Australia Post is wholly owned by the federal government. But the Business Council of Australia says it ought to be sold, and some economists agree. The federal government's Commission of Audit has been charged with finding ways to save the government money and return the budget to an eventual surplus, so the prospect of selling government assets has come up. Some believe Australia Post is in the firing line, along with Medibank Private. But a submission this week to the Commission of Audit suggested that, far from privatising Australia Post, the government ought to provide it with its own banking licence instead. The Communication Workers Union, the group that made the submission, says Australia Post should become a ''one-stop shop'' providing banking and insurance services, and everything else, for rural and regional communities.

If it had its own banking licence, it could compete with the big four banks too. That would help bring fees down and fill the vacuum left by the big four when they closed their country branches and retreated to the cities. Australia Post is a trusted brand. It is the country's biggest retail government network, and has 4429 retail outlets, nearly 60 per cent of which are in rural and regional Australia. The majority of its outlets operate as franchisees. These already act as agents for the big four banks and about 70 other financial institutions, providing banking and insurance services, among other things. It would become a fifth pillar. But there are still about 400 licensed post offices that do not have access to Australia Post's point-of-sale technology, and are thus unable to perform online banking transactions.

So the network has its problems. A Senate inquiry is looking into the way some licensees have apparently been under-compensated by Australia Post. If the government did consider giving the company its own banking licence, what would it mean for the public? Banking analysts say one of the biggest barriers to entry in the banking system is the ability to set up a network of branches that could seriously compete with the big four. The only companies in Australia that could legitimately do so would be Australia Post, Coles and Woolworths. But would it serve a social purpose?

University of Queensland economist John Quiggin says it would. ''Australian banks are highly profitable and have been protected on a 'too big to fail' basis,'' he says. ''Australian banking consumers would benefit from an expansion of competition and from the option of a basic bank with a range of low-cost standard services. ''This is a challenging idea, but the alternative would be to be a downward spiral as postal services are contracted.'' Terry Ashcroft, from LPO Group - an organisation looking after the interests of licensed post offices - says it would be a ''win-win'' for the federal government if Australia Post got its own banking licence. ''It would become a fifth pillar, and the big banks wouldn't like it,'' he says. ''But it would generate probably between $1.5 billion and $2 billion net revenue for Australia Post, allowing it to subsidise a lot of its community service obligations … while giving a huge return to the Australian people. The only loser in this would be the major banks.''

Some economists say there is no reason why the government should control an organisation such as Australia Post. A former commissioner for the Australian Competition and Consumer Commission, Stephen King, came out strongly in favour of a sale of Australia Post this month, saying the national broadband network would make letters redundant. ''It should certainly be looked at, and my own view is it probably should be privatised,'' Professor King said. Banking analysts say it would also be very difficult to grant Australia Post a banking licence. It is not a good time to try to set up a new bank. Australia has just gone through a period of re-regulation as a consequence of the global financial crisis. The Australian Prudential Regulation Authority (APRA), which is charged with keeping the country's financial system in good health, has set stringent liquidity requirements for institutions that take deposits.

More than half of Australia Post's branches are owned by franchisees. They would need to get a licence to take deposits. What if a private bank wanted to use Australia Post outlets for banking services? Who would buy it - Macquarie Bank? The ''silver doughnut'' might be able to secure a banking licence under APRA's stringent conditions, but banking analysts say Macquarie couldn't afford to do so anyway. Is there any political appetite for giving Australia Post a banking licence? Treasurer Joe Hockey is not in favour of it. A spokesman says: ''The government is not actively considering this issue. The government is carefully and methodically conducting a financial system inquiry and a Commission of Audit.'' Shadow treasurer Chris Bowen is hedging his bets, waiting on the outcome of the Senate inquiry into Australia Post.