It was another virtuoso performance from Paul Keating on Lateline last night when he neatly explained the global financial crisis and took credit for Australia’s strong banks and superannuation savings.
Unlike Kevin Rudd and Wayne Swan, Keating’s moved beyond the Government’s one-dimensional claim that our banks are well capitalised and well regulated.
As a nation, we do indeed have a savings challenge from that $60 billion a year current account deficit which sees out banks asking for $1 billion a week from international lenders.
And as the leaders at COAG in Perth are quickly realising, Australia’s public sector is in overall deficit and will only cease to be a net foreign borrower in this environment if projected infrastructure spending is slashed.
The Keating solution would be to further grow super and he blasted the Howard Government for not increasing the compulsory levy on employers from 9% of salary to 15%.
He then went on to say super funds should have invested more of their funds in Australian home loan mortgages, rather that commercial real estate trusts or international equities.
Given that Australian households have about $1 trillion in debt and just over $1 trillion in super, wouldn’t the more efficient solution have been to simply encourage citizens to save by building equity in their homes? Peter Costello probably thinks so now as horror stories emerge from his tax changes that encouraged debt-funded super contributions.
The biggest winners from Keating’s policy of compulsory super and soaring household debt has been the financial services industry which clips the ticket every which way churning the paper shuffling.
Indeed, since the state and federal governments got out of the banking business in the 1990s, the industry has turned into a rapacious cartel that serves up the world’s most expensive banking system to Australian citizens. But at least they are strong in a crisis!
Rather that just facilitating the rest of the economy, financial services companies peaked at more than 40% of our stock market last year when the global average never topped 30%. Thank you, Paul Keating.
The Big Four banks were capitalised at about $30 billion in 1992, but since then they bought back almost that much in their shares, plus paid out almost $100 billion in dividends and retain a combined market value of more than $150 million, even after the 40% plunge since last November’s peak.
Australians now have the most concentrated financial services sector in the world with big banks increasingly dominating the allocation of debt and equity in the economy, despite the obvious conflicts.
Finally, it was amusing to see Keating blast bank executives for making out like bandits when running utilities that were ultimately guaranteed by taxpayers.
One such executive is his former Treasury deputy secretary Dr David Morgan, who is married to Keating’s former Environment Minister Ros Kelly. Morgan made more than $50 million from his stint as Westpac CEO and would have been surprised to hear Keating tell Lateline: “I had the ANZ and Westpac in the sort of humidicrib for three or four years, and got their balance sheets back together again.”
* Check out this list of 1200 Australians worth more than $10 million. The largest category is paper shuffling financial services types like David Morgan.
Typos aside, tell me who you’d like to have representing you on the global stage……..PJK cuts it 4 me……the utliimate socialist……
In my ever so humble opinion, Keating MUST BE Australia First President……
Reading David Loves book on Keating you can almost get caught up in the narrative of little Australia as the banking Hub of Asia. Like this article points out, as does Love in the book, the wealth of the common man, for all Keating’s desire to see the worker participate in capital formation, went the way of Macquarie bank et al to finance the purchase of state assets and construct PPPs. However Love sees this as a remarkable acheivement and he’s right. I mean what a bunch of collective fools the plebs are. Its one thing to deny the labour theory of value and pull that off. Its another to take their savings and then use it to build infrastructure you then go ahead and charge them to use, all the while paying the top executives $50 million a year. What stooges, as if a bureaucracy could not have done it for less and without the nauseatingly excessive paychecks. How many days left on that ban on short selling?
Australians may have $1 trillion in debt and $1 trillion in super, but they aren’t spread evenly.
And Peter Costello could be his aide-de-high-camp.