Liberal UK Prime Minister Gladstone, 1868-94, grumbled that William III put the state in a position of ‘subservience’ to induce ‘monied men to be lenders’ in 1694. As Australia faces recession, the Government bows to every bank demand for low wages and flatter taxes, to foster more household debts, rather than a fair and cautious economic policy.
Finance, Insurance and Real Estate (FIRE) is many countries’ most powerful sector. FIRE’s profit motives are in direct opposition to the public interest and to fair economic activity. A bank CEO cited in Commissioner Hayne’s Report enshrined FIRE’s motive: “curb your sense of justice”. Thus, the question is not ‘if’ there’s a recession but ‘when’. The government’s money management only copies banks’ desires for ‘light touch’, asset bubbles to busts, and low wages, that is, debt deflation.
The situation was grim well before the May election. Labor could not warn of this beforehand, given the dangers of self-fulfilling prophecies. Yet the core of the ALP electoral promises in recession abatement and climate policies, are positive proposals that Labor can still defend.
These were Labor’s ‘referendum’ against wage declines; tackling climate change and, as important, policies for controlling the finance sector. Low wages have forced households across classes to become dangerously indebted, and suspicions about finance practices are widespread, whether or not voters followed the Hayne banking Royal Commission.
Undeterred by wrongdoings even illicit findings during that RC, bankers greeted the Liberal win with glee. The last thing FIRE wants is well-paid workers able to avoid or pay off debt – banks call the debt-free bludgers. As if on cue, the government is furthering its aims to curtail the right to free association, press freedom and other authoritarian procedures to avoid scrutiny and fair criticism.
Of the broader economy-wide madness against fair wages, Paul Keating often ridiculed Liberals for wanting to revive the master-servant laws. Liberals even remain bitter about Labor’s achievements with wages and arbitration. The H. R. Nicholls ‘society’ (1911) against Justice Higgin’s 1907 “Harvester Judgement” (the living wage) has Liberal members: Treasurer Costello only left it from Labor’s ‘unkind criticisms’.
While sinister elements of authoritarianism are alarming, there is also something ridiculous to Morrison’s government. The flatter tax rate for the top incomes is impossible to justify on evidence of past ’trickle up’, notably the USA. Nearly half the electorate saw its absurd nature.
Many argue that right and left have reversed their industry policies, Liberals to ‘big sticks’ and Labor to ‘the market’. But this misses FIRE’s major role. It enjoys laissez-faire – light touch. Controls on banks’ money creation are weak; their leverage in overseas money markets is unclear although the RBA seems hopeful. We do not know if anyone inspects banks’ off-balance sheets. Howard with Costello were equally laissez faire to banks and sent a hospital pass to in-coming Labor of the GFC.
In 2007-08 there was a run on UK and US banks by the money markets (or shadow banks). Quantitative Easing started, but banks did not invest long-term – as the wrong idea of ‘loanable funds’ insists – but on more asset splurges and share buy-backs. The RBA with Treasury under Rudd and Gillard put in far better policies than QE. The Liberals hated that, as did banks.
For the past six years, Coalition Governments became more subservient, as Gladstone put it, to banks’ bond market traders. Whether or not Liberals understood how their costly policing, rearmament and top income and corporate tax perks put them under banking’s control, they misled the public. I doubt they know that a 1926 Anti-Labor government set up a Commonwealth Oil Refinery. The City of London ran a campaign of denigration against Australian debt securities in fury at state ownership. That fear of the bond market marked later Liberals. They are historically weak.
A sudden, suspicious cry now is for the RBA to provide QE that repeats the same fool’s errand of the American QE. Any bonds a central bank ploughs into bank balances do not automatically result in decent investment, but the reverse. The wealthy can just hoard (also from tax cuts), and what is saved is not spent. Far easier for unregulated banks to park QE money in bubbles than do arduous assessments of, say, a new green project.
Today’s Liberals’ assiduous devotion to FIRE’s needs was clear when they rigged the financial sector RC; by how much only shows in the Terms of Reference (and senior bankers’ draft), and in Hayne’s Final Report of February 2019. Turnbull’s begrudging Terms forbad the RC exploring ‘prudential’ matters. Hayne could not shine a light on bank money manufacturing, or any lack of prudence about the direction of bank loans, guaranteed by taxpayers.See [https://johnmenadue.com/jocelyn-pixley-the-coalitions-terms-on-haynes-commission/
stimulate economic activity and foster decent wages. Only treasuries
and businesses can with union support, and with proper investment. The hot air of QE and share buy-backs that pump up dividends and bankers’ salaries, come at the expense of long term, productivity-enhancing investment.
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Jocelyn Pixley's research is on Citizenship and Employment (1993); Emotions in Finance (2004;2012), Mobile Capital, and Central Banks (2018), with CUP. She is an Honorary Professor in Sociology at Macquarie.
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