Ding dong. It’s Josh visiting.

The below was reported in the SMH CBD section; what is essentially the business and politics gossip page of the SMH/Age news papers.

It is presented as a bit of a laugh, but should it be?  Is it appropriate that a Minister, now Treasurer, use the power and brand of his office and of the government to beat up and threaten businesses.  And selected businesses at that.

Ok.  The banks and financial services industry have misbehaved, but it was not a individual effort.  It was a team effort of bad law, bad regulation, poor regulators and bad behaviour.  Thus far the banks and regulators have been slapped about by the Hayne Royal Commission.  How about some accountability from the legislators?

If the Treasurer wants a particular policy outcome, PASS A LAW.  If a business is not complying with a law or a regulation, send in the regulators or the prosecutors.

This is really the stuff of a totalitarian state at worst and of crony capitalism at least.

One really needs to wonder what the word Liberal means in the context of a Liberal-National Government.

Busy Frydenberg sets the banks straight

As energy minister, Josh Frydenberg made paddling then AGL boss Andy Vesey over high power prices a sort of political performance art.

We assume the major banks are hoping the now Treasurer doesn’t have similar plans for them following his recent re-election.

The good news is they’ve already had a chance to meet him post.

Frydenberg waited just one day after being sworn in to start on the rounds.

The first catchup was at the ANZ HQ last Thursday, where he met chairman David Gonski and chief executive Shayne Elliott, followed by a face-to-face with NAB boss Phil Chronican on Friday.

Yesterday, Frydenberg was spotted meeting with Commonwealth Bank chief executive Matt Comyn, perhaps to double check that he really hasn’t tempered his sense of justice.

And while he hasn’t bedded down a meeting with Westpac boss Brian Hartzer, we’re informed he has already been in touch with the bank’s chairman Lindsay Maxted.

We’re told the message from Frydenberg to the Big Four wasn’t just one of a full adherence to Kenneth Hayne’s Royal Commission recommendations.

He wants interest rate cuts, should the Reserve Bank decide on them today, to be passed on in full.

Since the financial services royal commission, the banks have departed the national policy debate to focus on no longer being the most hated businesses this side of James Hardie.

Those close to the Business Council told CBD they banks had not contributed for some time.

Getting on with Frydenberg might be a good place to start.

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19 Responses to Ding dong. It’s Josh visiting.

  1. stackja

    As I remember the Business Council was quiet during most of the election campaign. Banks first have shareholders then customers. Profit first then customers.

  2. John A

    He wants interest rate cuts, should the Reserve Bank decide on them today, to be passed on in full.

    And the message: Keynesianism rules, OK?

    Doesn’t matter that another cut will worsen the current mess.

  3. candy

    It reminds me of how Rudd and Gillard used to do business – threats and sneakiness.

    For the life of me, I can’t see that RBA cutting the interest rate is a positive or is some kind of inspiration to work and save. It is a depressing state of affairs, in my opinion.

  4. Bruce of Newcastle

    Maybe if he removed the major bank levy that the Libs hit the major banks with the major banks wouldn’t have to keep rates so high to offset the tax his government put on them.

    And if APRA allowed the banks to meet Basel III, not some imagined Basel CLXIV or whatever it is they are forced to meet now, they wouldn’t have to hold so much capital and therefore wouldn’t have to have such high rates to offset the money that the government has forced them to stash uselessly under a rock.

    But then Josh bashing the energy companies for doing what the government forced them to do (ie build lots of stupidly expensive and intermittent renewables) is quite in character with the bank bashing they been doing for years now. What would we be without hypocritical pollies?

  5. Squirrel

    In the dim distant past, when Josh was still dreaming of being a tennis pro, senior federal ministers would worry about record high household debt and a lamentably low savings rate.

    These days, all that matters is stopping the credit bubble from bursting and keeping the punterariat living beyond their means to maintain demand for all the imported merchandise, and over-priced local services, which constitute much of what passes for our economy.

    Aussie! Aussie! Aussie! Debt! Debt! Debt!

  6. Natural Instinct

    Josh they are obviously ripping me off. DO SUMFINK

    The Reserve Bank board decided to cut the cash rate by 0.25 percentage points to 1.25% today,
    Commonwealth Bank will reduce its standard variable rates for owner occupiers and investors by 0.25 percentage points, while ANZ says it will cut its standard variable rates for owner occupiers and investors by 0.18 percentage points.
    CBA’s standard variable rate for owner occupiers paying principal and interest will fall to 5.12% .
    ANZ’s standard variable rate for owner occupiers paying principal and interest will fall from 5.36% to 5.15% per annum

    So how did we get from 1.25% to 5.12%?
    Must be something else in the cost of funds than the RBA cash rate? Wow you don’t say.
    Fix it Josh!!!!!!

  7. Shy Ted

    He just wants his own housing bubble.

  8. Bruce of Newcastle

    So how did we get from 1.25% to 5.12%?

    My home loan iirc started at 17.5% and dropped in a few years to 14.5%. Luxury! I was very happy.

  9. Bad Samaritan

    I love the banks. Instead of keeping my dough under the mattress it’s over there in a vault (then in electronic dots and dashes). My other liquid and semi-liquid assets are scattered about, with a good few gold bars stashed away. I buy what I want with a piece of plastic the banks give me for free, and I pay for lots of other stuff via the banks’ websites.
    pa and inflation is running
    Why should I dislike the banks which make everything so much easier for me…with very little risk?

