17 April 2024
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I’m a bank cheerleader but purely for money reasons

Peter Switzer
28 March 2024

After revealing the wish list for tax reform by CBA’s CEO, there was a big reaction from worriers, thinkers, and insulters! And one, who had the misnomer tagline of “Balanced” ripped into me for being a cheerleader for the banks!

What? Me, a cheerleader for the banks? After decades of calling the big four out in newspapers, on radio and on TV, I’ve never thought about me being a bank lover. I’ve often tagged my criticisms using the line “banks behaving badly” but to be balanced, my view on myself when it comes to banks has to be: yes, my bloody oath I’m a cheerleader for our banks.

My critic called Balanced lamented how banks want a cashless society to get their clip of the ticket when we’re all using credit cards. Balanced sees tax cuts as a benefit to bank accounts and more fees to the robbers masquerading as bankers. And cutting stamp duty would increase property turnover and more loans, which again helps the banks’ bottom lines. This unnamed balanced person also thinks I’m an unquestioning dope, which makes me wonder how long he has been aware of my work!

Anyway, in a democracy and in a social media world, I support the view of the great English poet William Blake, who counselled us that without controversy there is no progress. (Blake said it more poetically but I like my economist’s version of his wisdom.)

It seems to me Balanced is conflicted because he resents banks acting like capitalists, arguing for a faster growing economy (which tax reform is meant to do) but he seems to think they shouldn’t be allowed to profit from progress.

In another post, Balanced responded to one reader’s concern about how a higher GST wouldn’t be good for self-funded retirees. To this Balanced said: “It wouldn't help self-funded retirees. But we have a government that ideologically hates anyone who is not dependent on the government, so what would they care?”

Hang on, my critic is anti-capitalist and anti-Labor and/or left-wing politicians who want us all to be government-dependent? That doesn’t add up and seems a little out of balance.

To recap, in case you missed it, the CBA’s Matt Comyn asked for these changes at the recent AFR’s Banking Summit.

  1. No tax up to $20,000, then a 20% rate from $20,001 to $80,000, then 30% tax $80,001 to $300,000 and 45% for over $300,000.
  2. Scrap personal deductions except for charity donations!
  3. The GST goes from 10% to 15% and a lot more goods and services will be GST’d!
  4. New tax on tech giants from OS to raise $5 billion.
  5. Crash the cash economy by stopping cash only payments at $500.
  6. Look for savings from the NDIS and other government services.
  7. Kill state payroll taxes and stamp duty on property and insurance, which will cost $55 billion.
  8. Comyn even wants the three-year term for the federal government to be raised to four years.

Be clear on this: all economists say these tax reforms would be good for growing the economy. And who’d complain about hitting the black economy and tech giants? Tax dodgers and big US companies?

If you think payroll tax is a good idea, well, you’ve never paid it unless you’re employing a lot of Aussies and taxed because you provide those jobs!

On the GST going to 15% and being traded off with tax cuts, this is a worry. I do think retirees would need big tax cuts but it’s hard to trust politicians. It’s also why no politician will risk doing this because voters would reject it.

Balanced’s fear about banks doing well out of changes that promote economic growth is like lamenting that good rainfall will increase our crop production, which will mean farmers’ prices will fall.

Whether you like banks or not, they are useful. Who hates a bank when they say ‘yes’ to a home loan for you to buy your dream home? Who hates banks so much that you cut up your credit card and never give into using the fantastic plastic ever again?

It's a minority.

By the way, despite my decades of criticising banks (especially before the likes of John Symond at Aussie and Mark Bouris at Wizard served it up to them with lower interest rate home loans and their rip-off behaviour with financial planning), the banks have actually been helpful.

During the GFC, their balance sheets were so good compared most banks in the world they ended up in the top 20 banks globally. Their strength and the support of Treasury meant we didn’t go into recession, which most other Western economies succumbed to over this time.

When the GFC hit, economist tipped we’d see 10% unemployment, but it topped out under 6%. If our banks were as dodgy as some of those in US, UK, and Europe, we would’ve seen a lot of Aussies out of work.

A balanced view of banks is that they don’t always behave well but they’re OK compared to others around the world and they can be useful.

By the way, their bad behaviour with financial planning was a fault of a succession of governments who ignored bad practices and who didn’t give enough money and directions to ASIC to clean up the poor behaviour of the financial institutions linked to these advisers.

By the way, for decades I have always said, if you don’t like the way banks treat you, get even by becoming a shareholder. I said this in the 1990s when CBA was a $20 stock. I said it in the ‘noughties’ when it went to $60 and fell to $27 in the GFC.

I kept up this advice in the 2010-19, whenever the market sold banks off, and especially after the Coronavirus crash, when CBA dropped to $58. If you’d taken my advice, you would’ve made 106% plus three years of dividend over 6% before franking credits!

So, am I a cheerleader for banks? My oath I am because I live by the rational view that banks are a useful fact of life. And anything worth doing, like buying shares in the CBA when the price is low, is worth doing for money.

I think that’s a pretty balanced approach to the real world we live in, where like or not, banks are really important.

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