Major banks post record profits as the economy slumps

Vanguard September 2013 p. 3
Max O.

 

Whilst the Australian economy is worsening and wage costs collapse major banks are reporting record profits. The Commonwealth reported a 10 % rise in its full year cash profit to $7.8 billion and the ANZ a $4.8 billion profit , which is a 7% profit rise during nine months to end of June.

Contrast these record bank profits with the wage cost index, which was 3.2% up to the June quarter and you can see who is winning and losing in the world of economic survival. Wages growth is the same as it was it in the Global Financial Crisis (GFC) of 2008, which makes it equal slowest for 13 years.

Where are the banks striking it rich? Mortgages and deposits. Income from the Commonwealth's retail section increased by 13% for the year, but business and private revenue fell by 3%. The latter figure indicates a decline in economic production.

However the banks’ overall revenue is down with the Commonwealth losing by 5 per cent to $44.87 billion dollars. This is reflected in falling share prices: Commonwealth shares dropped by 1.4 per cent to $73.51 and the ANZ by 2.9 per cent to $29.49.

Whilst everything seems solid at the moment for the banks, it can all melt into thin air. Hence the Rudd Government's announcement of a bank depositor tax of 0.05 % on all deposits up to $250,000. The purpose of the levy, which is set to start in 2016, is to fund any future bailouts of failing banks.

Banks don't like this at all, they expect the Federal Government to either guarantee or bail them out like they did during the 2008 GFC. However not to worry, whilst it would be levied on banks and not account holders, it is expected banks will pass that on to depositors.

You will find that multinationals from the USA , Europe etc are behind the big 4 banks here, and the business sheet they operate from is essentially the same. One would think that if a bank fails it should be the shareholders who ought to pay for the losses, after all they took the gains and had their say in the running of the business.

But no the banks want more! Over the years the corporate tax rate has been cut from 49% in 1988 to 30% today and it could well go down by another 5% to 25%, if the Business Council of Australia gets its way.

Added to this is the well-known fact that corporations get their accountants to fiddle the books to "underestimate" their profits and so evade tax. Subsequently corporations like the banks are already on a lower tax rate than most workers.

Not so long ago the Australian Tax Office revealed that about 70 Australians (which no doubt would include the big 4 bank CEOs) with incomes of more than $1 million each paid no income tax for 2010-11.

The solution to spreading the wealth around would be to nationalize the banks under an anti-imperialist government. Not such a bad idea.