SYDNEY, Feb 20 (Reuters) - The head of Australia's competition watchdog said on Tuesday a tribunal overturning its decision to block ANZ Group's A$4.9 billion ($3.2 billion) proposed buyout of Suncorp's banking business showed the need for merger law reform in Australia.

The Australian Competition Tribunal on Tuesday said ANZ, Australia's fourth-largest bank by market capitalisation, could proceed with buying Suncorp's banking business despite the regulator blocking the deal in the middle of last year.

"It provides a basis for support for the merger reforms that we have proposed," Australian Competition and Consumer chairperson, Gina Cass-Gottlieb, told Reuters in an interview by telephone.

"Where there are concentrated markets and critical household- and business-facing markets, such as banking services, that are conducive to co-ordinated behaviours, we need to have fit-for-purpose merger review laws so we can make sure we don’t lose competition or ... can promote more competition."

The ACCC has 28 days from Tuesday to lodge a judicial review, but Cass-Gottlieb said it was "too early to tell" if that would occur.

(Reporting by Scott Murdoch in Sydney; Editing by Alasdair Pal and Tom Hogue)