Wednesday, October 27, 2010
Six months ago at the Press Club I asked him about Australia Post.
He replied, "I send this warning to Australia Post: do not go into banking, do not be conned into the Rudd government rhetoric about going into banking, because we would strongly oppose any attempt by the Rudd government to set up a government bank. Australia Post should continue to do the good job that it’s doing, it should not be going into banking."
Which was commendably clear.
Until this week when he unveiled a 9-point plan to improve banking. Here's his point 4:
"Let's investigate David Murray's proposal for Aussie Post to make its 3800 branches available as distribution channels for smaller lenders... To be clear, the Coalition does not endorse Australia Post assuming balance-sheet risk and getting into the banking business itself."
Which modifies somewhat his absolute opposition to Australia Post going into banking.
He has changed in other ways.
A year ago when six leading economists called for a new financial system inquiry I asked whether he would be prepared to back it.
He wasn't quite. "We can't be policy lazy, this is a debate worth having," was the best I got out of him.
Only later when his leader Malcolm Turnbull embraced the idea did he actually back the call for a new financial system inquiry.
But this week he came out in favour of a new inquiry, "a son of Wallis, or granddaughter of Campbell, whatever you will," with all guns blazing. It was point 9 of his nine points, the one that "wrapped up" his whole program.
Which is fine. Consistency is overrated. As far as I am concerned it is better to be wrong then right than it is to be consistently wrong.
But that's just me. Labor had a field day. Their cheat sheet of Hockey quotes shows that in 2010 he said he called for a "social compact between taxpayer-guranteed banks their shareholders and the government", but in 2000 said "imposing social obligations comes at a cost." In 2010 he wanted the government to take on the banks with measures "punative in nature," but in 2001 warned that over regulation would make consumers pay "more for their mortgages, higher fees." And so on.
None of which means Hockey is wrong now.
And, although Labor's record in bringing the big four banks to heel was ordinary at best it scarcely bothered to suggest he was.
During the financial crisis Wayne Swan allowed Westpac to swallow St George and the Commonwealth to swallow BankWest. Westpac was allowed to grab RAMS, and the Commonwealth Wizard and 30 per cent of Aussie. NAB grabbed the lending business of Challenger and tried to merge with the ANZ.
The end result as Hockey said this week is that our "four major banks have largely become the Australian financial system".
Which would be okay except that each of those big four can now dictate terms of the government instead of the other way around.
Let's go back to the last financial system inquiry led by Stan Wallis in 1997, the one the government apparently doesn't think needs rethinking (although it is actually silent on that point, a strategy it prefers when dealing with the substance of what Hockey is saying rather than engaging).
Wallis recommended against guaranteeing any financial institution under any circumstances. It'd lock them together in a monkey grip. The government could never let go no matter what the institution did.
A decade on that's exactly what the government did, in extraordinary circumstances. It guaranteed both the deposits and borrowings of the big banks in such a way as put beyond doubt that it would do it again.
The banks meanwhile want to expand overseas and into new fields. (As an aside Hockey said that with the big banks now effectively constituting the financial system “aspirations to grow more rapidly than that system seem challenging”.) But why not? Each of the big four now rightly believe the government will rescue them if their adventures put their core business at risk. Taxpayers are now hostage to overseas adventures in a way never previously envisaged.
An alternative would be to have banks “more akin to bullet-proof utilities focussed on delivering stable returns to shareholders”.
Hockey says one solution would be “to quarantine the risks that taxpayers insure, for example allowing banks to expand offshore and engage in riskier business profiles, but ensuring that it is impossible for their offshore activities to in any way, directly or indirectly, undermine their Australian operations.”
It would be a bit like separating Telstra, another position the Coalition has arrived at late. We would have adventurous dynamic organisations risking capital but also safe government-backed and regulated service providers of exactly the kind beloved by conservative investors.
Brain explosion or not, Hockey is now making sense.
Of course we need a new financial system inquiry. Of course we need to ensure we are no longer hostage to the banks.
Labor needs to say more than that Hockey once said something else.
Published in today's SMH and Age
2010 10 25 Address to the AIG Annual National Forum
. Hockey explains himself on banks
. Hockey to spell it out: "It's time to talk Banking"
. Australia Needs a Comprehensive Financial System Inquiry
. Son of Wallis, daughter of Campbell
. Support grows, and names are mentioned