FUNDING GREED

The war against excess economic fat just got uglier, with keywords such as fair and affordable overlooked by those in charge of our standard of living, writes Mick Cartonne. 

Tonight's edition of statistical pain is proudly brought to you by the banks. Which bank? All the bloody banks.  

There were plenty of losers left red-faced last week in the game of life played out on that expensive island called Australia. 

Many backed the wrong horse, "We think we can pay" in the mortgage cup and made a bigger-than-expected loss when the interest rates rose on Tuesday afternoon. 

After a slow start, "We've got you by the balls" ridden by Missing CEO and trained by Greedo Excelcius, found his way back to the middle of the pack and then on the final turn, punished the punters who believed the advice of the so-called experts and backed the favourite school of thought; that that odds of a rate-rise were very low due to lower-than-expected inflation figures released the previous week. 


I am sorry to report but in the end the party was crashed when Australia's central bank opted for a 0.25 percentage-point increase in the official interest rate. 

With Christmas just around the corner, Commonwealth CEO Ralph Norris, then decided to get in on the spirit of giving by surprising us not with lollies in the fireplace stocking but with a loan repayment invoice, 0.2 points above the official cash rate.

Regardless of who lived in the mortgaged manger be it Jesus, Mary,Joseph, you or I, the CBA was determined to set itself up for a $1 billion windfall care of extracting just little a bit more blood from those who can least afford it, so to make the balance sheet look a little bit better. 

And we are just going to have to make a seasonal adjustment to our lifestyles to deal with it. How is this achieved? By decreasing our purchasing power. 

That means many Aussies will either have to eliminate the smoothest brand of toilet paper from their supermarket shopping list or cut back on petrol by canceling their yearly trip to the nursing home to see Grandma win the annual Premier's spelling bee using profanity that should be reserved exclusively for State Parliament question time. 

The message to the receivers (everyone with a loan) could not be any louder or clearer; we the banks are going to fiscally beat you up, but we're not going to kill you. That's our gift to you this Christmas. We'll keep you breathing, because we need you make another payment . 

Lots of silly statements from people in positions of power and influence soon followed. The merry-go-round went like this.

Someday opposition leader,Julia Gillard got 'angry', Future treasurer, Joe Hockey, pulled ideas out of his hat and ANZ boss, Mike Smith became less popular by accusing Hockey of populism. 

All good fun if the issue wasn't so serious for homeowners and businesses.  

After a short but noticeable absence from the reaction his organizations decision to inflict more pain than necessary, King Ralph eventually came out of his international hiatus.

In a statement unlikely to make it into the next edition of Great Comments of the 21st Century, the highly paid chief ($16.2 million per annum) of the Commonwealth Bank told the Daily Telegraph it was better to see "a few" foreclosures than have an economy hamstrung by a low profit banking system.

Better for who, Ralph?  

Shareholders with extra-large mansions, holiday homes, flash cars and enough credit to buy all their neighbours kids an X-box? 

The situation was already absurd after Westpac CEO Gail Kelly called for 'calm'  in the battle between Australia's major banks and the government over interest rates with the threat of regulation.  

That's easy to say for someone with the second highest salary package in the local banking sector. 

I'll do you a deal, Gail. I'll calm down if you donate all of your performance-bonus pay to a small group of less fortunate Australians. 

Okay, so you may have to forgo building a third wine cellar. Would it really hurt to lend a hand to those who need it and drink to that instead?

Strike that original idea. Let's issue the greater social good challenge to all CEO's of all commercial banks. 

Create a promotion, where on Christmas Eve, instead of getting fatter, you go on an economic diet to promote a healthier and happier society by paying off the mortgages of three struggling homeowners. 

I know what the response from the banks will be to this idea; sorry, we're a business not a charity. 

I forgot. Humanitarian causes don't affect the market value positively enough. What on earth was I thinking? I should stop drinking marxist cordial. 

The last time I checked though, you didn't need to be a communist or a socialist to have a conscience. 

Long before the 0.45 per cent rate rise arrived on the 2nd of November, other economic, political and social units operating the levers of revenue creation within the community, have been gorging on far too many party pooper pies. 

They too, deserve their fare share of recognition this week.
We cannot just blame the banks for the promotion of insensitive forms of economic vandalism.

State public transport, the Federal Government and Business lobby groups are also in on the great Australian feeding frenzy. 

A reader of mine informed me by email that he had a metaphorical gun held to his head last week. 

Awarded some extra-hours in his workplace, Phil McCrotch, started work at 7:30am instead of 9:30am. As a direct result, he no longer forked out $5.40 for a return fare to the city, but rather had to dig deep and hand over $8.00 because he was traveling at peak hour and not in an off-peak period. 

What added-value did State Rail provide Phil with to justify this extra investment?

An empty seat, a portable bed-pan for those long-trips that are made longer by bonus delays on the Harbour Bridge or even an upgrade to hygienic first-class?   

Phil's ROI (return on investment) came in the form of a dividend known widely in economic circles as NOTHING. 

