What were you expecting - fireworks?

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Thursday, 30 December 2010 18:43 by Feral Skeleton

I was just watching some vintage Paul Keating in full rhetorical flight the other day as I was recuperating and contemplating the ramifications of Wayne Swan's Banking Package, released in early December. Which seems eons ago when you've been to Hell and back, as I have been since then. And it occurred to me, the electorate expected a Paul Keating-like 'Bang!', but instead it came with Wayne Swan's customary polite political whimper. Very Oz-like, as in Wizard of Oz-like.

Especially the bit where the Wizard tries to convince Dorothy from the (Kansas) Suburbs that he really means it when he lets out all manner of exhortations from behind his facade, painstakingly constructed so that people couldn't easily see the meek and mild-mannered guy behind it.

Same thing with Wayne Swan and his Banking Package. There he was for weeks before it was released, thumping the tub and making as much loud noise as his tiny body could muster. He would scare the pants off those porculent Bankers (I'm mainly thinking Mike Smith from ANZ, here). Then, by the time he's finished, they'll all sit down obediently and behave like he wants them to. The Banking Package won't even need to be so cataclysmic with the sorts of changes to be imposed as to rock any boats therefore, and Wayne could then retire to Brisbane for Xmas and New Year, job well done.

Except for one small matter! The Australian electorate has been spoilt of late when it came to Treasurers. Sublimely at the peak of his powers as Treasurer was the Master of Vaudeville Switch-Flicking, Paul 'Ramrod' Keating. What a hard act to follow. What a class act.

So, the electorate expected this:

but instead they got this:

'Mr Sobersides'

Not to mention the fact, and as I say so often, when it is appropriate I will do it, that the Coalition threw onto the stage a pretty handy performer as Treasurer, when they were elected in 1996. One, Peter Costello. We may have loathed his H.R.Nicholls-esque ideological tendencies, but he was as interesting to watch in Question Time, in his own uniquely gormless way, as was Keating.

And then there was Wayne. See what I mean? He could re-write Basel III for the global financial system single-handedly, and the Australian electorate would go 'Meh.' Which is sort of what happened, actually, with the Rudd government's response to the GFC. 'World's Best Practice', and 'Best In Show', by popular acclaim, globally and locally. Yet still I get the feeling that that equates to a collective shrug of the shoulders from the electorate. I'm sure, thusly, Wayne Swan spends his downtime wondering, “Why don't they love me too? What more could I do?”

Well, put simply, Wayne, get a Funny Bone transplant. Sadly, it appears that that's what the punters are crying out for. Some more 'Wicked Wit' to go with their KFC Wicked Wings, as they chow down in front of the 6 PM News each night.

It's not going to happen, though. 'Fiscal rectitude' is Wayne Swan's motto, as opposed to 'Flamboyant Rhetoric'. Such that that is the only reason I can think of for the electorate preferring the $11 Billion Black Holey Roller Joe Hockey, when it comes to Economic Management credibility. He does the 'Fizz! Pop! Whiz! Bang! Whirr!' thing better than Wayne. It's surely not because of his superior economic competence.

Anyway, onto the Banking Package itself, with which I assume you are all well familiar by now. So, a precis of sorts. Long story short, it was a bit like this:

The Curate's Egg

It certainly wasn't one of these:

So, while the Opposition and the Greens talked tough about bringing down measures to curb the outlandish behaviour of the Big Banks, Wayne Swan actually delivered a package. And no, I don't count Joe Hockey's 9 dot points without any supporting legislation as any sort of equivalent substitute from the other side. As Laurie Oakes appeared to also say at the time in Banking on Wayne Swan’s tactics a good bet

As far as the package itself goes, the headline grabber was a ban on exit fees on new mortgages written after July 2011 (although fees will remain on existing mortgages) and a plan to pump another $4 billion into the Residential Backed Mortgage Securities market, which should help improve the pool of credit available to smaller lenders, and which should also hopefully flow through to Small Business as well as home buyers.

As Wayne Swan himself said at the time, “Generally making the market more competitive is just as important for someone who has that dream of owning a small business as it is for someone who wants to buy a home.”

So, what else is in it?

Firstly, the government will set up a feasibility study, to be run by former RBA head Bernie Fraser, to examine ways to make it easier to shift deposits and mortgages, including the introduction of full account number portability, which is something the Greens have been pushing for. Account portability is something that would truly enhance competition and the Big Banks don't really want.

Secondly, the Government will set up a taskforce with the RBA to examine competition reforms around ATMs, with the Central Bank to examine whether the $2 ATM fee is fair and reasonable.

There will also be new regulations to crack down on so-called 'Price Signalling' by the banks (the process by which they make public statements about rate rises and effectively warn each other what they are going to do), and new legislation to crack down on 'unfair' credit card fees, charges and conditions.

Finally, there are a few good old government information campaigns. All new home loan customers will get a mandatory home loan information sheet, and there will be an information campaign to help consumers understand their new rights and responsibilities.

Wayne Swan is also intent on building a 5th Pillar to rival the Big 4 banks, and sees supporting the mutual sector-credit unions and building societies as the best way to do this.

To this end he will encourage the banking regulator, the Australian Prudential Regulation Authority, to fast track the approval of 20 mutuals that want to call themselves banks.

Further, the mutuals will be at the centre of a government campaign to give lenders a sort of stamp of approval, the ‘Government Protected Deposits’ symbol, which will hopefully allow the mutuals to raise funds.

The government will allow banks, credit unions and building societies to issue covered bonds, which are bonds that are secured (or 'covered') by a pool of assets if the bond issuer becomes insolvent. These bonds are seen as a key method for lenders to harness the huge pools of superannuation funds washing through the Australian financial system, and reduce the reliance of lenders on overseas sources of funding.

The Government clearly needed to do something to invigorate the bond market, and it has tried hard to do that. But while the extra $4 billion for the RMBS market will be immediately welcomed, it will of course be a little while before we actually see smaller lenders issuing covered bonds.

Patience is still very much required.

As Wayne Swan said when he released the Banking Package, “There is no 'Silver Bullet' that will immediately fix banking competition.” The GFC changed the sector forever. There is no way we can hope to go back to the way it was during the days of easy credit. Nor should we.

What do you think?