The COVID-19 crisis has apparently trumped our memory of previous financial crises, what caused them, and the tortuous process of legislating to fix the long-term damage.
That could be your conclusion after reading the extraordinary speech that pumped-up Treasurer Josh Frydenberg is delivering to yet another Australian Financial Review talkfest today, the aptly named Banking & Wealth Summit.
According to the AFR take on the treasurer’s speech, he will “reprimand” — yes, reprimand — “the major financial regulators for hampering the recovery from the COVID-induced recession with overzealous intervention in policymaking”.
And if that tough talking wasn’t enough the dire warnings are ramped up with these ominous words: “He views some of their actions as an attempt to usurp the role of parliament and tie lenders in red tape.”
In other words, after years of parliament being forced to push regulators to better protect everyone he now blames them for doing what the public — then belatedly politicians — had been clamouring for them to do. Silly us for thinking the regulators were too soft.
On the surface it seems rather extraordinarily provocative — but that might be only if you actually put it into context.
Like reading another story in the Nine papers this morning under the headline “Time of reckoning” with the Australian Bankers Association’s dire warning of the problems ahead as loan deferrals and government stimulus packages end.
So on one hand the banks are warning us that next year there will almost certainly be a number of home defaults and business collapses, but also now is the time to loosen responsible lending initiatives and rev up the economy to help Frydenberg’s government’s reelection prospects.
While the treasurer quite rightly gloats about how well our financial system has coped with the pandemic — “no run on banks” he proudly noted, among other things — he must believe the worst of the crisis is over. How else to explain such an aggressive push to roll back the protections that Kenneth Hayne championed after the pain of that banking royal commission only two years ago?
Of course the government has used the cover of COVID-19 to hold up most of those reforms — despite promising to implement nearly all of them.
The explanation and context is simple: the banks have been pushing back strongly against responsible lending reforms and the treasurer is using that hoary old chestnut “cutting red tape” to justify rolling over to their demands.
In his speech Frydenberg cites the fact that in consumer credit the responsible lending framework has led “to almost 100 pages of ASIC regulatory guidance”.
“This has led lenders to become increasingly risk-averse and conservative for fear of falling foul of the guidance,” he said.
“As a consequence, the government is seeking to remove responsible lending obligations for all lenders except those issuing small account credit contracts or consumer leases, with APRA’s lending standards remaining.”
This is incredible given it was less than a week ago that ASIC reported that some consumers are having to cut back on essentials such as meals because of debt they racked up from using buy now, pay later lenders — warning one in five consumers were missing payments.
ASIC also admitted it was yet to actually do anything about this looming consumer credit crisis but it was working on it. (Don’t rush, if you are reading the treasurer’s speech.)
As well as pandering to the banking lobbyists to tone down responsible lending legislation and weaken the Hayne recommendations, the speech promises the usual ideological crackdown on the superannuation industry.
The treasurer wraps up by saying: “The reforms both preceding and during the crisis have helped Australia outperform so many other nations, but there is no room for complacency.”
A classic bit of newspeak where what he is saying appears to be exactly the opposite to what he means.
What do you make of the treasurer’s speech? Let us know your thoughts by writing to [email protected]. Please include your full name to be considered for publication in Crikey‘s Your Say column.