A recent joint Griffith University—Reserve Bank of Fiji working paper finds that the Australian and the Pacific island countries (PICs) banking systems are fairly well integrated. While not unexpected, the findings of the rigorous and evidence-based study are useful. They indicate policy implications.  They also provide opportunities for greater integration between Australia (OZ) and the PICs. And, given the budding relationship between OZ and New Zealand (NZ), especially during the COVID-19 pandemic and of course, the special concern for both regarding the PICs, the study provides opportunities for a strategic OZ-PICs-NZ partnership in the financial landscape. Let us elaborate.

Australian banks are pioneers in the PICs, having made a mark more than 100 year ago. New Zealand banks have also had a prominent stint in the region. Anecdotal evidence suggests that the features of banking products and services across the Pacific region are not too different from those in OZ or NZ. As well, PIC banks adhere to world class supervisory and regulatory norms—not much different from the practices in OZ or NZ. Capital adequacy rules apply consistently across the triangle, for instance. The region’s central banks have a cordial relationship with OZ and NZ counterparts—Governors meet regularly.

A more integrated, unified and amalgamated OZ-PICs-NZ banking or financial system will have many benefits for the region—deepening of markets, efficiency gains, risk management and consumer benefits for example. Better management by PICs of the new “normal” and dynamic financial and economic environment driven by extraordinary levels of market volatility, uncertainty and fraudulent activities, together with challenging climatic, geo-political, pandemic and global trade events. As well as enhanced capability in addressing the globally driven financial sector agenda relating to innovation, technology, soundness, stability, affordability and access.  Australian banks’ resilience to the 1997 Asian Financial Crisis and the 2007 Global Financial Crisis bodes well for the PIC’s financial system stability and sound.

So, the question is how to make it happen? For starters, it would be great to get more OZ and NZ banks (back) in the region. Governments may encourage and facilitate the process; Griffith’s South Pacific Centre for Central Banking (SPCCB), in light of its unique relationship with the central banks in the region, would be happy to help. The financial sector is one area where OZ and NZ presence can be real, ingrained and felt without a lot of effort—surely, the PICs would welcome the idea with open arms. This would be a step in the right direction for the Pacific “Step up” and “Reset” programs. Needless to say, that OZ and NZ will face very little, if any, competition here. Our feeling is that they’ll be the preferred choice over others in the region.

While this is being contemplated, other steps may be considered as well. One step for instance could be a survey of the characteristics (financial and non-financial) of banking products and services across OZ banks in the region for subsequent comparison with those provided by the same banks in OZ. The SPCCB, jointly with the region’s MoU partners, would be able to do this as part of their joint working paper series. In the meantime, high level conversations may be commenced between respective central banks and governments about the prospects of formalising an unified financial system.

What will this mean in practice? In a fully amalgamated OZ-PICs-NZ financial system, one should not be able to tell the difference between the quality and pricing of products and services of say an ANZ bank in OZ and its operations in the PICs. For instance, if the variable housing lending rate in OZ is 3% then it will be 3% in the region as well. If an ANZ customer has the option of a home interview for a housing loan, then it will also be the case in the PICs. There will be no difference between any aspect, including delivery of products and services in OZ, NZ or PICs of the same bank. Of course, competition will still be encouraged in the industry.

This could also mean exchange and attachments of staff at all levels. A new staff member recruited in Papua New Guinea, for example, would have the opportunity to get training in OZ or NZ. Exchange and attachments would occur at the management level, including senior management. It would become a truly Australasian banking landscape. After all, Prime Minister Morrison calls the Pacific “family”, anyway! The PICs have long longed for truly regional initiatives—this would be an ideal model, much like the SPCCB’s capacity building, in partnership with none other than OZ and NZ!

Where to from here? The next step might involve initial meetings between central banks, government representatives and other stakeholders—a committee perhaps—tasked to outline a step-by-step action plan. The SPCCB would be most happy to facilitate this.


Dr Parmendra Sharma, Griffith University and Ms Kalolaini Ranadi, Reserve Bank of Fiji.

The views are that of the authors and not necessarily of the institutions they represent.