One of my first jobs in journalism was as the banking reporter. The thing you learn quickly on the banking round is that banks like to give out free stuff to journalists (Mortgage holders? Another matter entirely).
Offers of free lunches at swanky city restaurants are swiftly forthcoming. Umbrellas emblazoned with the corporate logo are common gifts, and yes, I took a few.
And so it was that on a rainy day in early November 2010, I found myself heading out to dinner, casting a wary eye at the skies and another at my Commonwealth Bank freebie umbrella sitting by the front door.
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Struggling to get a handle on where the economy is heading? Don’t beat yourself up about it. You’re facing an uphill battle. Nobody tells the truth about the economy.
All the main sources of economic information - politicians, business people, economists and even journalists - are hopelessly conflicted when it comes to talking honestly about the economy. Let me lift the veil a little.
It shouldn’t shock you to learn politicians often bend the truth, particularly on such a hot button election issue as the economy. The political Punch and Judy show over government debt is a good example.
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Tight labour laws and excessive government regulation have stifled productivity in this country. But the massive growth of the financial sector is likely a factor too.
Underpinned by valuable implicit guarantees that give banks artificially cheap access to loans, banks’ size rose to unprecedented heights, drenching the economy with loans in the process. The total value of loans in Australia, about $2.1 trillion, as a fraction of national income has risen from around 80 per cent fifteen years ago to above 140 per cent today.
Government subsidies helped too. The Productivity Commission shows the finance sector receives more federal government budgetary aid than the car industry: $615 million last year.
Imagine if the government routinely chipped in half the cost of McDonalds’ and KFC’s bun orders. Other fast food restaurants had to buy their own buns. As you’d expect, the two chains would spread further, enjoy bigger relative profits than other restaurants who in turn would struggle to compete.
Such a policy would not survive public scrutiny. But banking works similarly in Australia, where taxpayer are each contributing up to $7 billion a year to the bottom lines of the big four banks – ANZ, Westpac, National Australia Bank and Commonwealth Bank.
The money doesn’t flow directly, but if the banks lose enough in a financial crisis taxpayers are on the hook to ensure their creditors get paid. No matter what governments might say, the GFC showed in the United States and Europe that they will come to the rescue when the financial system looks like choking.
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Campaigning for better banking is a bit like the start of the footy season. We begin as optimists, trying to forget the disappointments of last year, the unfair penalties and questionable free kicks, hoping instead for some healthy competition.
That is where the similarities end. While other national sports have salary caps and at least the semblance of a level playing field, our big four banks have spent the pre-season again demonstrating why they are about as popular as a tram of drunk Collingwood supporters.
Recent weeks brought interest rate rises outside of the Reserve Bank cycle and more record profits, set against a backdrop of outsourcing, job losses and tales of high-seas parties that could put “mad Monday” to shame. Even the most hardened optimist would admit there seems more chance of Russell Crowe’s Rabbitohs claiming the NRL trophy than our major banks putting customers first.
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Poor old Wayne Swan! He may be the world’s best treasurer but he can’t get the big banks to be nice to consumers.
It’s a bit like the world’s best dad asking a family member to behave or be nice to the other members of the household. And that’s the point. We have four big banks that, despite being valued members of society or the Australian “family,” are being self-centred and not very nice to consumers or the Australian household.
We then have a federal Treasurer and PM who are supposed to be guardians of the Australian household or economy being ignored by the big banks. And that’s after the federal Treasurer has been so nice to the big banks.
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We’ve been talking a lot about interest rates this week. And the 30 per cent of us who have mortgages will be keeping our eyes on news websites today, with ANZ expected to push up its lending rates and the rest of the Big Four banks likely to follow. That’s despite the Reserve Bank keeping the official rate on hold earlier in the week.
Interest rates are just one of the many ways that bankers rip us off. It’s pretty much their job. There’s no such thing as a free lunch (or mortgage) when it comes to the banks. The government can only do so much to protect us. Although in the past few years the federal government has started enacting some consumer-oriented reforms in the banking sector.
But the government could be protecting us much better when it comes to one part of our everyday banking: the fees we get charged when we withdraw our dosh from an ATM that our bank doesn’t own.
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Stop all the cheering, cut off the champagne. Prevent the pollies from barking and silence the drums. The piddling interest rate cut didn’t even happen.
Today’s widely expected drop of 25 basis points was the catalyst for plenty of chest beating. Treasurer Wayne Swan tried to unleash righteous fury, the banks tried to cry poor, the unions said the banks are squeezing ordinary Australians, and not in a good way. Nothing happened. The Reserve Bank of Australia decided to keep the cash rate steady.
But was all the hullabaloo justified in the first place?
