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Don't bash the banks - take them over

By John Passant - posted Thursday, 4 November 2010

The banks are showing us who really runs Australia. After the Reserve Bank put the cash rate up 25 points, the Commonwealth Bank announced it would increase its mortgage lending rates 45 points.

First, let's deal with the RBA. This unelected group of bourgeois economists and business peoplehas as its remit to keep inflation under control - between 2 and 3 percent. Underlying inflation last month was at its lowest in 5 years.

So why increase rates? Because they predict the mining boom will drive up inflation. You know, the boom because some miningworkers will get - shock horror - better pay. So the two speed economy is at the heart of the RBA's thinking.


I seem to remember the Resource Super Profits Tax would have had the effect of slowing down the mining boom and diverted the benefits and growth to the other sectors of the economy.

So we can thank those who opposed the RSPT, and those in Labor who capitulated and gave us the lily livered Minerals Resource Rent Tax for the latest rate increase.

That capitulation showed unequivocally that Labor manages the system for the benefit of capital and indeed for the benefit of powerful sections of capital. The mining magnates overturned a Government decision to impose a minor tax on them and destroyed Kevin Rudd's Prime Ministership to do so.

They ruled, Labor managed.

Now to the banks. The Commonwealth has raisedits rates because, they claim, its borrowing costs - the money it pays to depositors and to funds in the wholesale local and international markets- have gone up.

That is true - because the global financial crisis meant banks were scared to lend to each other and everyone's risk profile went up quite a few notches. But Australian banks are amongthe safest in the world, and with the Government guarantee on deposits even more so.


Remember back to the start of the global financial crisis? In October 2008 the Rudd Labor Government guaranteed bank deposits and bank borrowing. While it later refined these guarantees,propping up the banks was an important part of the Government's response to the GFC.

The Commonwealth Bank made $6.1 billion profit during a period of intense financial destabilisation. That profit is built on the back of its net interest margin gouging and government support.

Bank net interest margins are the difference between what banksearn in interest from borrowers and what they pay in interest to lenders. They increased during the GFC.

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This article was first published on En Passant on November 2, 2010.

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About the Author

John Passant is a Canberra writer ( and member of Socialist Alternative.

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