Not "which bank?" but "banks for whom?"

Vanguard November 2012 p. 7
by Nick G.

The Australian people are justifiably angry when private banks thumb their noses at the Reserve Bank and any decision it makes to lower interest rates.

The failure of the banks to match the decrease simply ensures that they get extra profits at the expense of customers who have borrowed from them. On top of this they delay their announcements - the exact opposite of the speed with which they raise interest rates when the Reserve sends them upwards.

Prior to the deregulation of the financial sector from 1979-84 the Australian Treasurer set the interest rate for the Reserve Bank, and the private banks followed suit.

But the 1970s saw the emergence of so-called “globalisation” and its accompanying political expression in neoliberalism. The speculative form of finance capital was strengthening itself against industrial capital and demanding the removal of all barriers to the free global movement of capital, facilitated as it was by computerisation and information technology.

The smart money moved out of manufacturing and into ever more complicated and opaque financial instruments. Finance capital demanded – and got – the independence of central banks from government control, to allow greater speculation, greater currency exchange manipulation and more arbitrage opportunities.

As night follows day, private banks simply asserted their independence from the central banks by refusing to pass on the full amount of any lowering of interest rates.

Australian banks are among the most profitable in the world. It is not the case that they cannot afford to follow the lead of the Reserve Bank. And where does this leave the poor old worker? As always, caught between a rock and a hard place.

Those workers who have struggled to pay off a mortgage and are trying to survive on their meagre savings fear cuts in interest rates. They know that their savings won’t keep up with the rising cost of living. 

Their adult sons and daughters, run ragged on the treadmill of trying to purchase a home of their own, scream out for interest rate reductions in order to save the $50 or $100 per month that a reduction equates to on their bank housing loan.

Any stimulation of the housing market through an interest rate reduction also affects those in rental accommodation as the private rental market generally responds to movements in house prices. Any increase in house prices will have serious implications for low income working class families, whether they are purchasers or renters of housing.

The only beneficiaries besides the banks are those who speculate in housing. Assisted by government subsidies in the form of negative gearing, these investors purchase housing when the market is depressed, squeeze what they can out of their rental clientele, and then sell when the market sees house prices rise.

There is an overwhelming sentiment amongst the people for the banks to pass on the full amount of interest rate cuts. This is a healthy sentiment and reflects people’s indignation at banking superprofits, at sky-rocketing fees for personal banking services, and for the seeming aloofness and inaccessibility of banks.

But neither the rock nor the hard place is acceptable to the people. A socialised banking system in an independent country is required to really guarantee the people’s livelihood and keep the local and international speculative vultures at bay.