The federal government has admitted that the present times are ripe for the introduction of changes in the Australian banking industry and one significant factor that could shake the power-balance of the sector is the entry of a fifth major player.

Once finalised, the merger of AXA Asia Pacific Holdings and AMP could spawn a financial entity robust enough to offer sufficient competition in the industry currently dominated by the Commonwealth Bank of Australia, Australia & New Zealand Banking Group, National Australia Bank and Westpac.

This according to federal treasurer Wayne Swan, who also declared that credit union and building societies could provide the necessary boost in establishing the new pillar that the Australia's banking system presently needs.

Amidst calls by the Coalition to formally present its stand on the heated banking reforms debate, the federal government is setting its sight on the role that the mutual sector could play in balancing the perceived unequal competition in the country's banking sector.

While the opposition intends to curb the major banks' price signalling on their interest rates, Mr Swan said that federal reforms would be announced during the summer break of the parliament, which he described as the banking sector's second wave of reforms.

Opting to keep mum on the details of the reform package, Mr Swan merely allowed that he is personally convinced that the mutual sector could prove crucial in acting a significant role in reforming Australia's banking system.

He also refused to comment on how the four-pillars banking policy, which prohibits the country's four major banks from merging or gobbling each other, could be tweaked into absorbing another key player in the sector.

In effect since 1997, the policy appeared ineffective in preventing the alleged monopoly of the four major banks but Mr Swan maintained that the situation could soon change once Australian banking clients start walking away from the giant banking firms.

Mr Swan pointed to the mutual sector as a viable alternative, owing to its relatively safe and competitive environment, which should give bank customers the idea that the giant banks could be ditched and they could still find a much better deal for their banking requirements.

Also, the federal treasurer aired his reservation on suggestions by the opposition to provide more regulatory powers to the Australian Competition and Consumer Commission (ACCC) so it can better police the banking industry.

The idea, according to him, is motivated by sheer populism yet price signalling should be dealt with by detailed and well-planned legislation, with sufficient inputs from government regulators as against to the seeming thought bubble being advocated by the opposition.