    BTW: The banks are paying me about 3% and inflation is roughly 1.5%, so what’s the problem?

  10. When does the Govt look at the deeming rate again. My recollection it was Scott Morrison who last adjusted it. Are the pensioners being looked after; their returns on financial assets, according to the government, may have declined somewhat. But then they have gotten some franking credits of late.

    Perhaps the Treasurer could look at the deeming rate as an adjustment may be appropriate to balance Govt pensions given lower yields on financial assets. That’s what the Government should be doing today.

  11. Mark M

    I’m preparing for perfect weather as we speak …

    … “Reserve Bank deputy governor, Guy Debelle, who in March warned [failed UN doomsday global warming] poses risks to Australia’s financial stability, and, in the process, noted policymakers needed to consider warming as a trend and not a cyclical event.”

    https://www.theguardian.com/commentisfree/2019/may/30/matt-canavan-should-stop-wagging-his-finger-at-those-who-want-climate-action?CMP=share_btn_tw

  12. Percy Popinjay

    inflation is roughly 1.5%, so what’s the problem?

    The problem is the CPI is a bullshit measure of the real rate of price increases. Go and compare your bills/ongoing expenses this year (e.g. council rates, health insurance, car insurance, home and contents insurance, petrol, electrickery, gas, water, etc) and see if any of them went up by only 1.5%. I think you’ll be sadly disappointed.

  13. Whalehunt fun

    The banks should raie their interest rates before the RBA announcement of a cut and then cut them back to where they were and announce they have passed on the cut. The Frydenberg buffoon needs to be put in his place.

  14. Texas Jack

    That Frydenberg thinks he runs private concerns should concern all of us. That successive Liberal governments have seen fit to threaten to intervene in gas export markets (where long term investors took long term risks, all championed by government, and should expect commensurate returns free of meddling), impose sector specific tax regimes, and stoop to promote the absurd shite that Turnbull and Pyne packaged as innovation policy, tells you how far the party drifted under the Turncoat brigade.

  15. Art Vandelay

    It’s possible that Frydenberg is even more incompetent and stupider than Chris Bowen.

  16. Colonel Crispin Berka

    Can anyone explain how ANZ rigged the BBSW, as anonymous “investigators” and the ABC claimed last week?

    OK, each bank can bid high or low to try to push the prevailing interbank lending rate in any direction, and the direction it goes could be beneficial to any bank’s subsequent trades that day, or could be worse.
    So if each bank knows other trades it plans to make it can use that inside knowledge to push the rate in a beneficial direction. But every bank can do that. And each bid is supposed to be a speculation of some kind of value, but the point of seeking that value is to make a profit anyway.

    Is there supposed to be some Chinese Wall between the sections in banks that bid on BBSW and the sections that trade other securities?

    What did ANZ do that is so different from normal proft-seeking behaviour, or different from any other bank?

  17. Rigging has a loaded meaning and there are a number of legal technicalities that are relevant but notwithstanding.

    Essentially the banks, ANZ included, have a number of other transactions/contracts that a referenced to BBSW (and other such benchmarks like LIBOR), eg various swap contracts. Thus what happened was that the banks were allegedly prepared to spend a bit extra to move BBSW in a direction that was favourable to their other contracts – delivering a profit.

  18. Colonel Crispin Berka

    TAFKAS, thanks for reply, but it’s still clear as mud as to why this should be considered bad.
    I guess I don’t understand exactly what the BBSW is, or how there might be side-effects on lots of other parties of the BBSW. I guess if lots of other people lose money due to a BBSW change but ANZ profits, one could question whether that’s fair. In plenty of other sectors or commodities it is accepted that large volume traders have a greater ability to set prices than small players and it is just accepted that smaller players can lose out as a result. Hard to see how it can be any other way when inter-bank lending must expose customers of one bank to risks of customers of another bank as well as the bank management themselves. If another bank’s customers are generally more profitable, and this is reflected in BBSW, aren’t the less-profitable bank’s customers going to lose out through higher fees – by design?

    Ideally banks should only profit when the projects they finance have profited, and the RBA does more to undermine that principle every 3 months with its absurdly below-currency-devaluation interest rate than anything I’ve heard about the BBSW. If they want to stamp out the rigging of lending rates that cause other people to lose money, they should start at the top.

  19. @Colonel Crispin Berka

    Imagine for the moment that the market price of widgets is $1.00 and you are the seller and I am the buyer.

    You and I agree that I will buy 10 widgets from you at the prevailing price at exactly 2.00.00pm on Wednesday.

    At 1.59.59pm the price was $1.00 and at 2.00.01pm the price was $1.00. But you, because of your special powers could influence the price that was as 2.00.00pm to be $1.02. I have thus paid an extra $0.20 to you than would have been otherwise.

    Voila.

    The BB in BBSW stands for Bank Bill. This is the rate at which the banks borrow from the market. Investors (eg punters such as fixed income funds) agree to lend to the banks at prevailing BBSW. They agree to deal in the morning at the price that is spit out at the end of the day. If bank pushes price down, they get cheaper money and the investor gets less interest.

    There are plenty of other scenarios, but TAFKAS assumes you get the gist.

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