The New Daily’s Rob Burgess has penned a very good piece today arguing that while there are good reasons for public outrage at the banks, we also shouldn’t let Australia’s politicians off the hook for creating the conditions for banking malfeasance:
Bankers are supposed to maximise profits for their shareholders within the regulatory environment in which they find themselves.
And so they have. But in the process they have shackled Australians to among the highest levels of household debt in the developed world.
And it all happened while politicians stood back and did nothing.
The governments of John Howard, Kevin Rudd, Julia Gillard, Tony Abbott and Malcolm Turnbull all pretended that the debt bubble was some kind of natural event. It’s nothing of the kind.
Before the GFC, it was due to lax prudential regulation and the capital gains tax reforms of the Howard era, in toxic combination with existing negative gearing laws.
During and after the GFC it was due to a series of first homeowner grants and low interest rates – plus restrictions on lending that only arrived when the bubble was near its peak…
The problem is that historic inter-generational transfer of wealth is neither repeatable nor economically efficient. It’s a misallocation of capital on a grand scale.
Politicians and regulators created the tax policy, interest rate policy and prudential regulations within which that historic run-up in house prices and debts took place…
So while bankers deserve the grilling they’re getting this week for negligence and deception in other areas of their operations, save a bit of bile for the politicians.
Some very good points raised. It is lax government policy that has overwhelmingly created the banking monsters that are today sucking the economy dry. These policies have included:
- Bank capital rules that overwhelmingly favour residential property lending over productive lending;
- Subsidised liquidity support offered by the RBA (taxpayers) to the banks;
- Implicit use of the sovereign AAA credit rating to guarantee the banks;
- Taxation policies that bias housing speculation over productive investment and savings;
- Superannuation rules that wrongly allow leveraging into property;
- Lax regulation and enforcement of property purchases by foreigners;
- First home buyer subsidies;
- Restrictive land release/planning policies;
- Unprecedented levels of immigration; and
- Lack of infrastructure investment to accommodate housing/population growth.
