Friday, November 12, 2010

Smoke, But Not Yet Fire

How interesting it is to see reports emerging today questioning whether there are knives being sharpened in the Federal Labor Party for Julia Gillard. Melbourne Age reporter Katherine Murphy has written today that there appears to be some internal friction between the forces of the New South Wales Right Faction and the Prime Minister’s office. It comes in the wake of Party Secretary Karl Bitar’s address to the National Press Club this week which blamed the election result on campaign mistakes made by the Prime Minister, along with a perception of disunity. As I remarked at the time, the twist is that he is himself one of the reasons for that perception, and this week’s speech didn’t do anything to subdue that appraisal. Following that speech, another prominent figure from the Right, Graham Richardson, although now retired, has gone into print with comments further undermining confidence in the Prime Minister and the members of her office.

Katherine Murphy asks in her report “are we watching the beginning of yet another destructive power struggle?” Now, Ms Murphy may be seeing smoke where there is not yet a fire, but it is never a good idea to simply ignore the smoke. Is it really possible that the very same power players who tore down Kevin Rudd are now preparing to do the same to Julia Gillard? Surely they could not be that indifferent to the lessons of the recent past? It was the so called “faceless men” led by Karl Bitar and Mark Arbib who have dragged the party into ill repute over the manner in which they dealt with the problem of Kevin Rudd’s falling popularity. It was those same men who actually drove the disunity that they now claim has done them so much damage. But so far, all the evidence seems to suggest that they have not learned from their mistakes, and refuse to accept any responsibility for their own contributions to the party’s troubles. By that reasoning, it is entirely possible that they may indeed be thinking the unthinkable, and preparing to turn against their chosen leader. But if they do, it will only serve to confirm that they really have lost the plot altogether.

After all, if there is a problem with the Prime Minister’s leadership, these clowns only have themselves to blame because they were the ones who put her there in the first place.

Thursday, November 11, 2010

Not So Common Sense

The federal Attorney General Robert McClelland has released a consultation paper on the draft Family Law Amendment (Family Violence) Bill, which once again tackles the impossible minefield of child custody arrangements. It’s not so long ago that the Howard Government introduced shared parenting measures which were intended to ensure that where possible children of separated couples would have an ongoing relationship with both parents. That law provided for equal joint custody to be used as the starting point for consideration by the court in making its deliberations. It was in principle a good idea, but there have been a number of problems in practice. In some extreme cases, children have died at the hands of violent or unstable fathers after the court insisted on shared custody. But even in less tragic cases, there are difficulties.

One difficulty was the assumption that shared care was supposed to mean that equal joint custody was supposed to be the automatic default, when that was not really the intention of the plan. When there is shared custody, there can often be logistical problems with children shuttled back and forth between houses with no sense of having a stable home. The court has been asked to balance the protection of a child’s safety against the presumption that the child should be entitled to a meaningful relationship with both parents, while under the present legislation both aims appear to have equal weighting even if they are in conflict. Under the proposed new laws it would be clear that the protection of the child’s safety should be given greater weight, although you have to wonder why that was not always the case. Interestingly, the new bill stops short of placing “the child’s best interests” as the highest priority, describing the proposal as “radical”. I find it difficult to understand what is so radical about something that should be plain old common sense.

Of course, you know what they say about common sense…. It isn’t actually so common.

Wednesday, November 10, 2010

Campaign Mistakes Were The Symptoms, Not The Disease

It appears that the Federal Labor Party is still experiencing a certain level of denial over its near death experience at the recent election. Party General Secretary and Campaign Director Karl Bitar yesterday addressed the National Press Club delivering his assessment of what went wrong. In his view, the electoral disaster was brought about by a combination of the following factors. 1. There was a widely held expectation that Labor would win easily, allowing many who would normally be loyal supporters to exercise a protest vote without worrying about the outcome. 2. There was disappointment over the performance of the first term of government which he said had resulted from voters holding excessively high expectations. 3. There was a perception of disunity prompted by the internal leaks about cabinet discussions and the intrusion into the campaign by former leader Mark Latham. And 4. The campaign itself stumbled on three specific occasions, which were the so called “real Julia” debacle, the embarrassing climate change citizens’ assembly proposal, and the promise to complete the Epping to Parramatta rail line which was widely seen as a pathetic and cynical grab for votes.

While all of these factors did indeed play a significant part in the election catastrophe, it is plain that they are in fact the symptoms, not the disease. If voters had high expectations of the Rudd government, who was it that raised those expectations? Who was it that promised to deliver an education revolution, fix hospitals, and rescue the climate? Who was it that not only failed to make good on these promises, but also botched their efforts to rescue the economy by building school halls that were too small, installing insulation which caused houses to burn down, and mailed out cheques to dead people? If there was a perception of disunity, might that not have been because the party had just executed the overthrow of its own leader just weeks before calling the election? That was no perception; that was real disunity, exposed for the world to witness. Blaming Mark Latham is an act of scape-goating that would embarrass even Pontius Pilate.

