Former PM urges RC to consider ‘contribution’ of banking sector

In his address to attendees of Loan Market’s Connect 2018 conference, held on the Gold Coast on Monday (13 August), the former prime minister reflected on the resilience of the financial sector during the global financial crisis (GFC).

“The Australian financial system came through the global financial crisis far better and in far better shape than the financial system of most other countries,” Mr Howard said.

“In 2009, there were 11 banks around the world that had AAA credit ratings and four of those 11 banks were the four major banks in Australia.”

Mr Howard, who served as prime minister from 1996 to 2007, urged representatives of the real estate and mortgage industries who attended the conference and the financial services royal commission to consider the stability and contribution of the banking sector before making a judgement.

“I don’t pre-judge anything and I certainly don’t condone improper, unfair or dishonest behaviour. But I do hope that in the overall judgement and reflection that is made of the Australian banking system, which is so important to your industry, that you bear in mind the stability and the contribution that was made by the Australian banking system — in no small measure due to the prudential regulation that was put in place by my government in the early part of this century.

“I hope that it’s something that is kept in mind for a balanced judgement.”

Howard on “strange economic environment”

Mr Howard also reflected upon current economic conditions, noting the low level of interest rates and the “trade-off” between employment and wage growth.

“We are operating in a very strange economic environment in many respects,” the former PM continued.

“There wouldn’t be anybody in this room, I’m sure, that has lived through an era of lower interest rates than we are living through at the present time. I certainly haven’t lived through such low interest rates.

“That’s good news for some people and it’s bad news for others.”

Mr Howard added: “The other strange thing is that, for the first time in my lived experience, we have seen a trade-off between more stable levels of employment and lower real wage growth. This has got pluses and minuses.

“If you’re most worried about job security, it’s a good thing, but if you’re worried about a continued lift in your wages, it’s not such a good thing. It’s created a very irritable middle class.”

Mr Howard highlighted the strengths of the Australian economy, pointing to the smaller gap between the rich and the poor, relative to comparable economies, and the traditional high level of home ownership.

“There are gaps between the rich and the poor, and some people need a safety net, but the gap is less marked in this country as it is in other countries,” Mr Howard said.

“We have a much larger middle class and private home ownership which is much higher, much earlier. Your industry should be very proud of that.”

The former prime minister concluded: “We will always have the challenge of economic change and economic reform.

“Keep striving towards the finishing line, but keep running or else your competitors will surge past you.”

[Related: Bank heads call for calm amid ‘embarrassing’ RC]