Following is a letter I had published on the banking non-issue. While the commentaries by Swan and Finance Minister Shorten, and to an extent, by Joe Hockey, are mainly political diversions, they also reveal an appalling ignorance of the operations of the financial system. As reflected (inter alia) in the recent customer switching of banks (about a third), competition has increased. What more does Swan want? Why doesn’t Hockey refer to this?
Incidentally, the fact that Gillard has taken over Swan’s role on “selling” the economy and her economic policies, and that Hockey continues to be just as bad at selling Coalition economic policies, indicates just how badly the community is served on economic policy issues.
As for Shorten (see his pathetic “Big Four Should Remember Who Backed Them in GFC” in today’s Aus), he displays himself as a financial ignoramus and union-hack when he says that “thousands of layoffs” should not occur (what “thousands”?), that banks should concentrate on improving their worker skills and that offshoring (which appears to relate mainly to bank administrative activities) carry many risks. Perhaps offshoring by banks will educate him just a teeny bit on the fact that we have a labour market system (sic) that is helping undermine our international competitiveness. In another context Shorten has also suggested that, when companies face difficulties, the first priority should be to accept lower profits not job cuts! Does he realise what the employment implications are if there is a general lowering of profits? Does he realise also that the policy of having Australia as the world leader in reducing CO2 emissions will lower the profitability of companies not compensated?
More on banking and exchange rate issues soon.
Des Moore
Banks should show heart while being commercial
letter published in The Australian, 9 February 2012
[Square brackets show deletions by Ed]
The decision by the Reserve Bank to hold the official rate stable is unlikely to stop the [pathetic] criticisms of the banks by Treasurer Wayne Swan When political parties run into [internal or policy] difficulties there is a [long] history in Australia of using banks as a whipping horse to divert attention [from other problems].
[Jockey] Swan has that job but he can’t decide which whip to use: he agrees that banks need to be profitable but not too profitable and he agrees they need to be competitive but doesn’t say they are uncompetitive. The end result is that jockey and horse risk being left at the start.
[As margins have shrunk, there is no doubt that] the banking sector has become more competitive [in recent years]. But there is scope to increase that competitiveness further by, for example, allowing overseas takeovers of one of the big four.
Your senior economics correspondent, David Uren raises the more worrying possibility (Commentary,7/2) of reversing the [successful] deregulation of the banking sector [,started by Treasurer Howard and continued by Treasurer Keating,] presumably with a view to trimming bank lending rates and profits. But such an abandonment of the competitive market approach would follow the disastrous path adopted in the labour market and must surely not be under serious consideration [by either major party].
Des Moore
Director, Institute for Private Enterprise
South Yarra Vic