Labor has accused the banking regulator of having a “co-dependent” relationship with Australia’s banks, saying it rarely reveals publicly the bad behaviour it has discovered.
Ed Husic, the shadow minister for the digital economy, says the dysfunctional arrangement is preventing shareholders from taking earlier action against banks doing the wrong thing.
It comes as the treasurer, Scott Morrison, is calling on the business community to argue more strongly for the government’s $48bn tax cuts, saying voters remain unconvinced about the value of tax cuts for big businesses.
Speaking on ABC radio on Thursday, Husic said he welcomed last week’s move by the Australian Prudential Regulation Authority to increase capital requirements for Australia’s banks given runaway house price growth in Sydney and Melbourne.
But Husic said the move was a reactive one, and Australia’s banks should never have been allowed to issue so many investor and interest-only loans. “I’ve had for some time concerns that Apra is in a co-dependent relationship with banks,” he said.
“They find out the bad behaviour but they never actually drag out the bad performing banks into the public light. The reason they [do] that is because they don’t want to affect those banks that are listed, and [which] might have a run by shareholders, or they actually see a benefit of those banks cooperating behind the scenes, because [the banks] are worried about being exposed.
“The best antidote is sunlight, and if we do have bad players their practices should be exposed, and shareholders should be in a position where they can take action against management teams that are doing the wrong thing.”
A co-dependent relationship is a dysfunctional one in which one person enables another’s addiction, irresponsibility or under-achievement.
Husic’s criticism of the banking regulator comes days after data showed Sydney property prices surged almost 20% over the past year, putting the city at the front of a nationwide trend that has seen dwelling values increase by 12.9% on average.
The data from CoreLogic, released on Monday, showed house values in Melbourne (up 17.15%), Canberra (13.64%) and Hobart (11.05%) have followed Sydney’s rapid rise.
Last week Apra wrote to major lenders, warning them to tighten their lending practices on investor and interest-only loans, prompting banks to raise their mortgage interest rates.
Philip Lowe, the Reserve Bank governor, warned on Tuesday that over the past year close to 40% of the housing loans made in Australia have not required the scheduled repayment of a single dollar of principal in the first years of the life of the loan. He said the Council of Financial Regulators would consider further regulatory measures if Apra’s latest intervention did not work.
Morrison gave a major economic speech in Sydney on Thursday. He said he supported Apra’s move to limit the share of housing lending that is interest-only.
He also pressured big business to support his entire $48bn tax cut package, saying it had an important role to play in conditioning the environment for the government’s policies.
“Australians readily accept that supporting and backing in the efforts of small and medium-sized businesses is good for our economy and good for jobs,” he said. “However, they remain less convinced about the contributions of larger businesses. I have raised consistently with large business representatives the need to address the broader collective reputation issues large businesses have with the Australian public that are being cynically exploited by an opportunistic Labor party.
“Large business needs to apply itself collectively and urgently to this task of communicating their value, not for the sake of the government, but in the interests of the Australian economy, their employees and their own shareholders.”
