Adam Bandt (Melbourne, Australian Greens) Share this | Hansard source

by leave—This report is the government turning a blind eye to bad behaviour in the big banks. As a member of the committee, I will not be agreeing with the majority recommendations. The Greens will be issuing a dissenting report.

The big four banks suckle at the government's teat and receive billions of dollars in implicit subsidies. That helps them make world-leading record profits because they know that, if they ever get into trouble, the government will step in and help them out. That gives them a leg up over their smaller competitors, and it gives them the kind of advantage that any struggling manufacturer in this country would love, or that a tourism operator dealing with the high Australian dollar at times would dream of—namely, to know that the government will underwrite you if you ever get into trouble—because it allows you to go to overseas markets and borrow much, much more cheaply.

The Reserve Bank has called this out; the IMF has called this out and said that something needs to be done about the fact that these big four banks are receiving billions of dollars in implicit subsidies. The big four banks came along to this inquiry and admitted it. They did not disagree with what the Reserve Bank or the IMF had said, and accepted that any other payments they might make probably do not offset the advantage they get because the government treats them as being too big to fail. But when we asked them at the inquiry, 'Would you be prepared to pay a bit for that advantage—to give something back to the public purse for the leg up that you, the big four, get?' they said no. They said, 'We are not prepared to do that.' They are leaners, not lifters.

It is time that this parliament stopped the cosy relationship that government has with the big four banks, where it is giving them a leg up at the expense of their smaller competitors and other businesses, and took some action. Any reading of the evidence from this inquiry suggests that the government is simply willing to turn a blind eye to the cosy subsidies that are given to the big four banks. And, sadly, there is absolutely nothing in the government members' report about that evidence given by the big four banks to us, which is one of the reasons that the Greens will be dissenting and suggesting that it is about time that we imposed a public support levy on the big four in recognition of this implicit public support they get that any other struggling business in this country would love.

But what was also alarming about the evidence that came to us during this committee hearing was: the exposure of the big banks to a growing and overpriced housing market in this country, because we learnt through this inquiry that the world-leading record profits that the banks are making are, in large part—and in growing part—dependent on writing more and more loans for more and more expensive housing. We heard some distressing evidence from some—there are claims, and these claims have been made on ABC television—that, in some instances, people's incomes have been inflated in order to allow for higher loans to be written.

There is something fundamentally wrong in the Australian financial apparatus when we have huge amounts of money going into unproductive areas—like increasing the cost of existing housing, which puts housing out of reach of many young people and everyday Australians—and only serves to increase the banks' bottom line. And that is what is happening. The money that is being lent out increasingly by the big four banks is not going into productive infrastructure. It is not helping businesses expand. It is going into pushing up the cost of housing. And what we learnt from the inquiry is that the banks' CEOs make money out of this. Their bonuses are, in part, dependent on growth and return on equity to their shareholders, which is, in turn, dependent on writing more and more loans for housing.

So there is a very worrying vicious circle developing in the Australian economy that means it is in no-one's interest to step back and say: 'Hang on—is it right that housing prices keep going up in this way; that record low interest rates fuel the growth in housing prices, fuel the profits for the banks and fuel the CEOs' salaries, all the time putting housing out of the reach of younger Australians?' But the government has turned a blind eye to that evidence in its report as well.

What we need—if you sat down and listened to the evidence that we have heard, including what the committee has heard in other evidence that has been given by other regulators—is to step in and stop this vicious circle. That means taking action on negative gearing, and it means taking action on the capital gains tax discount. But, sadly, that is missing from the government's report as well because the government knows that to take action on that might actually hurt the big banks, and heaven forbid that the government would want to do anything that involves standing up to the big banks.

Lastly, one of the key reasons for the two Senate inquiries that we have had and for the holding of this committee inquiry is what is called the question of vertical integration—the fact that banks in Australia also have big wealth management arms, and those wealth management arms make a lot of money out of selling financial products to people and then returning the profits back up the line to their owners, the banks. So, when they sell those products, the people selling them have a perceived conflict of interest because they have to make money to kick back up to the banks, their ultimate shareholders at the top, but they also have the customer coming to them, saying, 'Hang on, I would actually hope that what you're doing is in my best interest.' It is because of that perception of conflict that we have seen so many scandals where people have been sold products that ultimately get them into trouble that can mean that they lose their house.

We learnt throughout this hearing that no-one had lost their job as a result of this. It seems that there is a very, very clear pattern in the Australian banking industry. People get sold products that get them into trouble. Things go wrong, and it is everyday people who suffer. It is not the banks that expose it. That is left up to whistleblowers or journalists. It is then exposed. The CEO then fronts up, wrings their hands and says, 'I'm sorry; we made a mistake.' But, when you lift the lid on that so-called apology, you find that, back at the ranch, the same people are still in charge of the wealth management divisions within those banks. It seems that the problem all comes from the same source, an inherent conflict, and yet at this inquiry the big banks denied that there was any problem. They denied that there was any problem and suggested that the best answer was continued self-regulation.

The government's only solution is to say, 'Well, we'll put in a new body that might or might not have the powers to deal with problems after they arise,' instead of cutting off the problems before they even arise in the first place. We have an opportunity with this committee and in this parliament to stop the problems from occurring in the first place and to turn off the tap. We have the opportunity in this parliament to say: we need to look at whether vertical integration is the right way to go, or perhaps we need to look at the overseas models where they are breaking up the big banks and saying it is time to separate the deposit and lending arms from the wealth management arms because of that conflict and that perception of conflict. So we recommend in our dissenting report that there be a royal commission and that the royal commission look very, very closely at that question of vertical integration.

Lastly, can I say that it is clearer after this committee report than it was beforehand that a royal commission is needed, because, when committee members have all of 15 minutes to ask questions of bank CEOs, and the bank CEOs then disappear and come back again half a year later, that is nothing like the kind of forensic and intensive investigation that can be done by a body that is charged with getting to the bottom of this problem. We need to see beyond the veneer. We need to see beyond the apology that happens when a CEO fronts up to the committee. We need to look at the practices in the bank, because, if we are hearing that the same people are still in charge, that should send the alarm bells ringing for everyone. I think the decision to refer this matter to a committee rather than holding an investigation has backfired, because we will now have the opportunity every six months or every year, when these big bank CEOs front up, to be reminded that the same people are running the show and that nothing much has changed at all.

I want to thank the committee secretariat for all of their assistance, and I look forward to continuing as a member of this committee.

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