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Scott Morrison warns against rash response to banking royal commission

Prime Minister Scott Morrison campaigning in Brisbane this week.CREDIT:DOMINIC LORRIMER Prime Minister Scott Morrison campaigning in Brisbane this week.CREDIT:DOMINIC LORRIMER

Prime Minister Scott Morrison says the Australian economy faces "significant consequences" if the banking royal commission triggers a credit crunch, while warning an election contest over which party is tougher on the beleaguered financial services industry risks undermining the system.

Mr Morrison, who was treasurer when the Coalition ordered the royal commission despite opposing an inquiry for years, predicted former High Court justice Kenneth Hayne’s final report would contain "legitimate" criticism of the government's financial regulators when publicly released on Monday.

Australian Banking Association CEO, Anna Bligh, hopes the Commissioner's final report will lead to reforms in the banking sector.

However, he rejected claims thousands of victims of misconduct had been overlooked during last year's public hearings and pledged to put consumers at the heart of his government’s response.

"It will be a question of what suggestions or measures they put on the table but I will be very mindful that I want to see the oil that lubricates our financial system – which is access to credit – continues to flow, otherwise the consequences would be quite significant," Mr Morrison told The Sydney Morning Herald and The Age in Brisbane.

Any major reduction in lending would damage the economy and hurt small businesses, he warned.

In a separate interview, Treasurer Josh Frydenberg echoed the Prime Minister in saying the government was inclined to adopt all of the report's recommendations but would need the weekend to study the fine print after receiving the findings on Friday. He added the pace of lending to small business, while up from last year, was still below its historical average, "and so we’ve got to be very conscious in responding to the report that we ensure the free flow of credit".

Australia's banks have recently tightened new lending to companies and prospective home buyers – something Mr Morrison described as "in-part an almost instinctive reaction" to the royal commission.

Reserve Bank data released on Thursday shows total housing debt outstanding to Australian borrowers grew 4.7 per cent last year – down from 6.3 per cent growth the year before. Investor housing debt grew just 1.1 per cent – down from double digit growth rates in 2015.

"The easiest way to ensure nobody gets hurt is to lend nobody any money. But if nobody gets lent any money then everybody gets hurt. So I think we have to be sensible," Mr Morrison said.

The big banks are concerned the release of Commissioner Hayne's findings so close to the federal election campaign could trigger a rash response from both sides of politics given the industry is deeply unpopular with the public and the inquiry has been a major political issue since Labor first proposed it in early 2016.

"What the royal commission has so far discovered is what they call non-financial misconduct," Mr Morrison said. "So there are no issues with the stability of the system, but there are real issues with their conduct and I totally understand that. But we've got to be careful. Be careful what you wish for."

The Prime Minister will go to the May election framing Bill Shorten as a risk to the economy.

"Shorten has been a rank populist on this and he hasn't been driven on sound financial policy," he said. "He's just been too keen, too quick to play the politics card on all of it. But as a Prime Minister who was treasurer, I get how that if you undermine your financial system that is one of the worst things you can do to your economy."

Shadow Treasurer Chris Bowen said only Labor could be trusted to rebuild trust in the financial sector.

"Labor also understands the critical importance the banking sector plays in the heart of the Australian economy – but that must not service as an alibi for bad banking conduct or criminality," Mr Bowen said.

Speaking during a blitz of marginal seats around Brisbane, Mr Morrison also claimed Australia survived the Global Financial Crisis due to the strength of its financial system.

"The reason we survived that wasn't because Kevin Rudd blew the budget, it was because our banks kept lending and none of them went under. In the UK and other countries banks were falling all over the place – the US was a bloodbath."

Mr Morrison praised Justice Hayne for being aware of a tightening in the lending market and sticking to the February completion deadline.

Hearings began in March and ended in November despite calls from Labor to extend the timeline to allow for a broader scope and more of the 10,140 individuals and groups who lodged submissions to have their say in the witness stand.

"I would absolutely reject any suggestion the royal commission has not considered any of these submissions," Mr Morrison said. "They have and I think the suggestion from Labor that they haven't is offensive to the royal commission and the work they have done."

This article was first published by
Author: Bevan Shields
Last modified onFriday, 01 February 2019 21:19

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