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Poor old bankers. They keep telling us how tough it is for them with their funding costs expected to go up and how they will need to keep interest rates inflated.
And if the crying poor line isn’t enough the banks are quick to tell us that we are “picking on them” if we have a debate about how poorly they behave especially when the RBA changes the official interest rate.
Perhaps the “we’re doing it tough” line would carry some weight if the big banks didn’t show record profits year after year and if the banks’ CEOs weren’t getting such big pay packets year after year.
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Sue O’Reilly, who has guest written today’s column on The Angry Cripple is a freelance journalist. She co-founded Australians Mad as Hell last year with Fiona Porter to campaign for an NDIS and established a charity called Fighting Chance to help people with disabilities pay for essential therapy services.
Bill Moss was one of the highest paid business executives in Australian corporate history when he worked for Macquarie Bank, prior to his retirement in 2007 on health grounds.
As head of the bank’s real estate and banking division, Moss built - literally from scratch - an international real estate and funds management business that spanned five continents, created thousands of jobs and made billions for the bank’s investors, shareholders and, through tax payments, federal Treasury coffers.
So really, all Australians are pretty fortunate that the slowly degenerative physical disability with which this razor-sharp businessman was born - a form of muscular dystrophy known as FSHD - happened not to become overly evident (to others at least) until Moss was in his early 40s and had already established his credentials.
Here we go again - another bank switching package from Wayne Swan. Has Swan got it right this time? Well, yes and no.
There’s no doubt that Wayne Swan’s recent announcement that bank customers will be allowed to sign a single form to switch banks is well overdue. In reality, Swan could and should have pursued the “one form” approach back in 2008 as we all suspected that bank switching can be as simple as filling in just one form.
Should we be excited about Swan’s latest bank switching package? Well, not just yet. Any excitement needs to be tempered by doubts as to whether the latest reforms are to be extended to small business customers.
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Holy crap, Ralph Norris has resigned. Well, I guess if you were Ralph Norris with all that pressure and all that money, you’d be looking for some R & R too. Still. The world will never be the same.
According to the legend of Ralph Norris, for a while there they called him ‘Chuck’, which is a sissy kind of name for a dude who grew a beard in utero and burns it off with a withering gaze each morning. And then every five minutes.
The Commonwealth Bank chairman David Turner described him as “outstanding and fearless”. That doesn’t even scratch the surface of Ralph Norris.
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A News Ltd survey of Australian imams unearthed a renewed call for the recognition of sharia banking in Australia. At The Punch we weren’t really sure what that meant, so we asked expert in Islamic banking Dr Hussain Rammal, a lecturer in International Business at UniSA, to talk us through the basics.
What are the main differences between Islamic banking and Western banking?
The main difference is in the way the two systems deal with money. Under the Islamic economic system money is seen as a medium of exchange and has no intrinsic value. Therefore charging a higher rate of return (interest) on lend money does not sit well under the Islamic system. Islamic financial institutions use an asset-backed system where they purchase the assets on behalf of their customers and then use various financing agreements to on-sell the asset to their clients. These include profit-and-loss sharing, leasing and hire-purchase, and mark-up based agreements.
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ATM fees have long been a sticky topic. For many people, paying an ATM transaction fee is an unwelcome but accepted fact of life.
For Indigenous Australians in remote communities however, ATM fees can have a significant impact on their life, swiftly eroding their humble bank balance.
This is the finding of a report released late last year by the feisty Australian Financial Counselling and Credit Reform Association (AFCCRA), titled “ATM Fees in Indigenous Communities”, which focussed on excessive ATM fees in remote communities.
Each and every day millions of Australians pay financial institutions to access their own money.
Some pay more while others pay less, depending on the way they do it. Sometimes, as with EFTPOS transactions, the price consumers pay for their own money is largely invisible, being factored into the prices of goods and services. In other cases, the cost of using your own money is embedded in bank fees, or else in forgone interest from transaction accounts with negligible rates of interest.
One of the most expensive ways for Australians to access their own money is by using a third-party automatic teller machine - that is, an ATM not provided by their own bank. In most cases, third-party ATMs charge $2 for every transaction, including checking one’s account balance. In other words, $2 is the price consumers pay every time they are disloyal to their bank.
Have you had a close look at Wayne Swan’s December 2010 bank package? Don’t worry if you haven’t yet as you haven’t missed much.
For those who have, it’s clear that it’s so light handed and minimalist that the big banks aren’t bothered by it. In fact, the big banks have even told the Senate banking inquiry that they actually like aspects of the package.
So much for Swan’s tough talk regarding the big banks. Given how much of a fizzer the package will be, one has to wonder if Swan’s announcement was more about being seen to be “doing something” in response to the public anger towards the big banks.
