As we’ve observed before, there is nothing that the Reserve Bank of Australia and friends won’t do, no place they won’t go, to protect their pet housing bubble.
On the surface the financial regulators appear to be happily deflating said bubble by pretending that the economic outlook is good, tightening macroprudential and holding interest rates steady. But under the bonnet there are a bunch of signals that show the regulators are dangerously close to losing independence to keep the great economic hernia hanging from their belly nicely plumped.
Recall that behind the scenes the RBA is working with Treasury to prevent any change to the corrupt banking regime exposed by the Hayne Royal Commission upon which the bubble depends:
The Reserve Bank of Australia and Treasury have privately cautioned the Morrison government that any regulatory response to the financial services Royal Commission must be careful to avoid putting the brakes on lending to home buyers and business.
This despite four our of five Australians losing faith in their own banking system:
Only one in five Australians believes banks act ethically and only one in four thinks banks take responsibility for mistakes and keep their promises to customers, according to the damning findings in a new national survey.
The survey underlines that the job of repairing customer trust in the wake of the Hayne royal commission will be a long and challenging road.
The inaugural Deloitte Trust Index – Banking 2018 has found the public’s dim view of banks is not influenced by major political party persuasion, class or gender. Nor are branch customers any more trusting than those banking over the internet.
We’ve lost confidence for good reason, with a new dump of royal commission shockers late yesterday for the RBA and Treasury to protect:
…multiple reports of sexual harassment at work events and outside the workplace.
…erroneous listing of credit card defaults against 16,228 customers in breach of the Privacy Act,… personal details of 60,463 customers sent to the owner of a string of adult websites.
…falsified more than 100 loan applications, two business bankers who colluded with third parties to make 47 fraudulent loans…
…staff manipulating internal systems such as ‘simulating’ account deposits to trigger bonuses, falsely recording that offers had been made in order meet key performance indicators…
Recall that it was Labor that triggered the royal commission. It is also Labor that continues to agitate for it continue. And it is Labor that has made it clear that it will legislate appropriately against any repeat of illegal and immoral banking. Yet the RBA and Treasury have implicitly lined up with the Coalition to prevent it.
It doesn’t stop there. The RBA’s sister organisation, APRA, is giving some sort of tacit endorsement to the Coalition regarding management of the bubble into the election, via the AFR:
Mr Frydenberg on Wednesday accused Labor of trying to “smash” the already-falling housing market from its plan to curtail negative gearing and capital gains tax breaks.
He has instead endorsed the prudential regulator’s interventions to cool the property market via cracking down on investor loans.
This follows Treasurer Frydenberg reappointing APRA chair, Wayne Byers, for five years when his term is not even up, even while he faces extraordinary questions about APRA’s competence. A chorus of observers including the AFR ‘s Chanticleer described that as dodgy this week:
The early reappointment of Australian Prudential Regulation Authority chairman Wayne Byres sends a message that is both poorly timed and off-key, given the important questions that have been raised by the royal commission.
Commissioner Ken Hayne’s interim report was so incendiary that it’s easy to forget it only covered the first two-thirds of the commission’s hearings.
Perhaps this is just the ham fist of an apprentice treasurer but the optics are terrible.
Long ago MB christened the mock separation of fiscal and monetary powers as the “politico-housing complex”, run by a sad gaggle of bureaucrats that have no better idea for their nation than to protect a debilitating property bubble. Said complex has been able to keep the bubble inflated far longer than elsewhere owing to its one competitive advantage – dubious ethics – which has enabled sequential policy violations to ‘kick the can’ through several serious periods of threat. This strategy is also very much in regulator’s own personal interests as they hold huge numbers of properties themselves, as well as avoiding blame and associated career damage if the thing implodes.
As the deflation gathers pace, and Labor looms as the democratically endorsed pin for the bubble via negative gearing reform, that complex is being exposed in the plain light of day as oligarchic, corrupt and politicised to the core.