Friday, June 11, 2010

Figures Never Lie, But Bankers Might

It really comes as no surprise that the latest Reserve Bank figures have revealed a dramatic increase in bank fees in the past twelve months. The total fees collected amount to $12.7 billion, which is an increase of 9%, well above inflation. The bulk of the increase can be attributed to fees levied on business customers, who are now paying $7.6 billion, the fact is that any increase in the cost of business eventually flows through to the customer in the end. That is, if the business concerned can actually survive the more difficult trading conditions. But even retail customers like you and I are still getting stung if we have a credit card or a mortgage.

The fees charged on home loans grew by 17%, while credit card charges rose by 8%, and personal lending fees went up by 14%. Home loans in particular represent a graphic illustration of everything that is wrong about allowing the banks to get away with charging extortionate fees. The fact is that we are captive to the banks and we have no choice but to use their so called services, and it is nothing short of exploitative for them to impose fees for what should really be overheads. Mortgages are the category where customers are the least mobile. It’s a big inconvenience to change from one mortgage to another, and certainly not something that anyone would want to do over and over again looking for a better deal. So it’s not really a coincidence that the fees on mortgages have gone up the most with an increase of 17%.

Although the rules are supposed to allow the banks to charge reasonable fee to cover reasonable costs of providing services, surely these so called services should rightly be considered overheads. But even if we accept the need for some fees, which I believe is arguable, the truth is that with the total increase of all fees amounting to 9%, it is abundantly clear that the banks are opportunistically exploiting customers who are captive to their so called services, over and above anything that could be considered reasonable. The bottom line proves it, with bank profits continuing to expand at a rate which would embarrass even the mining companies... well, maybe not quite that fast, but you see what I mean.

We all know the banks are taking us for a ride, and the proof is in the figures. As they say, figures never lie, although I suspect that bankers might on occasion be tempted to stretch the truth.

Wednesday, June 9, 2010

Mostly Harmless

The New South Wales budget handed down yesterday afternoon by Treasurer Eric Roosendaal could perhaps be best described in the words of the late author Douglas Adams as “mostly harmless.” Previously made commitments have been met, without any spectacular Easter eggs, while returning the budget to surplus earlier than expected, largely through good fortune rather than good management. Increased revenue from the GST along with the proceeds from transactional taxes levied on the resurgent property market have taken the pressure off the Government just in time for the lead up to the election early next year.

The most dazzling piece of policy to emerge from the budget has been the decision to eliminate stamp duty temporarily on all purchases of property off the plan, and discount the duty for properties already in the process of construction. The aim is to provide a real incentive to encourage new construction, which will boost jobs and economic activity while also increasing overall property supply, and hopefully improving home affordability. It’s very much a “win-win-win” situation, and even the government could come out ahead if there is sufficient increased activity in the overall market to offset the concessions.

Coupled with the $20 000 cap on Section 94 developer contributions to councils, there is every chance these measures will have the desired effects of better and more affordable housing supply, while at the same time fostering further economic recovery. However, there is a catch. The councils who depend on Section 94 contributions are now sticking up their hands and demanding to know just how they can be expected to pay for community infrastructure and services when the rates they charge are pegged, and the developer levies are scaled back. And they have a point.

The recent decision to shift the responsibility for rate pegging to the Independent Pricing And Regulatory Tribunal was a step in the right direction, but sooner or later councils must be given the power to set their own rates, and be directly answerable to their constituents. Until that happens, the State government must continue to be held accountable for the infrastructure shortcomings that plague the state of New South Wales at every level. And infrastructure of every kind is the big gap in this budget.

Perhaps they know they won’t be around to worry about it after next March.

Tuesday, June 8, 2010

The Political Revolving Door

Editorial Tuesday 08.06.10.
Nobody expects the New South Wales Government to win the election next March. The list of policy failures, backflips, and disasters is just too long to be ignored. Since the last election there have been three different Premiers, and each time there is a new Premier there is a new plan, with previous commitments torn up, often at the cost of hundreds of millions of dollars. Even when there is a plan, such as the Garling recommendations for hospital reform, the government appears to be incapable of actually carrying it out.

