If there is one thing that I really, REALLY, hate, is being forced to find myself on the same side of an argument as the likes of Joe Hockey. But, like Hockey, I find the behaviour of the major Australian banks simply unconscionable. However it should also be remembered that back when Hockey was a junior finance spokesman, he publicly put the banks ‘on notice’. The reality of course is that they didn’t take any notice of him then and shall be taken even less notice of him now.
It must be remembered that the major Australian banks are making quite literally billions per year in profits. These profits come largely from the seemingly never-ending scale of fees being introduced. The basic operations are traditionally funded by the difference between interest received and interest paid to depositors. But for the last couple of years the banks claim that the cost of raising funds is so high now that they cannot afford to pass on the full extent of any cuts interest rates by the Reserve Bank of Australia. Yet, just as the oil companies play silly buggers with petrol prices at the pump, the banks are equally as quick to pass on the entirety of any increase in interest rates. Until now that is. Now that the Commonwealth Bank of Australia has passed increased rates by more than the latest rate increase by the RBA.
The bottom line is that the banks are allowed to get away with such behaviour for several reasons. Deregulation of the banking industry years ago, freed the banks from the last of such regulation that could have controlled such behaviour. The Commonwealth Bank used to be a publicly-owned asset (note – contrary to public perception, CBA staff were not public servants as they were not paid from the public purse). However following the privatisation of the CBA, like all the other banks, the CBA has to look after the interests of and respond to shareholders. Thus the minor curbing effect the CBA used to have on the market is now gone. Finally, government has absolutely no power to force the banks into line.
Sure, there is plenty of rhetoric, but the Coalition proved unable to stop the banks (Malcolm Turnbull’s boast of 2008 that the banks were scared of them has been proven the load of shite that anyone with half a brain knew it to be). The current Labour government seems unable to do so either.
It must not be forgotten that the recent Global Financial Crisis was caused by a poorly regulated banking sector. That Australia came through the GFC in pretty good shape was no thanks to the Australian banking sector. As the banks have now well and truely shown themselves to be the school ground bullies we all suspected they were, the time has come to really draw a line in the sand. While other sectors were being forced into greater regulation of their activities, the banks were given less.
What is needed now is a re-introduction of a degree of regulation. Please note that I am not advocating governmental control of interest rates that was the logical extenstion of Hockey’s recent public announcements. However legislating that banks are not allowed to exceed the prime rates as determined by the RBA is not an unreasonable thing. Legislation forcing them to pass on all of any rate reductions in prime is similarly reasonable.
Clearly the banks are not prepared to act in a socially and economically acceptable manner, therefore the school principal needs to step in.
As I said, I really hate being on the same side of an issue as Joe Hockey, but in this instance his basic principle was right on the money.
And that’s my rant.