The ‘big girl’s blouse’ jobs debate

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In theory it’s the job of media to hold other institutional powers to account. The truth is much more complicated because the media must choose a standard against which to make the judgments that constitute that account. Sure, some of those values are self-selecting: democracy, law and order, social standards etc. But even here you can see that under these easy labels there is a well spring of values, where again, the media has already made any number of assumptions before it can execute its primary task of accountability.

So, the truth about media is that it’s job is much more about canvassing and policing values that it is about holding others to account. That’s why you get such a wide sprectrum of ideological viewpoints expressed through different media outlets.

In my view, the best outlets set up their boundaries across as broad as possible political, moral and ideological positions within (and sometimes outside of) accepted national value systems. That’s why, for my money, the Murdoch press is far too limited in its outlook (which is as much about business strategy as it is anything else) in keeping its judgments confined to economic libertarianism and social conservatism. Just as frustrating are the Fairfax metropolitan dailies, which are addicted to feeding the armchair left their platitudes of social progression and economic protection. It’s probably no coincidence that the Australian print media landscape is run by a duopoly. You could argue they’ve simply divided the audience between them.

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This rather silly division is one reason I prefer the Australian Financial Review to both. It’s solid liberalism is much more sensible than both.

But appearances can be deceiving. As I’ve argued before, in my view a different set of values largely forms the frames of reference of all Australian media, including business and economic reporting. It’s not judeo-Christian, Western or Eastern versions of capitalism, it’s not even solid Anglo-Saxon liberalism. It’s “the battler” versus “the bludger”. And never is this conflict more in evidence than during times when jobs are becoming more scarce.

The current debate around the loss of bank jobs is a classic case in point.

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For the past week we’ve been subjected to an incredible amount of hand-wringing over declining bank jobs. It’s been a back and forth debate between hyperbolic media and government commentary upset over as many as 7,000 job cuts over the next three years (rendered by implication by a bunch of “bludger” executives) and a gallery of ex and current banking folk selling the line that the banks have every right to control costs and blaming government (the ever present bludger). More of the same is available today from Don Argus at the AFR.

What gets lost in this battle for the moral high ground of Australiana is the simple fact that bank job losses, and by extension further job losses in credit dependent industries, are inevitable. We’ve all lived high on the hog for thirty years of easy credit and now that has passed the bill must be paid. It means higher capital charges and liquidity requirements to make banks safer. It means more expensive funding costs for banks. It means lower system growth for all. All of which adds up to less and more expensive credit. And a warning for bank investors, it means lower returns and dividends as well.

Take, for instance, a note put out by Moody’s late last week called “Why global banks rating will likely decline in 2012”. In it Moody’s points out that:

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Several trends are currently weakening the credit profiles of many rated banks globally, including (i) deteriorating sovereign creditworthiness, particularly in the euro area; (ii) elevated economic uncertainty; and (iii) elevated funding spreads and reduced market access at a time when many banks face large debt maturities.

  • In advanced economies, these factors are expected to lead to many banks experiencing downward migration of their standalone credit assessments and their debt and deposit ratings in 2012. In the short-term, these pressures will primarily affect the ratings of global capital markets intermediaries (the largest firms trading securities and derivatives) and, in Europe, other banks exposed to financial market disruption. We expect to place the ratings of a number of these banks under review for downgrade during first-quarter 2012, in order to assess the effect of these trends on bank credit profiles.
  • Although we note positive factors — such as the accommodative stance of central banks in advanced countries and the strengthened regulation designed to make banks safer — the positive trends are overshadowed by the aforementioned negative credit factors.
  • The expected decline of bank ratings reflects the acceleration of interrelated pressures on the banking sector since the second half of 2011. These pressures most immediately affect global capital markets intermediaries and European banks. Most European banks are vulnerable to the euro area debt crisis that reflects eroding investor confidence and a weakening regional economy. Our concerns centre on the ability of many European banks to retain the confidence of investors and counterparties and to fully refinance substantial 2012 term debt maturities. To reflect these challenges in ratings, we will further emphasize the forward-looking elements of our bank rating methodology, increasing the weight given to estimates of bank solvency under anticipated and stressed scenarios, and adjusting our views on the operating environment, franchise value, risk positioning and financial fundamentals for vulnerable banks. As a consequence, the standalone credit assessments and ratings for many European banks will likely decline.
  • In contrast, the credit profiles and ratings of banks operating in more stable environments, and of banks with strong, retail-oriented business and funding profiles, will be less affected. However, despite some banks being less affected, we acknowledge that the highly interconnected financial markets and economies imply elevated uncertainty for all banks, even those banks that have shown resilience thus far.
  • Global capital markets intermediaries face macroeconomic uncertainty, low growth and severe market volatility. These factors, combined with regulatory restrictions and intense revenue pressure add to existing credit challenges for these firms, such as interconnectedness, complexity and opacity of risk profiles. As a result, we expect to lower its standalone credit assessments of many global capital markets intermediaries, including the standalone credit assessments of broader-based banking groups with significant capital markets operations. The long-term — and in some cases potentially short-term — debt and deposit ratings of these institutions will likely also be affected.

Australian banks may not be global banks but they remain heavily integrated with global markets and the $300 billion or so in liabilities to Europe expose them all the more.

It’s simply a realty that banks must shrink (or grow much more slowly) and so must credit-dependent industries so we’re all less exposed to a bigger economic accident later on. Yet after the post-GFC backdoor bailout of the banks, as well as ceaseless rhetoric of economic exceptionalism the politico-housing complex of government, finance and media has no narrative to explain these job cuts. Nor solutions to them. That’s not to say I’ve no sympathy with those losing their job. On the contrary, this ‘big girl’s blouse’ debate does nothing to help find the new economic settings that will be required to create new jobs for them.

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About the author
David Llewellyn-Smith is Chief Strategist at the MB Fund and MB Super. David is the founding publisher and editor of MacroBusiness and was the founding publisher and global economy editor of The Diplomat, the Asia Pacific’s leading geo-politics and economics portal. He is also a former gold trader and economic commentator at The Sydney Morning Herald, The Age, the ABC and Business Spectator. He is the co-author of The Great Crash of 2008 with Ross Garnaut and was the editor of the second Garnaut Climate Change Review.