For months Joe Hockey has been resolutely trying to blame the Government for interest rate rises, pinning the blame on its “reckless spending”. The Reserve Bank had steadfastly refused to cooperate, repeatedly pointing out that public demand was scaling back and pressure for rate rises was in fact coming from the resources boom. It confirmed this again yesterday in explaining its decision to lift the cash rate: “the economy is now subject to a large expansionary shock from the high terms of trade and has relatively modest amounts of spare capacity. Looking ahead, notwithstanding recent good results on inflation, the risk of inflation rising again over the medium term remains.”
Fortunately for Hockey, the Government’s resistance to his proposals for an overhaul of banking regulation, and the shameless bastardry of the banking cartel, has served to bring him a whole lot closer to being accurate when he tries to blame Wayne Swan. And Hockey has shown perfect timing, as well. He started this debate — albeit clumsily — a fortnight ago and has put a strong set of reform proposals on the table.
Now, almost as if bent on demonstrating Hockey’s point, the CBA has demonstrated just how serious the lack of competition in banking is. His critics — external and internal — might take note of how well he has played this.
The reasons — and timing — of the RBA’s decision to lift rates have more or less been lost in the wake of the astonishing act of rapaciousness of the Commonwealth Bank in lifting rates by nearly twice the RBA increase. And that silence you can hear from the other three is them letting the Commonwealth take as big a public walloping as possible before, most likely, bumping up their own rates, probably by slightly less than the CBA in order to look slightly less usurious.
For the Commonwealth, it’s a no-brainer of a decision. Whichever bank went first was going to cop a mauling, so there was no point in doing things by halves. If the CBA was going to be criticised for gouging, it made sense to go for the full eyeball. And that’s what it did.
And the politics? The CBA can make its move aware that not merely is Wayne Swan unlikely to do anything, but that Swan appears to be anxious to appear as the guardian of the current system of banking regulation, despite its obvious post-GFC inconsistencies. This is the Government, after all, that caved in to the big polluters on its CPRS, caved in the big miners over the RSPT, and is caving in to irrigators over the Murray-Darling Basin. Does anyone seriously think it has the will to take on the banking cartel?
Swan instead has promised another round of reform measures to make the sector “more responsive and to make it more competitive” in December. Last week he flagged in Parliament — after mocking all of Hockey’s proposals — that he thought there was merit in giving the ACCC power to examine collusive signalling, which has plainly been going on in recent weeks. What else will he offer? Not, hopefully, a variation on the loan switching package that the public has stayed away from in droves.
When Labor MPs return to Canberra on Monday week, they should be asking exactly why Swan appears to have vacated what should be natural territory for Labor, sticking up families with mortgages against the banking oligopoly. They should be asking why he is letting banks belt small businesses, one of the key employment engines in the economy. Not merely has the Government been out-maneuvered by Hockey, it has locked itself into a position where adopting any of his proposals is at odds with its highly critical rhetoric — after all, it’s only a few days since Bill Shorten was suggesting Hockey’s ideas might drive foreign investors away.
But if Labor doesn’t want to be seen to be legitimising Hockey by accepting his proposals (New Paradigm or not), it already has a model for responding creatively to them. It invited all parties and independents to nominate members to its climate change committee to work on options for a carbon price to try to establish a consensus on reform.
Why not adopt a similar model and invite all parties and independents to nominate a group of experts to undertake an independent review of banking regulation? Treasury, the RBA and the key regulators would need to be represented as well, but it could offer Wayne Swan political cover to pursue serious reform on issues like strengthening competition in banking and regulating the big banks more effectively to address their too-big-to-fail status.
Such a group stands a greater chance of producing quality recommendations for a major overhaul of banking than the new Senate inquiry, which (as Swan knows very well) will be heavy on bank-bashing and focus on (legitimate) consumer grievances like ATM fees, but be unlikely to handle the systemic issues that have arisen in the wake of the GFC. And it should enable a bipartisan approach to the resulting legislative task for overhauling banking regulation.
The alternative for Labor is more of what we had yesterday — Wayne Swan railing against the banks while they exploit their market dominance with impunity.