Profits made by the big four Australian banks have increased astronomically in recent years. Most of this money was made after the banks refused to pass on the full amount of the interest rate cuts made by the Reserve Bank. In other words the money has effectively been taken from savings that should have been passed on to people with loans.
By Kirk Leonard, Socialist Party
Insult is added to injury when the banks charge exorbitant fees for things that effectively cost them nothing – like ATM transactions. At the same time ordinary borrowers are suffering badly from mortgage stress and rising cost of living pressures.
Since the beginning of the world economic crisis in 2008 the four major banks have increased their pre-tax profits by almost 50% – up from around $22.6 billion to $33 billion in 2012. Compare this to the 2% or 3% yearly wage increases being offered by most governments and employers!
In the aftermath of the economic crisis the Reserve Bank began cutting interest rates with the aim of giving the economy a boost. The idea was to make people’s loans cheaper, therefore freeing up more of their wages to be spent on goods and services.
At the time the banks said they couldn’t afford to pass on the full amount of the cuts as they were paying more to borrow money from overseas. Studies have since revealed that the complete opposite is true. In many instances international borrowing costs have become cheaper in recent years.
A UBS analyst remarked recently that Australian banks are now making more money from granting mortgages than ever before. Via refusing to pass on interest rate cuts the banks have managed to engineer an extra layer of financial ‘super exploitation’ on top of the regular profits that they make from holding onto other people’s money. Is it any wonder that the banks are one of the most hated institutions in society!
The majority of people are rightly angry at that blatant profiteering carried out by the big banks. The bankers are more than happy for us to yell at the TV screen or to complain amongst our friends but what they fear the most is people fighting for an alternative to the private, for-profit, banking sector.
At the moment if you want to put a roof over your head you either have to run the gauntlet in the expensive private rental market or save a deposit and then beg one of the banks for a loan. The wait for public housing can be years and even then there are strict criteria for applicants. If you do manage to get a home loan you are then at the beck and call of the bank for up to 30 years. This is a mad situation.
Rather than the big banks exercising such control over our lives, and our housing situation, we need to fight for a situation whereby banks are there to assist people rather than being a weight around their neck.
A single publicly owned bank that was democratically run, not for profits but for need, would be a huge turn around from what we have today. Not only could such a bank offer cheap or free loans to ordinary people and small businesses but it could use its capital to invest in socially useful projects.
Side by side with other publicly owned industries it could assist in the development of a sustainable plan of production that would help improve everyone’s living standards. Rather than super profits for a tiny minority at the expense of ordinary people this is the type of banking sector we need to be fighting for.