But it’s not just the policy failures which have led to growing disillusionment with the government. It’s the long list of embarrassing scandals ranging from the couch jumping former Police Minister Matt Brown, right through to the abrupt resignation of the minister dubbed “Sir Lunchalot” Ian McDonald amidst investigations by both the Independent Commission Against Corruption and the head of the Department of Premier and Cabinet into allegations of travel rorts. It’s hard not to get the idea that for some of our politicians the $77 lunch vouchers are more important than delivering services to the people who elected them.

Mr. McDonald has not only resigned from the Ministry, but as of yesterday has also resigned from the Parliament. It has been widely observed that in doing so he has preserved his superannuation entitlement, estimated to be around $150 000 a year, indexed, for the rest of his life. Had he stayed on until the end of his term in the upper house his entitlement would have been reduced as it would have been based on his finishing salary as a backbencher. There would also have been the risk of losing his entitlement altogether if he was found guilty of any corruption. Mr. McDonald maintains his innocence and insists he will fight any and all allegations, but that won’t stop people making their own interpretation of his decision to quit.

Following on from the departure of Karen Paluzzano in disgrace, and Graham West apparently in disgust with his own colleagues, the government is appearing more and more to be in disarray. People must surely be wondering who will be next to be caught up in controversy, and whether there will be any more untimely exits through the political revolving door. After all, numbers are beginning to dwindle. If the exodus continues at this alarming rate, perhaps there won’t be anybody from the current government actually left in office next March for the people of New South Wales to boot out.

Monday, June 7, 2010

Point Of No Return

If you were awake early enough on Saturday morning you might have been one of the hundreds of Australians who saw a strange spiraling light travelling across the sky towards the sunrise. People were amazed by their UFO experience and struggled for an explanation. Many people thought it was proof at last that alien life forms have been making a practice of visiting us for decades. Others looked for a more rational explanation such as some form of weather phenomenon. Still others realized that an American company called Space X had just launched an experimental rocket and that was what they saw traversing the early morning sky. None of them were right. What they really saw was Kevin Rudd’s re-election chances rapidly leaving the planet.

Today’s Neilsen Poll published by the Herald shows unequivocally that if an election was held right now, Tony Abbott would not only become Prime Minister, but he would have a massive majority. With the two party preferred figures showing 53% support to the opposition there can be no doubt that the government is now in very deep trouble. Now, it is just one poll, but it continues a trend which has been developing over a sustained period of time and which has been seen in all of the big polls. Last week’s Newspoll showed the opposition pulling ahead, and the Galaxy poll is also showing a collapse in support for the government.

But hold the bus. Should Tony Abbott be popping the champagne corks just yet? The real winners in the opinion polls seem to be the Greens, with their support at 15% in the Neilson poll and 16% in the Newspoll, double what it was at the last election. Even if Tony Abbott wins in a landslide in the House of Representatives, he could very well be confronting a hostile Senate controlled by the Greens. Gone are the days of the Howard era when the coalition had the numbers to pass pretty much anything they damn well pleased. So, it remains to be seen whether an Abbott led government would actually be in a position to deliver on promises such as bringing back the Pacific Solution, Work Choices Lite, and a great big tax on business to pay for a parental leave scheme.

Of course, the real question is whether or not Kevin Rudd can arrest the slide in support for his government. Somehow, Mr. Rudd has to convince people that he can turn things around and deliver on his promises. Somehow he has to convince people that if they trust him again things will be different. After the failure of the Emissions Trading Scheme, the disaster of the home insulation program, the embarrassing rorts of the school building program, and the backlash against the proposed mining tax, an increasing number of people already feel that they can no longer trust anything that he says.

At some point a line is crossed when any cause is beyond salvation, and there’s a very strong chance that Kevin Rudd has already crossed that line.