Australian consumers are paying high prices, by international standards, for financial services and savings are not being passed on to them, Industry Super Australia argued in its submission to the Financial System Inquiry.Industry Super's submission may be one of the richest so far published for its engagement with questions of industry costs.Zachary May, Industry Super's director of policy, collaborated with Boston Consulting on the analysis. It showed that costs per dollar of footings have declined by more than six per cent per year since the 1980s. The submission said that, in banking, "over the long term, the cost margin has declined by five per cent per year since 1990, but revenue margins have declined only four per cent, with the difference not being passed on to businesses and households. "The level of concentration in Australia's banking system is linked to correspondingly high levels of pre- tax profits and net interest margins. Australia's major banks have higher pre-tax profit as a percentage of assets than banks in other jurisdictions."The submission argues that the spreads between costs and revenues of the major banks are higher than comparable countries, while "there are signs that the financial system has become less efficient."Similar inefficiencies apply more broadly. "The economic resources consumed by the financial system in connection with long-term capital formation have increased over time."During the 1980s and 1990s, the Australian financial system consumed about A$360 of labour and capital, on average, for every $1000 of capital formation. In 2013, for the same $1,000 of capital formation, the system consumed over $500 of labour and capital."The lopsided nature of bank lending is also highlighted in the submission."Bank residential loans have shifted from financing the creation of new housing stock - new capital - to financing the resale of existing stock. Between 1992 and 2012, residential lending increased from 15 to 37 per cent and lending for new dwellings fell from 22 to 12.5 per cent," it said.This may help explain the unusually high profit levels of banking in Australia."In terms of retail banking, Australia's Big Four banks have higher profit per customer than the top banks in comparable countries. "The revenue per customer is nearly double that in the US and UK; the profit per customer is nearly quadruple US and UK rates."Another factor is "their lower cost of funding relative to their competitors due to their perceived status of 'too big to fail'."The submission pegged an "average estimate of the value of the implicit subsidy to the major banks at $2.1 billion over the period 2007 and 2012 or about 4.8 per cent of their annual net interest income."This cost advantage was exacerbated by government guaranteed debt issued during the GFC."On another topic relevant to banking (and in a separate response to the Productivity Commission's draft report on public infrastructure), Industry Super yesterday said "there are no fundamental financing issues, just a lack of deal 'pipeline'."