Wednesday, October 27, 2010

Hockey Alone on Economics

Joe Hockey is alone on economic policy. Opposition Leader, Tony Abbott, was stunned into silence this morning when asked if he supported Hockey's 9-point plan to control the banks. Twice he was asked if he supported Hockey's plan; twice he  gave an unrelated response. Later, he was asked if that was all just a bit of a misunderstanding withe 9-point plan. His reported response was "Umm ...", followed by a longish silence.

Later still, Abbott made phone calls to radio stations with essentially pre-prepared statements and answers.

Meanwhile, Jon Howard said that Hockey is "not in the same league" as (former Treasurer) Peter Costello. On 22 October, The Australian reported: "Senior Liberal MPs, including frontbenchers, told The Australian yesterday they did not agree with the position Mr Hockey had taken on the banks and said it demonstrated lack of judgment. "This is certainly not Coalition policy," one frontbencher said."

Among the ideas were:
  • legislation to regulate the interest rates banks can charge.
  • An investigation by the Prudential Regulation Authority to investigate the risks banks take.
  • More pressure from the ACC on alleged price-collusion the big 4 banks
  • other points in the plan are more difficult to find,  but legislative regulation of the banks is definitely contrary to the Liberal Parties free-market policies.
For all the bagging Hockey has received, a new Banking Inquiry might not be such a bad idea. They make noises about rising costs of funds (ie overseas interest rates,because about 2/3 - 70% of their loan funds are sourced overseas. However, they quite deliberately left out the bit about the high $Aus benefiting them enormously while they (re)negotiate their 3 and 5 year loans!

Deregulating the banking sector created an oligopoly: the big 4 banks control the vast majority of home loans, and they flex their individual & combined market power. Their repetitive statements about the need to increase interest rates is classic consumer softening by repetition and frequency. It should be resisted, especially in light of the significant increases in their profits, and profit margins! An inquiry is one way, but not the only way, for more people to be aware of this information, and counter the banks advertising-by-repetitive-statement tactic.

For all that, I believe Joe Hockey is rather alone in the Liberal Party on economic policy, and the "amended", watered-down plan taken to Shadow Cabinet and ultimately approved by them was really them saving Hockey's backside. They won't do it too many more times.