Australian bank are copping the brunt of a wider backlash against big business because they are such an outsize part of our economy and the public cannot see why salaries in the sector are so high, says former treasurer and now chairman of the Future Fund Peter Costello.
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Mr Costello said all institutions of authority are under challenge around the world, including churches, governments, banks and big business generally.
"I don't think this is unique to banks but big business generally in Australia is the banks," Mr Costello told the Financial Services Council Leaders Summit in Sydney.
"There wouldn't be another Western country where the banks are such a large proportion of the stock exchange. When people talk about big business in Australia, they don't mean Telstra or CSL, they mean the banks."
By market capitalisation, Westpac and the Commonwealth Bank are usually the two biggest companies on the Australian Securities Exchange and the Big Four banks make up a quarter of the ASX200.
Mr Costello pointed out this was highly unusual - for example, the biggest companies in the US would include tech giants such as Apple and Google and oil companies rather than banks.
He said the anger against banks was more understandable in the UK and the US where taxpayers' money was used to bail out banks during the global financial crisis.
"If I were American I'd feel really angry that Main Street bailed out Wall Street ... but we never had that here," Mr Costello said.
Pay gripes
"So what is it that they're angry about? I think they feel that, sure, banks are important but they look at salaries and say are they really necessary? Are we really getting value for money?"
Mr Costello said one explanation might be that the West generally is in the grip of populism.
Alternatively you could argue that banks have not made their case for high salaries and sold it to the public. Or it could be that the public has legitimate concerns that banks need to identify and deal with.
Mr Costello said he would leave it to others to draw the conclusion, but communication would always be part of the answer.
"I do know one thing, if you want to change public opinion you need to work at it," he said.
"Now you might say what I do know? Well I introduced a tax on everything, called GST, and boy did we have to work on that. It wasn't immediately popular, [this idea of] let's tax every good and service."
Four pillars
Mr Costello said the advantage of big banks was stability and this was part of the reason Australia fared well during the GFC. He noted Canada, which had a Six Pillars policy based on Australia's Four Pillars policy, also did well during this turbulent time
The Labor opposition has a policy of a Royal Commission into banking and financial services.
FSC chief executive Sally Loane, who was moderating the question and answer session, noted that some Labor senators had already said that breaking up the big banks should be an outcome.
Mr Costello noted you don't need a Royal Commission to do that.
"If you wanted to break up the banks, you don't need a Royal Commission to do that," he said.
"You'd adjust the four pillars policy, or you'd make it easier for new entrants, or you could if you wanted to even order divestment. Westpac took over St George, CBA took over BankWest, and if you really wanted to go to extreme lengths [and reverse that], you don't need a Royal Commission. A Royal Commission is really where you suspect schematic illegality is going on."
Mr Costello also took aim at the Turnbull government's superannuation reforms from the 2016 budget, which mostly came into effect on July 1 this year.
"I don't see what's wrong with giving people a tax break to put money into super," he said. "The government gets it back eventually when you take them off the pension, but that theory seems to have fallen out of favour."
Furious agreement
Australian Banking Association chief executive Anna Bligh said she was in "furious agreement" with Mr Costello on the need for bank chiefs to better explain their remuneration packages.
"I think he's right - not only for banks, but for all of corporate Australia - that those who are earning very generous salary packages need to be able to demonstrate the value that they provide to the company and, in some cases, beyond the company's interests," she told the National Press Club.
"Shareholders determine, ultimately - and shareholders approve - the remuneration packages of our senior executives. In doing so, boards are required to provide very extensive and detailed remuneration reports."
Ms Bligh said that the manner in which salaries were determined for CEOs across corporate Australia was one of the most transparent in the world because shareholders had the chance to say yes or no to a package.
"If you want to think about a different system for setting CEO salary than the one we currently have, I would suggest that's got to be something that should be considered right across all publicly listed companies. I don't see any reason to be singling out, again, one industry," she said.
"Peter Costello is right - value has to be demonstrated."
Caitlin Fitzsimmons is Money editor.
