What’s with the AFR’s bank levy conniption?

It’s a pretty obvious loss of perspective at the AFR. Those article attacking the banking levy:

Those supporting it:

Does that look like fair and balanced coverage to you? Even The Australian noticed how good Chris Joye’s article in support of the levy was:

Yet they have a point on Scott Morrison’s 0.06 per cent bank levy. All the tabloids loved it — and who could fail to be amused by the Daily Telegraph headline on Thursday “What a bunch of bankers”.

The levy does have the look of the mining super profits tax about it and many suspect punishment for appointing former Queensland Labor premier Anna Bligh chief executive of the Australian Bankers Association. That and a bit of populist bank bashing to match Labor’s.

Best argument in favour of the levy, apart from budget repair, was made by Chris Joye in The Aust­ralian Financial Review on Friday. Joye noted the five banks to be slugged already benefited from an implied double upgrade by the ­ratings agencies on the back of ­assumed government guarantee of their solvency.

So is the era of deficit repair ­really over? I think not. If the economy manages to grow for another four or five years and voters stick with the Coalition rather than Labor, which now looks ­reckless in its attitude to spending, taxation of middle income PAYE taxpayers and anti-business company tax rhetoric, growth will take care of the deficit.

I am left to wonder though why so many media conservatives on radio and pay-TV rail so hard against deficit financing but give such enormous publicity to the crossbench independents who have since 2014 blocked budget repair. And as this paper’s Adam Creighton revealed last month and Bolt mentioned again on his Sky News program this week, with 60 per cent of households now receiving more from the government than they pay in tax, the system needs reform so voters do not simply opt for ever more spending financed by those few in society who actually pay for everything.

Yet the same piece did not even run in the printed AFR edition. A few points:

  • banks are the paper’s biggest advertisers so some sympathy is inevitable but the above bald-faced bias?
  • the paper has been doing quite well since Michael Stutchbury took over (Stutch). He is a graduate of the Murdoch school of business journalism which conflates private ownership with functional markets and often therefore subordinates market structure to individual business interests;
  • however, that makes for dreadful business media, which relies upon objectivity to drive readership, so Stutch may be overreaching.

Get it together, AFR. The bank levy is a long overdue Piguvian tax that rectifies a dreadful market imbalance and public subsidy. If you’re in favour of liberalsim and functional markets then get behind it. Any other point-of-view is bought at the price of your own credibility.

Houses and Holes
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  1. MSM reporting is as balanced as a Shadow Bank’s money laundering ledger.
    Last night Media Watch did a segment on Brickx and how the ABC had done a virtual “puff piece” on the business model.
    Brickx was a topic here about 2 weeks ago. Perhaps the reporting of the bank levy is another free kick for Media Watch?

  2. HadronCollision

    ME bank CEO almost 100% flubbed his chance to advocate for the levy this morning on RN. Alison Carabine (spelling) had to help him reach the obvious conclusion. He was way too stand offish in the first half and took way too long to mention Chris Joye’s article.

    Who is prepping this clowns?

  3. Jeremy Bentham

    Honestly David, you must have some understand of the levels of debt these banks have in foreign markets ?

    The banks are well and truly aware that the bubble has popped and the market simply has not caught onto it yet – the Chinese demand has evaporated, mortgage indexes are collapsing, the developers are freaking out – every single possible prick mentioned over the past seven years has come to bare on the bubble simultaneously – including boomer down-sizers.

    The banks KNOW its over.

    The levy is several things – it is not merely raising revenue. If its passed on it will probably be the straw that makes the camel realise its back was broken back in January. If it is not it is a 5% reduction in investor returns on top of the losses which are going to start flooding in over the next three months.

    If the banks do not pass this on, and are facing this levy on top of a collapsing housing market does it impact their credit rating ?

    I think the banks are in more trouble than they are letting on. We KNOW they have been comprehensively diddling the books on investor / ppr loans. We know they have been diddling the books on pretty much everything. We know they have been covering up their tracks in the mining towns.

