The sight of the government standing four-square behind Australia’s banking oligopoly as it exploits its privileged position to gouge consumers and businesses must be deeply unsettling not merely to progressive-minded Labor MPs, but all those interested in reining in the excesses of this cartel at the centre of the Australian economy.
It’s ironic that today’s announcement of a $5.1 billion profit by ANZ was accompanied by some vituperation aimed by its CEO at Joe Hockey and his calls for greater regulation. Mike Smith is the architect of ANZ’s strategy to do exactly what it should not be permitted to — leverage off its domestic oligopoly profits and its too-big-to-fail status to chase rapid growth in Asian markets. Such growth, in markets with poorer governance and legal structures than here, leaves it exposed to the sort of foreign-sourced debacles that have plagued other Australian banks before it and which potentially endangers the viability of its core business in Australia come the next financial crisis. And there will be another one.
It’s also rich given that during the GFC, ANZ cut and ran from Australian domestic borrowers, slashing its loan-to-value ratio for mortgage lending and dramatically cutting its supply of credit to Australian households.
The dismissal of Hockey’s proposals as “populism” by both Smith and the government is risible. Hockey is talking about recognising the too-big-to-fail nature of our banks in a regulatory system built on the idea of not guaranteeing parts of the financial system. He’s talking about the banks’ drive for higher-risk sources of growth from endangering their core business of borrowing and lending, which is critical to the economy. And he wants to engender greater competition in lending. If that’s populism, it appears to have grown up and got an MBA since we last encountered it.
It is not good enough for the banking cartel and Wayne Swan to dismiss these issues or hide behind opposition divisions. It’s time for Swan to justify his resistance to an inquiry into financial regulation, and why he thinks his own measures to strengthen competition for the banking cartel are effective when, by all possible measures, they are anything but.
Joe Hockey’s policy will lead to credit rationing.
Competitors will re-emerge in Australian banking when they see the profits rising.
Profit will then be competed away as it was last time the non-bank lenders entered the fray.
A good editorial this time, but it seems to share blocks with BK’s article following it.
Why is the “profiteering of banks” such a hot topic now?
It’s not as though it’s either new, or that it’s had any less impact on the rest of the community, in the past?
They’ve been “privateering the high seas of opportunity from their havens” for years (Monty Python even made a sort of movie about it) – and the government of the party to which Hockey belongs, was in power (in a position to do something about this “piracy”) for 11.666(7) years (and with interest rates above what they are now) and did as much as they’re doing now for those poor battlers = “SFA”!
And Hockey on Lateline last night (we all know how “disinterested” in economics Abbott is, not just from his own “unscripted mouth”, he’s got references to prove it) – was he hinting that Abbott knew this “empty populism with a set of no chance of implementation” (drawing such “reviews” now) was coming?
So Bernard you are the author of the leaders. Having your cake and eating it?
Well you know what Bernard, you are wrong. Our banks are pretty regulated and none of them went broke during the GFC when other banks all over the world did.