The bank guarantee – what does the Opposition and the media really believe?

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Thursday, 30 October 2008 17:40 by Ad astra

Ever since the Rudd Government announced its guarantee for deposits in banks, credit unions and building societies there has been a running commentary from the Opposition and the media about that move.  After a brief flirtation with bipartisanship, following Tony Abbott’s dictum that oppositions should oppose, propose nothing, and turf the government out, the Opposition has embarked on a corrosive process of criticism in the hope that some of the gloss would be rubbed off the Rudd Government.  Even if that were a legitimate course of action for oppositions, it would improve their standing if they at least added their considered opinion on the best course of action, so the public could judge which seemed better, their's or the Government’s.  So far, the only recommendation that Malcolm Turnbull has made was to limit the guarantee to $100,000.  All the rest has been carping criticism.

One would have hoped though that the media might at least have been even-handed, dispassionate and critically analytic, and that their analyses would be based on factual evidence, precedents, experience elsewhere, or well-founded, economically sound arguments.  Sadly that has not been so.

We have seen a wide range of appraisals. Janet Albrechtsen’s 12 October piece Courageous Rudd overcomes history and populism, written the day of the guarantee announcement, says “...the Rudd Government deserves praise for acting responsibly and courageously.” and “Whilst safeguards, limits and restrictions need to be added to today’s measures to avoid them becoming blank cheques for foolishness, the government has clearly demonstrated leadership at a critical time. It is a sign that the Rudd Government is economically responsible in direct contrast to the Liberal Party populists who have ignored the international reality that banks are falling over, or being bailed out by governments, on a weekly basis.”  No mention of bungling.  Paul Kelly too had praise initially, although he subsequently hedged his bets by saying that although the unlimited guarantee was a ‘mistake’ it would do the Government no harm, and that Rudd had played his cards brilliantly.  Predictably, Dennis Shanahan labeled the move as Rudd’s ‘first big mistake’.

As time went by, with the benefit of hindsight, the media began to express even greater doubts.   Some, such as Alan Kohler in Business Spectator on 28 October said in Savings in a stranglehold  “Unless they (Rudd/Swan) are to go down in history as the bumbling fools who wrecked the Australian economy, they must instantly, this morning, put a universal price on the deposit guarantee that was announced on October 12.”  Strong words, but at least he offers advice, namely that every institution be enabled to offer AAA accounts that pay zero interest, and explains how this would work.  Who knows if there’s any merit in his advice, (no one else has publically endorsed his views) but at least he’s explained himself.  Not so the rest of the media. More...