Published in The Guardian on 5 October 2020.
Pardon me for being just a little suspicious, but when I see an avalanche of enthusiasm from such reputable institutions as the Morrison government, the Murdoch media and the Australian Banking Association (anyone remember the Hayne royal commission?) about the proposed “reform” of the National Consumer Credit Protection Act, I smell a very large rodent. “Reform” here is effectively code language for repeal. And it means the repeal of major legislation introduced by my government to bring about uniform national laws to protect Australian consumers from unregulated and often predatory lending practices.
The banks of course have been ecstatic at Morrison’s announcement, chiming in with the government’s political chimeric that allowing the nation’s lenders once again to just let it rip was now essential for national economic recovery. Westpac, whose reputation was shredded during the royal commission, was out of the blocks first in welcoming the changes: CEO Peter King said they would “reduce red tape”, “speed up the process for customers to obtain approval”, and help small businesses access credit to invest and grow.
And right on cue, Westpac shares were catapulted 7.2% to $17.54 just before midday on the day of announcement. National Australia Bank was up more than 6% at $18.26, ANZ up more than 5% at $17.76, and Commonwealth Bank was trading almost 3.5% higher at $66.49. The popping of champagne corks could be heard right around the country as the banks, once again, saw the balance of market power swing in their direction and away from consumers. And that means more profit and less consumer protection.
A little bit of history first. Back in the middle of the global financial crisis, when the banks came on bended knee to our government seeking sovereign guarantees to preserve their financial lifelines to international lines of credit, we acted decisively to protect them, and their depositors, and to underpin the stability of the Australian financial system. And despite a hail of abuse from both the Liberal party and the Murdoch media at the time, we succeeded. Not only did we keep Australia out of the global recession then wreaking havoc across all developed economies, we also prevented any single financial institution from falling over and protected every single Australian’s savings deposits. Not bad, given the circumstances.
But we were also crystal-clear with the banks and other lenders at the time that we would be acting to protect working families from future predatory lending practices. And we did so. The national consumer credit protection bill 2009 (credit bill) and the national consumer credit protection (fees) bill 2009 (fees bill) collectively made up the consumer credit protection reform package. It included:
- A uniform and comprehensive national licensing regime for the first time across the country for those engaging in credit activities via a new Australian credit licence administered by the Australian Securities and Investments Commission as the sole regulator;
- industry-wide responsible lending conduct requirements for licensees;
- improved sanctions and enhanced enforcement powers for the regulator; and
- enhanced consumer protection through dispute resolution mechanisms, court arrangements and remedies.
This reform was not dreamed up overnight. It gave effect to the Council of Australian Governments’ agreements of 26 March and 3 July 2008 to transfer responsibility for regulation of consumer credit, and a related cluster of additional financial services, to the commonwealth. It also implemented the first phase of a two-phase implementation plan to transfer credit regulation to the commonwealth endorsed by Coag on 2 October 2008. It was the product of much detailed work over more than 12 months.
Scott Morrison’s formal argument to turn all this on its head is that “as Australia continues to recover from the Covid-19 pandemic, it is more important than ever that there are no unnecessary barriers to the flow of credit to households and small businesses”.
But hang on. Where is Morrison’s evidence that there is any problem with the flow of credit at the moment? And if there were a problem, where is Morrison’s evidence that the proposed emasculation of our consumer credit protection law is the only means to improve credit flow? Neither he nor the treasurer, Josh Frydenberg, have provided us with so much as a skerrick. Indeed, the Commonwealth Bank said recently that the flow of new lending is now a little above pre-Covid levels and that, in annual terms, lending is growing at a strong pace.
More importantly, we should turn to volume VI of royal commissioner Kenneth Hayne’s final report into the Australian banking industry. Hayne, citing the commonwealth Treasury as his authority, explicitly concluded that the National Consumer Credit Protection Act has not in fact hindered the flow of credit but instead had provided system stability. As Hayne states: “I think it important to refer to a number of aspects of Treasury’s submissions in response to the commission’s interim report. Treasury indicated that ‘there is little evidence to suggest that the recent tightening in credit standards, including through Apra’s prudential measures or the actions taken by Asic in respect of [responsible lending obligations], has materially affected the overall availability of credit’.”
So once again, we find the emperor has no clothes. The truth is this attack on yet another of my government’s reforms has nothing to do with the macro-economy. It has everything to do with a Morrison government bereft of intellectual talent and policy ideas in dealing with the real challenge of national economic recovery. Just as it has everything to do with Frydenberg’s spineless yielding to the narrow interests of the banking lobby, using the Covid-19 crisis as political cover in order to lift the profit levels of the banks while throwing borrowers’ interests to the wind.
This latest flailing in the wind by Morrison et al is part of a broader pattern of failed policy responses by the government to the economic impact of the crisis. Morrison had to be dragged kicking and screaming into accepting the reality of stimulus, having rejected RBA advice last year to do precisely the same – and that was before Covid hit. And despite a decade of baseless statements about my government’s “unsustainable” levels of public debt and budget deficit, Morrison is now on track to deliver five times the level of debt and six times the level of our budget deficit. But it doesn’t stop there. Having destroyed a giant swathe of the Australian manufacturing industry by destroying our motor vehicle industry out of pure ideology, Morrison now has the temerity to make yet another announcement about the urgent need now for a new national industry policy for Australia. Hypocrisy thy name is Liberal.
Notwithstanding these stellar examples of policy negligence, incompetence and hypocrisy, there is a further pattern to Morrison’s response to the Covid crisis: to use it as political cover to justify the introduction of a number of regressive measures that will hurt working families. They’ve used Covid cover to begin dismantling successive Labor government reforms for our national superannuation scheme, the net effect of which will be to destroy the retirement income of millions of wage and salary earners. They are also on the cusp of introducing tax changes, the bulk of which will be delivered to those who do not need them, while further eroding the national revenue base at a time when all fiscal discipline appears to have been thrown out the window altogether. And that leaves to one side what they are also threatening to do – again under the cover of Covid – to undermine wages and conditions for working families under proposed changes to our industrial relations laws.
The bottom line is that Morrison’s “reform” of the National Consumer Credit Law forms part of a wider pattern of behaviour: this is a government that is slow to act, flailing around in desperate search for a substantive economic agenda to lead the nation out of recession, while using Covid to further load the dice against the interests of working families for the future.