Turnbull’s banking inquiry is nothing but theatrics

Sadly but predictably, Malcolm Turnbull’s parliamentary grilling of the banks is all politics.

The best thing about Malcolm Turnbull’s pledge to haul the major-bank chief executives before parliament every year is that it’s not a royal commission.

Apart from that it’s policy trash, and the Prime Minister knows it.

An annual grilling of the CEOs by a parade of “concerned” MPs will achieve precisely nothing.

Sure, there will be some theatrics, an opportunity for more earnest explanations from the industry about the multiple stakeholders they have to satisfy with their pricing decisions, and the matrix of inputs that determine their cost of funding.

But seriously, what hope is there of a sensible outcome when Scott Morrison rejigs his talking points from Wednesday to say yesterday that there’s no excuse for the banks to have held back some of this week’s 25 basis-point rate cut by the Reserve Bank.

Morrison knows that’s not true.

He knows you can have a cheap banking system or a stable one, but you can’t have both.

The Treasurer also knows that a brace of mostly sensible reforms since the financial crisis have weaned our banks off more volatile wholesale funding in favour of sticky — but more expensive — deposits.

It’s a trend that both sides of politics will privately support.

But when the banks respond by passing on some of their costs, as most businesses would in a similar position, all hell breaks loose.

It’s complete rubbish to say that the banks haven’t explained their actions adequately.

They have tried repeatedly, but the residential mortgage is a protected economic species — the cost of it can go down but never up.

In fact, trouble brews immediately if Joe Public thinks the rate hasn’t gone down by as much as it should, even if bank funding costs have decoupled from the cash rate, as they have since the financial crisis.

Morrison and Turnbull know that. It was the Coalition that commissioned the financial system inquiry, for heaven’s sake.

Sadly but predictably, this is all about politics.

Opposition Leader Bill Shorten has made a commitment to a royal commission.

It’s electorally popular but not a massive vote-changer.

Turnbull risks being seen as a bank lobbyist if the Labor Party works up a parliamentary motion for a royal commission, so he softened everyone up, including the bank chiefs, with a two-card trick that began on Wednesday.

The PM told the banks there was no excuse for holding back on a full rate cut.

He warned them they would have to explain their position if they inflated their margins at the expense of customers; a decision, of course, that they had already made.

Then, surprise, surprise. Come Thursday, the PM and Morrison organised the platform for the inquisition.

The Australian Bankers’ Association rightly pointed out that no other businesses are required to justify their commercial pricing decisions in such a way.

There’s some pretty aggressive regulation of telecommunications and utility companies by the competition watchdog.

The CEOs, however, don’t have to participate in an annual show trial, where the questions are likely to have very little rhyme or reason.

Apart from theatrics, that is.