Australian government watching bank mega merger: PM

SYDNEY: Australian leader Kevin Rudd Wednesday said he was committed to maintaining competition in the banking sector, after two banks agreed to merge to create the nation's biggest financial services group.

Prime Minister Rudd, whose centre-left Labor government has been critical of the fees charged by banks, refused to comment on the proposed merger between the country's third and fifth-largest banks.

But he said the government was committed to maintaining competition in the sector and would watch closely the mega merger which would create a bank worth around 66 billion dollars (62 billion US).

"Let's see how all that unfolds," Rudd said after St George Bank on Tuesday agreed to larger bank Westpac Banking Corp's 18.6 billion dollar merger offer.

"These things are a complex business when it comes to the market place and I don't wish to make any statements which would seem to be inappropriate," he told the Seven Network television.

"The key thing for us is to make sure we've got enough competition in the Australian banking industry."

The proposed merger will require clearance from Australia's competition regulators and Treasurer Wayne Swan and is expected to test the government's "Four Pillars" banking policy which has prevented mergers between the four major banks.

"We'll watch this one carefully, but I don't want to issue any edict about what market should do," Rudd said.