Royal Commission needed on banking & financial services in Australia.

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Increasingly concerned about the extent of corporate misconduct, many informed voices have been calling for a royal commission into banking and financial services. There is too much misconduct to be explained by the action of rogue individuals.

In many cases, the problem is systemic in some sectors of the financial industry, in the culture of these organisations, and even more fundamentally than this in a collapse in moral standards resulting from the neoliberal belief in maximising profits in the short run without regard for wide social consequences.

Exacerbating the problem of corporate misconduct have been cuts to the budgets and staff of the government regulatory watchdogs. Since the 2013-14 budget, nearly 15 per cent have lost their jobs out of the almost 4000 people employed in these agencies, including the Australian Tax Office and the Australian Securities and Investments Commission (ASIC). The recent report by the Australia Institute, Corporate Malfeasance in Australia, contends that “malfeasance by the private sector is widespread” in Australia.

The Turnbull government maintains against the Labor Party that ASIC already has all the powers of a royal commission. But a lawyer working in ASIC’s Regulatory Policy Branch resigned a dozen years ago at what he considered improper conflicts of interest. Writing in The Saturday Paper on 30 April, James Wheeldon contended that the “regulator has been captured by lobbyists”. It “has repeatedly failed to act in the face of egregious conduct that has destroyed lives”.

Wheeldon argued that ASIC had “presided over a raft of scandals absolutely breathtaking in scale”; and “if a royal commission were held, more horror stories of corruption and incompetence would emerge.”

Excessive concentration of market power

A royal commission could also examine the extraordinary concentration of market power in Australia, including of the two airlines, the two big supermarket chains, the three big mining companies, and the big four banks. These are supported by government guarantee, boosting their profits by $4 billion a year, according to the Reserve Bank, as it allows them to borrow cheaply. Overseas multinationals like Google, Apple, Microsoft, and Facebook dominate the Australian market, and pay little tax, despite the efforts of Australian authorities.

As Andrew Leigh and other economists point out, such dominant market power concentrates wealth in few hands, exacerbating inequality, and corroding the economy’s competitive engines.

Yet the Coalition government’s budget embodies the supply-side economics that to help the poor you give to the rich. As Richard Denniss, chief economist at the Australia Institute, wrote: “Forty-seven per cent of the value of the personal tax cuts goes to the top one per cent of income earners. Seventy-five per cent goes to the top ten per cent. Zero goes to the bottom sixty-five-or-so per cent.” No wonder the top 20 per cent of households have 70 times more wealth than the bottom 20 per cent.

Australian voters need firmly to challenge the power of special interests, and reaffirm our commitment to social equity and fair competition in business. Instead of tax cuts for the wealthy, why not increase the Newstart allowance from $38 a day, expand public housing on behalf of the massive backlog of people in acute housing stress, and invest in public infrastructure, thereby creating employment and boosting local businesses?

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