Australian Banks play hardball to remain profitable

Be in no doubt. Australia’s big four Banks will tough out any criticism from the Prime Minister and Treasurer down to keep their profits at record highs, financial crisis or no financial crisis.
The case in point is that mortgagor homeowners are suffering more than they should because in the last eight months, the Reserve Bank has cut official interest rates by 425 basis points and our banks have passed on only 385 basis points.
A stable and secure banking is important to support the Australian economy, jobs, business activity and investment, our banks need to ensure they remain well-run and profitable, even if that means making unpopular decisions, says Australian Bankers' Association chief executive David Bell.
But the reality is that the strong Australian economy has protected the banks from the World financial crisis, because mortgage borrowers have kept their jobs and not become bad debts on mass for the banks, which in turn would have crippled the banks as their security would not have matched their loans outstanding.
The banks seem to think they are the saviours here, and are increasing their margins at the expense of their customers, says Rick Adlam from Mr Mortgage. Independent economists and commentators agree that Australia is weathering the current global economic downturn better than any other advanced economy. What has that got to do with the Banks? They seem to want to take credit where credit isn't due.
The IMF is predicting a 1.4 per cent contraction for the Australian economy which compares very favourably with the US economy, which is expected to slide by 3 per cent, and Britain which is expected to contract by 4.1 per cent. Forecasters and commentators also agree that the stability and security of Australia's banking system has played an important part in our economy's resilience, but the banks seem to want to overplay this into a self backslapping exercise. They may have played some part, but they were not the core reason. In fact the Banks that have got into trouble were the one's who bought into valueless US mortgage derivatives, offloaded by wobbly US Banks! That's why we are not getting the full benefit of the official RBA rate cuts.
And it's not the only recent crisis in which Australia has fared well.Just a year ago there were around 20 AA-rated banks in the world. Today, there are just eight and Australia has four of them - not a bad result when our country is just 2 per cent of the world economy. Australian Banks need to continue to make sound commercial decisions to ensure the long-term stability of Australia's banking system, which is in the interests of customers, shareholders and the Australian economy. This is not aligned with increased profits that they are reporting.
They don’t need to be increasing their profit margins in a recession at the expense of their customer base and especially high debt carriers like mortgage borrowers, says Rick Adlam at Mr Mortgage. And their needs to be a level playing field for the small regional banks and non bank mortgage lenders.

Will Australia avoid the World recession and swine flu come out stronger?

What happened to the Recession and Swine Flu?
Banks and other mortgage lenders, first home buyers and retailers and all rejoicing as Australia appears to have escaped the recession that has swept the World and the dreaded Swine Flu in a single bound!
Swine Flu reported numbers are falling and without a single fatality, and the Reserve Bank of Australia deciding to leave interest rates unchanged at 3 per cent, when the board met today at its June Meeting.
The Rudd government must be dancing in the corridors of Parliament house this afternoon. Expect them to make the Liberal opposition pay now for its criticism of the stimulus package handouts, and First Home Owners Grant boost, which saved the building industry from decline and job losses. The Retail industry must also be thankful as the stimulus reaped them a record April shopping spree. Things are looking good.
The decision to keep interest rates at its 45-year low is good news for the housing industry, home buyers and mortgage lenders because there is money to throw at any weakness the RBA board sees later in the year.
In a statement released this afternoon, Reserve Bank governor Glenn Stevens said there was evidence emerging the global economy is stabilising.
"The turnaround is clearest in China and some other emerging countries," he said.
"Recovery in the major countries is likely to take longer to begin and be slower when it does occur."
Mr Stevens said although the effect of low mortgage rates was yet to be seen, future rate cuts were possible if the economy continued to deteriorate.
"The prospect of inflation declining over the medium term suggests that scope remains for some further easing of monetary policy, if needed."
The Reserve Bank cut the official cash rate by 25 basis points in April ending 425 basis points worth of reductions since September.
The central bank has since indicated it is in no rush to lower rates further as it assesses the impact of its easier monetary policy stance and the Federal Government's stimulus packages.
The stimulus packages have worked their magic and have lifted the retail industry, with figures out yesterday showing consumers spending a record $19.4 billion shopping in April.