This was the same amount offered to me recently by the editor of regional paper to write a column. I kindly refused. 

Unfortunately, you don't get a choice when traveling to work.

Its quite simple really. You fork out the extra-dollars or you wait until the off-peak hours and arrive late to your place of employment (if you are lucky to have one). Some choice. 

Peak-hour fares never hit peak popularity amongst Sydney commuters because they were never designed to be fair in the first place. A bit like the set-up of the free market where according to Margaret Thatcher 'society does not exist.'
 
Then we have the Federal Government using make believe emotional rhetoric, rehearsing and then delivering hollow dialect with violins playing in the background as they pretend to be on our side against the big bad banks, when in fact this is the same mob that uses a progressive taxation system to charge us income tax in as many ways as is plausible.

Under the income tax assessment act, interest earned on a term deposit is fully assessable for income tax in the tax year it is paid, despite the fact the most of the money ever entered into these type of accounts usually stems from wages that have already had tax deducted.

So anybody who benefits from the decision of both the RBA and the individual banks, they too are becoming progressively poorer.   

Never mind the fact that all funds earned in those deposits could be used for practical measures such as individual donations to the political parties come election time or heaven forbid, paying for private health insurance to reduce numbers on the public hospital waiting list. 

The Commonwealth Government is nothing short of two-faced, regardless of which party is in power. They give us a hug with one arm and elbow us in the ribs with the other. 

Not that they couldn't do anything about this.

Just as we have a means test on couples earning up to $150,000  as it relates to the 30 per cent private health rebate (singles $75,000), what's to say we couldn't make the first $100,000 of a household's term deposit tax-free? 
  
Nope, good ideas in this country are too expensive for the same bastards that the defunct Democrats forgot to keep honest.  

BUT WAIT. THERE'S STILL MORE. As if you haven't had enough pain for one week.

The Australian Industry Group is applying to cancel Christmas and New Year's Day penalty rates, arguing companies shouldn't have to pay staff extra - despite the NSW government, declaring them public holidays.

Our brave friends in the employer group believe penalty rates should only be paid to staff working the substitute holidays - the following Monday and Tuesday - as Christmas, Boxing Day and New Year's Day fall on a weekend.

I can kind of understand why this is happening. 

As Ross Gittins points out this week, small businesses often pay more on their indicator interest rate than home buyers. Some businesses need to save more money by spending less on employees to help manage their bank loans to keep the business afloat. 

But with an incoming Liberal State Government due next March and one which will probably have an insane amount of power, there is a good chance the employers will get some form of win on the public holiday issue in the future. 

In other words don't be surprised if Santa Clause goes into a NSW Public Hospital for lap band surgery in the New Year but instead undergoes a personality makeover that turns him into scrooge.  

I'm not going to get into an economic argument with the Sydney Morning Herald's leading economic writer. I came last in economics in year 12 and he didn't. 

Gittins is right when he says 'If I'm on the right track, the claim that there's no competition between the banks will be seen as false.' 

I've milked plenty out of the banks by threatening to walk away though sometimes I did have to go through with this threat to get a better result.

But when he says people such as retirees, those who rent and/or those saving for a home deposit are benefiting from savings deposited with banks, that's where I will debate him.  
The renters, in particular, will lose what they earn in their deposit accounts to the Taxman and then possibly have to spend most of what is left on paying the extra payments via rent rises on the landlords investment property. 

The type of term deposit they have will determine if they can shed their money quickly or not. A Westpac Reward Saver account is easier to transfer funds from then a fixed term Deposit. 

But still, they'll eventually end up raiding the accounts that work for them if the institutes helping them continue hurting their landlords mortage repayments.

All because the banks went beyond the call of duty and the Governments don't want to restructure the tax system in case they become as unpopular as a bout of herpes and need some money for a public awareness campaign.

Hello..............the community is already aware that governments don't promote the best ideas on offer. We don't need more money wasted on telling us what we already know care of the nightly news. 
 
You are right, Ross. There's plenty of competition. But it's between the banks and the Australian government who are mainly involved in the business of self-wealth management. 

The moral of the story is a simple one; the next time a credit card company tells you in a TV commercial 'don't leave home without it', take a deep breath and avoid panicking. 

Chances are you won't have a home to leave it in for very much longer. 

If you feel like a whale being attacked by Sharks on one side and Piranhas on the other, don't worry. You are not alone.

BEFORE I FORGET.....

On my tea break from the hassles of everyday living, I managed to switch on the greatest worst tournament of all in football, the Rugby League Four Nations. The world's weakest team, Papua New Guinea, battled bravely against the globe's most useless side, England. Steve McNamara's poms obviously need Julia Gillard to give them a good talking to about moving forward while PNG need to set up an attacking football academy because until they do all their energy, effort and execution put into turning up to play is a waste of time no matter who is coaching them. I think we can all agree that a Kangaroos win next Saturday will simply mean next year's tournament might need to be re-christened the ONE NATIONS.