ANZ chief economist Saul Eslake memorably blamed jaw-boning by former Treasurer Peter Costello for the reluctance of banks to jack up interest rates faster than the RBA before last year’s Federal election.
Whilst the big banks have since stacked on about 60 basis points in additional premium on the average home loan, those games should now be coming to an end.
It would be an extremely brave Commonwealth Bank or Westpac, which together will soon control about $400 billion of Australia’s $850 billion in home loans, that would not pass on next month’s cut in official interest rates.
Westpac and St George have both proclaimed themselves to be in rude health and yesterday we had the spectre of CBA unveiling a record $4.9 billion profit. Both Kevin Rudd and the Reserve Bank responded by publicly declaring that margins don’t need to be widened any further.
The media is also fully on board this latest round of thoroughly deserved bank bashing.
“What a bunch of bankers: how big banks are hurting business”, screams the cover of this week’s BRW above a picture of a knocked out bloke in a suit.
Even The AFR produced a page 26 lead today headlined “Pricing on loans draws plenty of flak” which contained numerous quotes from unnamed companies, CEOs and finance directors lashing CBA for being the greediest and most bloody-minded of all the banks.
Hmmm, so much for Ralph Norris being Mr Customer Satisfaction whose bonus partly relies on Gary Morgan surveys. Sure, the mums and dads visiting the branches are feeling better but this sort of out-pouring in The AFR would suggest the corporate community has had enough of the biggest bank in the world’s most expensive banking system.
The Australian’s heavily conflicted Janet Albrechtsen will be a lone media voice defending bank gouging because even Rupert Murdoch experienced excessive penalty interest charges during News Corp’s 1990 debt crisis.
Whilst Westpac has received the ACCC green light to buy St George, chairman Ted Evans will presumably be reading the political tea leaves better than most given that he is a former Reserve Bank director who was appointed Treasury Secretary back in 1993 when Labor was in power.
One potential conflict here is the Rudd family share portfolio which included more than $200,000 worth of shares in ANZ and NAB before they disappeared into a blind trust. The PM’s office did not respond to a query about this before our publishing deadline.
Another potential conflict comes from having a Federal Government led by two Queenslanders who were instrumental in establishing the $100 million-plus Labor Holdings investment portfolio which owns 42,500 CBA shares and has a $10 million margin loan with Comsec.
If the belligerent banks refuse to yield next month, maybe Labor should direct the Reserve Bank and the Future Fund, which is currently lending tens of billions in cheap money to our banking cartel, to instead offer punters home loans at 1% over the official rate. That would make the oligopoly really sit up and take notice!
*Listen to some good old fashioned bank bashing on 2UE and 4BC yesterday.