If Bill Shorten was seriously wanting a royal commission into the banks, he could have voted for it last year when the Greens put up the idea. But he didn't. So when he changed his mind and called for a royal commission last week, he exposed nothing more than a stunt for the election. He couldn't even dream up a terms of reference and he has no answer to the fact that existing agencies like APRA, the RBA and ASIC have between them as many powers as a royal commission. It would cost more and take longer than existing agencies.
Shorten's approach is not just an example of a party that still worships Ben Chifley who failed in his attempt to nationalise the banks in the late 1940s. It is also exposes a lack of understanding of the importance of banks in a free-enterprise system. Playing games for political purposes to win a few populist votes is just plain irresponsible.
Royal commission into banks unnecessary: PM
The financial services sector is already highly regulated according to Malcolm Turnbull who says Labor is overreacting to the recent problems. Courtesy ABC News 24.
I worked in the European Bank for Reconstruction and Development for a few years and saw first-hand why private sector banks are important. Australia should now leave the EBRD but putting that issue aside, the EBRD did one very important job in the early 1990s. It re-engineered the communist banks that had been behind the Iron Curtain. The days of government, banks which just collected funds from the proletariat to prop up government businesses, was over. The EBRD taught the staff how to run a bank for the benefit of business, large and small, and then listed the newly restructured banks on the stock exchange.
The essential element of the EBRD policy was to reinvigorate the economies of those countries that were kept behind the Iron Curtain by giving them access to the funds they needed to grow their businesses. Instead of being the servants of communist dictatorships, the new system put the customers of business at the centre of the new system. And the banks had to face real competition from other banks who in turn had to answer to their shareholders. .
![Federal Leader of the Opposition Bill Shorten.](/web/20160413113245im_/http://www.watoday.com.au/content/dam/images/g/o/3/k/s/j/image.related.articleLeadwide.620x349.go3hwi.png/1460357498196.jpg)
The impact in Eastern Europe is a good example of the profound impact that banks can make. For that reason, our governments have continually acted to ensure the system works in the public interest. Labor's first big reforms in the Hawke years were the deregulation of the exchange rate, and later, the sale of the Commonwealth Bank. The latter notably having earlier attacked John Howard for advocating the sale of the CBA. And, also important, as we were reminded by John Howard last week, were the comments of Julia Gillard who spoke well of the banks and the key role our strong banks played in supporting Australia's economy in the GFC.
The result is that banks in Australia are carefully monitored and a key objective is to maintain public confidence that people's money is safe with the banks.
Of course Labor is not just running stunts to advance their election position. Their approach is deeper than that. Labor, at its core, has a socialist culture. It sees economic management from the vantage point that government is entitled to rearrange the private sector to suit Labor's political objectives. While Labor is obviously not riddled with communists as was once the case, it is still often resorts to highly interventionist responses to economic circumstances.
A classic case in the last week was the Shorten proposal to require governments, state and federal, to prop up the steel industry at the expense of consumers and taxpayers. Labor's first objective is to maintain union membership. Imposing higher costs on exporters and steel users could quickly become a serious burden on our economy. Add in retaliatory tariffs, it could easily become a lot worse than Labor's 2001 decision to shut down the cattle industry.
The same attitude of looking after their mates at the expense of other players in the market place is the Shorten deal to look after union truckies at the expense of free-enterprise small-business independent truckies. The Transport Workers Union is not worried about safety, it's worried about competition and membership. The TWU claims to have 90,000 members, it controls MPs in the Parliament and it funds election campaigns. It may not have the same reputation as the CFMEU but the effect is not much different.
When you see Labor looking after its mates inside the powerful unions, the CFMEU on the war path and joining with the MUA, the TWU closing down small businesses and the banks being targeted, you can be sure that Malcolm Turnbull will not be short of a narrative to run all the way through this year's election.
Peter Reith is a Fairfax Media columnist and a former Howard government minister.
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