of Abacus felt that instead of maximizing external shareholders returns, credit unions and mutual building societies put their profits back into greater rates, fairer fees and responsible lending, and that rather than arguing for a people's bank, the economists should concentrate on having more credit unions and building societies.