Former Future Fund chairman and CBA CEO David Murray has this afternoon delivered the political elite another post-GFC caning on the sidelines of the Association of Mining and Exploration Companies convention in Perth, warning politicians not to engage in “debt-fuelled vote buying” and instead urging them to act to protect Australia’s “weak” AAA credit rating. From the AFR:
“Our high net foreign liabilities to gross domestic product creates huge vulnerability when we’re so dependent on foreign bondholders – and bondholders can revolt”…
“We cannot take our triple-A [credit rating] for granted. In fact, it’s a weak triple-A already and we are copying the things that we saw in Europe that created structural difficulties…
“There’s over regulation, debt funded entitlement vote buying by the politicians all these structural rigidities in these systems.
“…here we are in an election where the biggest issue is which side of politics is telling more fibs about our fiscal position.”
While it is heartening to hear these views expressed publicly by Mr Murray, it is also a little irritating given he is one of the people partly responsible for Australia’s debt addiction and high external liabilities. When Mr Murray was at the helm of the CBA in the late 1990s, he ignited a price war amongst the banks by slashing CBA’s variable mortgage rate (remember ‘equity mate’?). Let’s also not forget that the CBA has been one of the largest issuers of offshore wholesale debt and one of the biggest mortgage lenders.
Indeed, part of the reason for Australia’s massive foreign liabilities is that the banks have borrowed to the hilt from foreign bond holders to pump housing, requiring the Budget to remains strong in order to support (implicitly) the over-leveraged banking sector.
