Treasurer Jim Chalmers has urged prominent Australian banks to persist in serving Australia’s nearest international allies, committing $6.3 million in support.

The Albanese administration has appealed to major Australian banks to maintain their presence in Pacific nations, amidst concerns that the cessation of services could provide China with an opportunity to expand its sway in the area.

The significance of sustained operation and mutual cooperation between Australia and the Pacific will be highlighted by Treasurer Jim Chalmers in his principal speech at the Pacific Banking Forum, encouraging the private sector to contribute its share.

“We know how critical these services are for local communities,” he will say.

“Which is why we have been actively talking to all the major Australian banks to let them know how important a continued Australian banking presence in the region is to the government.”

His remarks arrive as Pacific nations grapple with the swiftest global retreat of banking services, barring their banks and citizens from accessing international payment services, worldwide financial systems, and funding for crucial projects. Australian workers are likewise incapable of remitting money to their native countries.

This situation has sparked apprehensions of a growing influence from the Chinese Communist Party, with its state-controlled bank already expressing plans to expand operations throughout Papua New Guinea following the establishment of a foothold in the capital, Port Moresby. Chalmers is also set to declare a $6.3 million financial enhancement to aid in the improvement of systems and law enforcement procedures, thereby motivating banks to maintain their operations.

The allocation of funds is divided into three projects: $2.9 million is designated to the World Bank to assist in the creation of an inclusive and secure digital identity framework; $1.7 million is assigned to the Asian Development Bank to enhance adherence to anti-money laundering and counter-terrorism financing stipulations; and another $1.7 million is set aside to support criminal justice and law enforcement initiatives, which will be overseen by the Attorney-General’s department.

He enumerated five objectives for Australia, which encompass the ambition to reverse the downturn in services, relieve the immediate strain on local institutions, draw new private investments into the markets, and bolster the integrity measure to enhance market confidence.

“Ensuring all Pacific countries have access to safe, secure and stable banking is one of Australia’s highest priorities in the region,” Chalmers will say.

“You can bank on Australia to work with you to keep the Pacific connected to the global financial system.”

Chalmers is set to declare his attendance at the Pacific Islands Forum Economic Ministers meeting, scheduled for August in Suva, Fiji. Here, he will provide the ministers with an update on the progress thus far. Shayne Elliott, the head of ANZ, expressed that banking operations in the Pacific regions pose significant challenges and risks due to the smaller economies and business conditions.

Among all Australian banks, ANZ boasts the most extensive presence in the region, with 19 branches. However, it has shut down 10 branches, excluding Papua New Guinea, over the last five years. Furthermore, it withdrew its operations from American Samoa and Guam in 2022.

“Each country has its own laws, regulations, customs and tax. While it’s important that each country charts its own course, this can create costs for businesses that want to operate across the region,” he said.

He said banks would find it easier to operate if Pacific countries adopted common laws, implemented “consistent regulation” and enhanced “regional financial crime efforts”.

“High-cost and high-risk countries that don’t offer scale have become less attractive for banks to serve,” he said.

“While the Pacific is not unique in facing this challenge, it is an area that is badly affected by it.”

Editors Publicspectrum

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