The Prime Minister doesn’t call too many Sunday afternoon press conferences, so it was apparent, based on overnight press reports, that Kevin Rudd was likely to announce the bank guarantee when the alert went out at 2pm yesterday. Most of the Gallery showed up, in various states of casual clothing, some with children in tow. I asked my son if he wanted to go to see the Prime Minister at a press conference. “I can see him on TV dad,” I was told. That put me in my place.
Presumably because it was Sunday afternoon, the announcement caught non-gallery commentators and analysts on the hop. John Durie was out of the blocks quickly, calling the move “plain dumb policy” that “brings the moral hazard argument front and centre in Australia.” But Stephen Mayne welcomed the package, saying while “Australia’s banking system is the strongest in the world in terms of profit, minimal bad debts, balance sheet strength and market capitalisations, there is a critical reliance on foreign debt to service that dangerously high $1 trillion in household debt”.
John Quiggin also briefly welcomed the move, then fleshed out his support to The Age’s Peter Martin, suggesting the Government’s previous bill to guarantee up to $20,000 might have perversely sparked a run on the banks, although you’d have to wonder at quite how much “churn” a fraction of the “unprotected” 15% might have caused. According to Martin, Rudd had dodged an enormous bullet (an artillery shell, perhaps?).
Saul Eslake thought Rudd’s hand had been forced by foreign Governments, although on Saturday he was calling a guarantee “a solution in search of a problem” that “would give a whole lot more people reasons to fear that the banks would run into difficulties”. Ken Davidson thought it “almost certainly unnecessary, but it is probably good politics of the kind that gave us the “be alert but not alarmed” approach to terrorism”, and in fact Rudd had explicitly compared the crisis to a “rolling national security crisis” during his press conference. “Extreme, but necessary,” Malcolm Maiden thought.
Corporate Australia got behind Rudd’s announcement. Don Argus called it “certainly the right move in terms of developing confidence again”. NAB and ANZ welcomed it as well. Predictably, the banks led a stock market surge this morning. What’s not to like in an underpriced oligopolist with a sovereign guarantee?
Political analysts were pretty much as one that the Government had no choice. Michelle Grattan thought it “the inevitable result of the global nature of the all-engulfing financial crisis”. Phil Coorey thought it necessary “such is the level of distrust that wary foreign banks are reluctant to lend to other banks, including ours, unless there is a government-backed assurance that the money is safe.” “Rudd and the Government had little choice but to act,” according to Dennis Atkins.
Others had a bit of difficulty focussing on the big story. Glenn Milne was back to his frequent approach of running whatever a shadow minister would give him, with a Chris Pyne attack on Julia Gillard’s alleged class warfare tendencies. Janet Albretchsen had a crack at Fairfax.
And the AFR was disappointingly reticent in its assessment of the biggest economic decision in years.
The best observation was made by Jennifer Hewett, who suggested the Government was trying to get ahead of both the Opposition and the crisis itself. Rudd was emphasising the element of pre-emption yesterday. “Our responsibility is to look ahead – three, six, nine and 12 months,” he said.
Parliament resumes today for a two week sitting, although next week the Senate breaks for Estimates. With the Government and Opposition in furious agreement on guaranteeing deposits and the need to provide more funding for residential mortgage-backed securities, and the general need for reassurance from political leaders, Question Time might have a rather forced tone of moderation.