There appears to be absolutely no acknowledgement whatsoever that many of the voting public felt cheated of their right to vote either for or against the man they believed they had elected to be Prime Minister. There seems to be no recognition that Kevin Rudd’s popularity began to fall only after acting on the policy advice of the very same individuals who later blamed it all on him and got rid of him. Now, I’m not saying that Mr. Rudd had no problems or that he would have necessarily won the election. There’s no real way of ever knowing that. But the fact is that a significant number of Australians were left with a disgusting taste in their mouths over that whole affair and many of them would have changed their vote because of it. And yet, Karl Bitar can only point to what he considers “mistakes” in the campaign, despite the fact that he was the campaign director.

Or was that somebody else’s fault too?

Tuesday, November 9, 2010

Whatever They Want, Whenever They Want

For years I have known that Australian bank mortgage contracts are not really contracts at all. They are more like documents of indentured servitude. If you bother to read the small print, as I did once many moons ago, you will discover that there is usually a clause which says something like “the bank may vary any of the terms and conditions at its discretion at any time without notice.” It effectively means that while you have signed up to a set of conditions which will bind you, committing you to pay on time, to pay certain fees under certain circumstances, and so on, there is no such constraint on the bank. The so called contract does not commit the bank to anything, because that wonderful escape clause basically means that you have agreed to let them get away with doing whatever they want, whenever they want, without consultation or recourse.

When it comes to the standard variable rate home loan, we are usually fully aware that the bank reserves the right to change the interest rate as it sees fit. Even though we might not like it, we know that’s what we have signed up for. However, even that arrangement is now being called into question with the revelation that Australian home loans are almost unique in the world. It turns out that in some countries, most notably the United States of America, the “standard” home loan is usually a fixed rate long term loan. Not only that, but it is also usually a non-recourse loan, meaning that if the worst occurs and the bank is forced to take your house away you are at least protected from owing the bank any shortfall that might occur if the house is worth less than the debt.

Although the American approach sounds more appealing than ours, it is also unusual. In fact, the most prevalent form of home loan around the world is known as the “adjustable rate” loan. In this version of a variable rate loan the contract binds not only the customer but also the bank to an interest rate which is determined by adding a specific margin to a benchmark interest rate. For example, in Britain a typical home loan interest rate might be set at the Bank Of England Base Rate plus 2.25%. If a similar scheme existed here it would have prevented the Commonwealth Bank from making its controversial decision to almost double the Reserve Bank increase, saving their customers a whole lot of anguish, and the bank a savage public relations backlash.

With so much discussion in the past week about reform of banking regulations, and improving competition among banks, there is now a proposal to introduce this form of lending here in Australia. Along with restrictions on excessive fees and charges, this is a measure which would help to give Australian bank customers a better deal. So why has Australia been the odd one out for so long? Why have these “adjustable rate” loans not been offered to Australian customers before? The answer can only be that, until now, the big banks have been able to get away with doing whatever they please, whenever they please.

It even says so, right there in the fine print of their loan contracts.

Monday, November 8, 2010

Thanks For Not Mugging Me Anymore.

Welcome to Bank Bashers Anonymous. My name is Leon, and I am a bank basher. In my own defence, I would point out that the banks do seem to go out of their way to encourage us to take aim at them. Slagging the banks might be a cheap shot at an easy target, but at the end of the day, it doesn’t actually have any impact upon them at all. They really don’t care, in fact if anything they seem to derive a perverse kind of enjoyment out of it. Let’s face it, with $22 billion profit between the big four and with their executives getting paid more money than a lotto winner, they’re the ones who are laughing all the way to the, well er bank.

Of course, they do provide so much ammunition for the humble bank basher such as myself that it is impossible to ignore. As I have stated countless times before there is nothing wrong with any business making a profit, but in the case of the banks it is the context in which those profits are made which really gets up people’s noses. It’s the unjustified fees and charges, it’s the decisions to increase mortgage interest rates over and above the Reserve Bank official rates, and it’s the willingness to destroy the livelihoods of Australian families by retrenching staff and replacing them with offshore contractors.

No wonder both the government and the opposition are now promising to do something about it, and the first cab off the rank is apparently a move by the federal Treasurer to outlaw mortgage exit fees. But wait a minute! Here come the banks, apparently preparing to launch a pre-emptive strike by abolishing such fees of their own choice. Presumably, this is a move intended to stave of the threat of having tighter regulation imposed upon them, and if it means that these unfair and unethical fees disappear that’s very good news. But it shouldn’t mean that they get let off the hook by the government.

There is no justification for these exit fees, and there never has been. They are nothing more than a mechanism to prevent customers switching to another bank or financial institution, and as such are clearly anti-competitive. They are also clearly nonsensical. If I borrowed $100 from you and promised to pay you back at the end of the month, only to find myself in a position to pay you back sooner I would not expect you to charge me extra for repaying my debt ahead of the due date. And yet that is exactly what the banks do by charging up to $1000 to any customer who has the audacity to pay back the money he owes the bank ahead of time.

This ludicrous practice cannot even be justified by the spurious claim that the bank needs to cover the cost of discharging the mortgage. Aside from the usual legal costs which would apply no matter when the loan was finalised, it is only going to take a staff member a few minutes to enter the data into the computer system, sign a few papers, and file it all away. Unless it is done by the C. E. O. himself, the cost of the employee’s wages will be something like $30 or so. If the banks really are about to abandon this vile practice, it is no more admirable than the mugger who has finally decided to stop beating you over the head.

That’s why, regardless of whether or not the banks act of their own volition, there still needs to be appropriate regulation to ensure that they never do it again.