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Wayne Swan is aggrieved. The hard-working treasurer is disappointed at the way his long-heralded bank reform package has gone over. But should he be surprised really?
Let’s face it, bank packages, especially over-hyped ones, always underwhelm. Knowing this, it is curious that the Government has again managed expectations so ham-fistedly, taking weeks to reveal an unremarkable hand. Perhaps, like many things, it depends on where you stand.
After toiling away behind the scenes, the Government feels it has offered up serious reform. This may or may not turn out to be true if things like genuine portability of account numbers come to pass. Ditto with allowing banks to tap into the one trillion dollar national superannuation nest-egg, which may help storm-proof the finance sector against future global credit crunches. But neither of these reforms, nor many other aspects of the package, will do much for home-owners right now.
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Treasurer Wayne Swan, as Acting Prime Minister, began his press conference today by acknowledging Australians who have been hit by savage, widespread flooding.
Then he started talking about how he was going to help ordinary Australians by shaking up bits of the financial system, and it was at that precise point that Wayne Swan lost about 99 per cent of banking customers.
Floods they could understand, even if they were high and dry; covered bonds and RMBS funding were outside their usual ATM transactions.
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Not since Paul Keating introduced compulsory superannuation contributions in the early 1990s has there been such an important opportunity to change the way Australians think about saving for their retirement.
This urgent need for change is magnified when Australians are asked how much they actually know about their superannuation. A recent survey by Suncorp Life found 49 per cent of us don’t understand our super, and 30 per cent of us don’t believe our super is even our own money. Annual changes to the superannuation system are also a constant and frustrating occurrence. That’s why it’s vital for the Government to get it right this time.
The results of the much-anticipated Cooper Review announced last week urge a range of sweeping reforms to superannuation, and herald an exciting new era for the industry. The question is whether the Government is prepared to do what’s needed to simplify the system, and restore Australian’s confidence in superannuation.
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Hands up everyone who never sent an email which, if made public, would cause themselves and their employer massive embarrassment.
The particularly modern form of humiliation has the added bonus of many of them being recorded electronically, putting them beyond dispute. It’s not someone’s recollection of events - it’s Microsoft’s.
Investment banking firm Goldman Sachs is the latest to cop it, with emails from executives talking about “shitty” products they were selling with one hand and betting against with the other. The most sensational are the emails from Fabrice “Fabulous Fab” Tourre to his girlfriend referring to “Frankenstein” products invented via “intellectual masturbation” being sold to widows and orphans. Not much room here for the traditional defence of being taken out of context.
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How long have you been with your bank? When was the last time you switched all your accounts to another bank?
If you’re like most Australians the answer will either be “never” or “years ago”.
And there’s your reason why bank service will never be quite up to scratch. It’s us. We’re bank suckers. We talk about how banks treat us, and the poor level of service, but that’s all we do. Talk.
Before the election, in the May 2007 budget in reply speech, Rudd the Regulator stated “I have already announced our intention in government of adopting a simple principle: no new regulation imposed on business unless an existing regulation is withdrawn”.
So how is Mr Rudd going with this promise? According to the Federal Register of Legislative Instruments on the Comlaw website, in 2008 – 4699 new legislative instruments were added and in 2009 till the end of September – 3699 new legislative instruments were added.
That’s 8398 new forms of select legislative instruments, statutory rules and regulation.
A few days ago, I was part of a group of 6 economists who wrote an open letter arguing for a new Inquiry into the financial system—a so-called “Son of Wallis, Daughter of Campbell.”
Put simply, so much had changed in our understanding of finance, banking and economics and so much ‘on the fly’ policy had been undertaken, that surely stepping back and reviewing our policies above the political fray would be a good idea.
We had hoped that this might get a little media and perhaps push the government into putting an inquiry onto the agenda. Our letter was a long and not particularly reader-friendly affair. But towards the end we asked the following:
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LIKE darning socks, car-pooling and drinking instant coffee, bank bashing went out of favour when we were all getting rich during “the great neo-liberal experiment”. Now, from the top office in the land down, this wholesome pursuit is making a comeback.
It’s not that the banks ever lost their talent for bastardry. It’s just that for a decade or so it has been suppressed by competition – from the likes of Aussie and Wizard – and by the buoyant economy. That $140 annual account-keeping fee didn’t look so bad when your credit card was in the black and the value of your house had doubled in the past two years. But with competition to the Big Four now all but wiped out, leaving the Westpac, Commonwealth, NAB and ANZ as the last saviours of our financial system (just ask them), the bastards inside can once again be unleashed.
The Commonwealth took one for the team this week when it raised variable home loan rates 0.1 percentage points to 5.74 per cent. It was the first mortgage rate increase by the banks since last year but won’t, unfortunately, be the last.
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