Hot Off The Press

The NAB has announced on Thursday that they have lifted their full-year profit 2.5% to a staggering $6.6 billion. With a bottom line like that, you would think that the NAB would be content but you would be wrong, in the same breathe the NAB announced that due to “reshaping our workforce” 6000 employees will lose their jobs by 2020”.

Doesn’t seem quite fair, does it, but ‘fairness’ and ‘bank’ are not two words that the Australian public associate with one another, but why is this?

Well, I believe that it all stems from the illogical power given to the big banks in 2008, when Kevin Rudd made a very unwise decision to guarantee all bank deposits, effectively wiping out Australia’s established private mortgage market with left the big banks with a virtual monopoly.

The chart below shows the NAB profit and asset difference before and after the Federal Government guarantee when these big banks started hoovering up all of their rivals.

The truth behind the banking monopoly is that pre-2007, 60% of new mortgages were written by the big 4 banks whereas, in 2017, it is more than 90%. The banking system is something that matters to us all and banking decisions affect our lives directly, whether it is job insecurity or changing Interest Only loans to Principle and Interest, putting Australian Families under financial stress the banking sector needs to be able to be held accountable. As I have always said ‘Competition Breeds Success’.

Are you struggling with your bank changing your Interest Only loan rates forcing you into Principle and Interest loans? Well, it is not just you, the chart above shows a spike in Interest Only rate hikes. One thing is evident from this, our Treasurer is asleep at the wheel when he is supposed to be protecting consumers.

Remember in the last Budget, the Treasurer announced with great gusto that in conjunction with slugging property investors he would hit the Banks with a Bank Tax. The Treasurer assured us then that he would monitor this tax so that the banks didn't pass this onto the consumers. I am not sure whether it is benign neglect or a blatant fib but one thing is certain, the buck stops, once again, on everyday Australians.

Bank profits have steadily grown since the banking monopoly was formed by Kevin Rudd approximately 10 years ago. I wrote, back in 2010, that we were in the midst of the biggest transfer of wealth in Australia’s history from opportunists pockets to a bank monopoly. This is still apparent now, as we ourselves in the longest credit squeeze in Australia’s history, evident in evaporating savings and diminishing disposable incomes.

The latest release by the ANZ shows a cash profit increase of a whopping 18% within the last 12 month period. Surely, this is a clear indicator that there is some ‘stealth of your wealth’ tactics occurring yet the Treasurer does or says nothing. The Australian inflation of less than 2% is in stark contrast as is the share market average return minus the banks is less than 4%.

Interestingly, this week the ex-RBA Governor, Glenn Stevens announced that he has picked up, of course, a large pension courtesy of the taxpayer and but he now also has got a job. Yes! you guessed it, it is with one of the banks that he was supposed to be monitoring. He has joined Macquarie Bank just as they too announced a record first-half profit.

This steady flow of RBA Governors to the banking corporations that they are supposed to be monitoring surely raises a question of conflict of interest? Are the RBA decision-makers concerned that if they upset or oppose the banking sector to protect the consumer they won’t be offered lucrative opportunities from the banks after their appointment?

Banks are desperate for the RBA to increase the cash rate, but in my opinion, the RBA will keep the cash rate steady at 1.5% even though the US rate will move up shortly. Currently, there is no reason in Australia for the rates to go up. The costs of funds have not increased in 2017 and they are not expected to increase in 2018 either.

This morning the Bank of England has just announced that they have raised their rates for the first time in over a decade. This newfound stability will be a godsend for business, employment and the economy, we would love that!

The Bank of England has raised their rates from 0.25% to 0.5%, this is still one whole percent below the current Reserve Bank. The UK has indicated that they foresee only two more ¼ point rises over the next two years, which really indicate more coming stability in the market.

This means that even after both of those rises they would still be below our current RBA rate, furthering my prediction that Australia will see no upwards movements. Unfortunately, this is irrelevant as the banks do not seem to follow the RBA as they use too. Since the Rudd government allowed a banking monopoly we are witnessing the biggest transfer of wealth in Australia’s history from your pocket to the bank coffers.

Keen to hear your thoughts. Please send your comments and requests to enquiries@propertyclub.com.au

Until next time,

Kevin Young