Take big stick to banks: Swan

Former Labor treasurer wants Scott Morrison’s ‘big stick’ powers applied to banking ‘cartel’.

Wayne Swan thinks the banking royal commission failed. Picture: Kym Smith

ALP national president and ­former treasurer Wayne Swan wants Scott Morrison’s “big stick” powers aimed at breaking up ­energy companies to be applied to the banking “cartel”.

Declaring the financial services royal commission a failure, Mr Swan said competition problems in banking were similar to those in the energy sector.

“With energy the problems are government-created, whereas in banking the problems are caused by the abject greed of the banks themselves,” he said. “The government is carrying on about ‘big sticks’ but where is one when you need it?”

Mr Swan’s push for a new round of regulatory action against the banks comes as senior Labor figures — including Treasury spokesman Jim Chalmers and NSW Right frontbenchers Joel Fitzgibbon and ­Michelle Rowland — call for the party to reclaim the ­political centre, including dumping the tax-and-spend polices that Labor took to the May election.

Deputy leader Richard Marles this week said the party should “stake out the political centre” and offer “hope rather than handouts” in a bid to appeal to the working-class and aspirational voters that deserted it.

Mr Swan, tapping into a wave of criticism of the major banks after they passed on barely half of the Reserve Bank’s 0.25 percentage point cut in the official interest rate last week, said “the whole thing” was “a cartel”.

“They are a cartel sitting at the centre of the economy, making super economic returns and under­mining macroeconomic policy,” he said. “It’s not as if they are not profitable; their profits are still among the highest in the world.”

Scott Morrison accused ­National Australia Bank, the Commonwealth Bank, ANZ and Westpac — which have passed on about three-quarters of the ­Reserve Bank’s three interest rate cuts this year — of “profiteering”.

Former consumer watchdog chairman Allan Fels backed Mr Swan, saying the Australian Competition & Consumer Commission should have the power to break up any firm that didn’t comply with competition law “as a last resort”.

“The time has come for ­reform,” Professor Fels said.

Legislation that would give the energy regulator wide-ranging powers to control prices and supply in the wholesale energy markets, including scope to break up companies as a last resort, is expected to pass parliament soon.

Business Council chief executive Jennifer Westacott said it was “critical that this sort of legislation does not spread to other sectors in the economy”.

“We don’t support intervention in markets,” she said.

Australian Chamber of Commerce and Industry chief executive James Pearson said divestiture measures “risked stymieing investment”. “Businesses are concerned that such measures in the electricity sector could act as a precedent to intervention in other industries,” he said.

Former Nationals leader Barnaby Joyce said the Liberal Party wasn’t captured by the banks but rather was cowed by the BCA’s “substantial lobbying power”, which included an implicit threat: “you’ll never get a job in corporate Australia if you don’t toe the line”.

“And they’ll send out all their lobbyists saying it’s the end of the economy as we know it, but it’s a load of rubbish,” Mr Joyce said.

The banking royal commission recommended strengthened codes of conduct and greater efforts to enforce the law by the corporate and prudential regulators.

But Mr Swan said: “The royal commission failed in my view ­because it didn’t go to the core of the racket, and that is executive pay.”

As treasurer in 2011, he banned home-loan exit fees, making it easier for borrowers to switch.

“I tried really hard on switching and you can switch relatively easily now,” he said. “Maybe the royal commission has jolted people’s willingness to look around.”