Australia’s four largest banks will be summoned to appear before the House Economics committee once a year to be grilled about their policies, practices and profitsm due to be announced in coming days.
The Turnbull; government took this decision in the wake of all four banks decision not to pass on to mortgage customers the full benefit of a 25 basic point cut in interest rates announced by the Reserve Bank on August 2. The base rate now stands at a record low of 1.5 per cent.
With the half yearly results season upon them – and margins and dividends under pressure – banks have to balance the interests of borrowers, depositors and shareholders, and are not succeeding. Bank shares have fallen, lending criteria make it more difficult to get a mortgage, new government regulations require banks to hold greater reserves, and depositors get a raw deal.
The Australian Labor Party has not given up on a siren call for a royal commission into the banks, a move that has the support of the majority of independent senators that now control the upper house. Hence the government’s popularist move to call bank bosses up to Canberra to account for themselves.
Bank loans, particularly for home mortgages, are growing faster than deposits, and the big four have a shortfall of funds to lend of an estimated $400 billion. Most of this money has to be found in the offshore wholesale market, where rates are low, but the currency risk is high. The Australian dollar has been extraordinary resilient, but a weakening now seen as likely, especially if inflationary pressures grow in the US and the Fed lifts rates.
In this economic environment the Turnbull government has to negotiate a passage where it has a House of Representatives majority of only one, and a Senate that can be counted on to reject much of the legislation presented to it.
The net result is that in coming months even less progress can be expected out of Canberra than in the past arid three years. The prime minister seems to have stopped telling people “there’s never been a better time to be an Australian”, because few people believe that the mess the July 2 election has created will lead to much good.
Meanwhile, hot on the heels of Britain’s prime minister, Theresa May’s decision to look again at Chinese investment in the nuclear industry, Australia’s treasurer Scott Morrison says he government was “examining to the nth degree’ the security issues that might arise if it permitted Ausgrid, the electricity network in New South Wales, to be leased to the State Grid Corporation of China or Hong Kong’s Cheung Kong Infrastructure.