    And this is the thing. How much are they losing in these towns ? 5,000 loans at a million each is a shit load. It really is. And between every single mining town which has gone bust – there are at least that many – probably ten times that number.

    And they are all gone.

    But the main reason the LNP have literally done a double back flip on their ideological bread and butter – they also know how much trouble the banks are in – HENCE the levy.

    There is more to this than meets the eye.


    • The banks are essentially the lynchpin of a defunct economic model – sell off dirt and leverage that to lever up into housing.

      They are the mechanism by which we all levered up and they are, as you rightly identify, levered to the eyeballs, and their collateral on that debt is the assets (not worth half of what they have them down on their books for?) the people servicing the debt(in of the most heavily indebted societies about, with the most pathetic competitive position, made more so by the policy of feeding the competitive sectors of Australia to the banking-real estate model to keep the ponzi going) and government support for the banking sector borrowings and the legislative support for the model (with the government wearing out its welcome with the punterariat, being forced to plausible address housing affordability, starting to be a tad more circumspect about immigration, and very barely fending off widespread anger about the behaviour of the banks over a generation) .

      The government cannot continue to support them. It is that simple. Sure people can rightly point to the economic and social fallout – and yes it is going to be painful – but even the strongest political will in the world cannot really save the model. As David and Leith have pointed out ad infinitum all of the financial system supports which would ordinarily be there to soften any downturn have been used to inflate the bubble higher. The legislative side cannot really fend off the people pissed off with higher migration, higher house prices, higher debt, and weaker and weaker jobs prospects forever, and Australia’s banks will for sure have been aware of (and probably worked out a game plan of sorts for) this very potentiality.

      They are ultimately largely controlled by global capital and in a crisis will presumably behave in such a way as to extract the greatest possible benefit for those interests. It is in their interest for as many Australians as possible to believe that calling the banks to account for a generations worth of asset inflation and debt dispersal (especially where this has eroded the competitive position of Australians per se) will be so painful that it should never be contemplated, because this will ensure that the profitability of those banks for the global capital set (and yes it will also be for numerous ordinary Australians – essentially in place as human shields) is maximised.

      But the question for Australian policymakers is not solely about bank profitability. It is about the wider economy and how best to make Australia a competitive economy, or competitive enough to support a lifestyle satisfactory for Australians, and ultimately policymakers (both sides of politics and our major regulatory and policymaking institutions) need to ask themselves if feeding the economy to the FIRE sector though debt, asset sales and commodity exports employing circa 3-4% of Australian employees is going to continue to work, or if it is a diminishing return (with an appropriate jumping off point gambled into play). From there (and I think many here would identify that the point has passed) it becomes a task of managing the demise (in relative terms) of the banks, and minimising the socio economic upheaval. I reckon we arent far off. Sure banks can scream that they should be untouched and that they should be the last edifice standing of what was once a competitive robust economy allowed to wander off into bubble land taking Australians with it. But ultimately they are out there drawing lines in the sand telling the tide not to come in.

      For mine I think it should be made clear to Australia’s banks that it is highly likely that one of them will become a ‘bad bank’ to carry into eternity the spectacularly ill thought out lending policies of the lot of them in the Howard-Rudd-Gillard-Abbott-Turnbull era, when (not if) the moment arrives that their position at the trough can be sustained no more in the interests of the future economic viability of Australia. A little bit of caveat emptor might do everyone a lot of good.

      The levy is just the start, and the reason they are screaming the way they are is, as you identify, they know where it leads to next. But you sure couldnt say they are blameless and havent made their own bed.

  4. First time I read the AFR in years at coffee shop yesterday. Towards back edpiece on how corporations must fight back.

    • That’s probably it, advice an immediate push-back against any sensible modification of tax policy. If the public noticed they have power against the banks/FIRE then that might embolden the public to fight for an even fairer outcome. AFR has a mantra: Fight for the status quo.

      • It wasn’t just banks must fight back, it was corporations!
        We are a defeated and occupied nation.

  5. Murdoch school or not, Stuch knows that the AFR must identify with its readership. The high subscription price tells you who they are!