Good morning to you and to the Committee members, and thank you for the invitation to appear before you today. We look forward to resuming our discussion about how our banking system can effectively support the people, businesses and communities that we exist to serve.

When we appeared before the Committee last year, we emphasised two critical themes for the banking sector: those being, strength and fairness. And I would like to return to those themes today because together they lie at the heart an effective banking system. And an effective banking system, in turn, lies at the heart of a prosperous economy. This critical linkage was noted by the Financial System Inquiry in 2014 when the Inquiry emphasised the importance of Australian banks being “unquestionably strong”. Underpinning this view was an understanding that great opportunities exist in Australia to create a prosperous society for everyone, that to realise those opportunities requires investment, and that the domestic supply of savings cannot foreseeably meet that need. So for the foreseeable future, we will depend on the ongoing confidence of offshore funders in our economy, and in particular the strength of our banking system.

When making this point we often refer to the global financial crisis, when the strength of our system served our economy well. But I would like to refer to even more recent history.

We live in a resource dependent economy, and for years investment in resource projects provided a strong economic base for our economy. In 2012, mining capex peaked at 9.4 per cent of GDP, the highest share in the 160 years for which we have data. Then that fell, and fell quickly. Today it stands at 3.4 per cent of GDP. That is a difference of $60 billion. When the investment in the mining sector began to fall away Australia faced a period of economic uncertainty, marked by low wage growth, low levels of business investment and a deterioration in our terms of trade. Uncertainty had an impact on the behaviour of households and of businesses.

Typically, such uncertainty also weighs heavily on the appetite of foreign investors to fund a banking system. Such a profound shift in mining investment in a resource dependent economy, combined with terms of trade falling by 40 per cent, has the potential to make investors – particularly offshore investors – very nervous. Yet they kept funding Australia’s banks without a hitch. Despite headwinds that could have pushed Australia into recession, growth was maintained. Many Australians are still doing it tough – which is of concern to us and should be of concern to all of us. But there could have been many, many more.

To be more practical, since we last appeared in front of this Committee Commonwealth Bank has raised $39 billion in offshore funding markets. Since 2013 that number is $433 billion – just for Commonwealth Bank. As a result of our funding position, in the first six months of our current financial year, we advanced $109 billion in new personal and business loans, including: to 140,000 new home buyers; $3.5 billion in new loans to 12,000 small businesses; over $1 billion in new lending to farmers and other rural customers.

Over that same period: we employed 3,200 more Australians; paid over $3 billion in salaries; contributed $1.9 billion in tax as Australia’s largest tax payer; and, paid $3.4 billion in dividends to 800,000 Australian families who own us directly, and to millions more who own us through their super. I ask you to consider how the economy may have fared if our banking system had performed like those of many other developed markets.

In this context, we note that competition can enhance the strength of a banking system. Competition prompts companies to improve. It creates better service levels, better prices and choice for customers. We welcome this committee’s strong focus on stimulating competition. As you will see from our response last week to the Committee’s recommndations, Chairman, we are of similar mind to the Committee in relation to most of the Committee’s views on competition. To the extent that we have difference in views, they relate to balancing competition with privacy, security and prudential strength.

On the other hand, strength does not mean being immune from scrutiny. Quite the contrary. We expect it, and listen to it. Maintaining trust is a vital part of our being unquestionably strong, and this is where we come to the issue of fairness.

Over recent times, questions have appropriately been asked about the trust the public has in our banking system. Just as the banking system must have the confidence of overseas funders, we must have the trust of the public. I have said before in this forum, and in many others, that we did not do enough to build and sustain that trust. We have made mistakes.

As we have sought to address the consequent community concerns, we have repeatedly heard that actions speak louder than words. And we agree. For example, in the five months since we last appeared here:

• We have appointed a Customer Advocate to be a stronger voice for customers internally, including for our small business customers;
• We have started simplifying our contracts, sending new terms and conditions to 10 million deposit customers; 
• We have developed a new best practice whistleblower policy, which I expect will be approved by our Board when it considers it next week;
• We have improved our credit card offering. Customers can now reduce their credit limit in the Commonwealth Bank app. They can get clearer about information about fees and how to avoid them. They can receive reminders ahead of payment due dates.

For our part, we were put on notice that the community expected to see change. We have listened, we are listening, and we are acting. Our work is ongoing. In the next three months, for example, we will:

• Remove loan-to-value ratios for loans under $1 million;
• We will implement changes requiring us to give small business customers at least 30 days’ notice of changes to their contract and 90 days’ notice of a decision on roll-over; 
• We will implement a fully digital experience that enables customers to close their credit card using the CommBank app or online without the need to go into a branch or call our contact centre.

We have made improvements, and still have much more work to do. So by the time we next appear here, there will be a much longer, and still continuing, list of practical actions taken. 

In conclusion, ultimately, strength also depends on effective policy, supervision and bank management, and this brings us back to our appearance today. Last week I attended four days of meetings in four cities in the United States and Canada. I heard again and again from investors how important it is to them that they continue to see policy that maintains the strength of the banking system, and that requires an effective partnership between policymakers and banks. This partnership is critical to our remaining unquestionably strong, and being perceived to be so, here and abroad, so we can do our job for our business and consumer customers in good times and in bad times.