Banks dodge a bullet but gun is still loaded

Australian Financial Review Jun 15 2017 6:36 PM

Phillip Coorey

Australia's banks came within one vote of having to face a royal commission-style inquiry in a clear indication they remain a prime political target despite the raft of measures thrown at them in the May budget.

In a dramatic day in Parliament, a Greens bill to establish a parliamentary commission of inquiry into the banks passed the Senate and then only fell short by a single vote in the House of Representatives.

Because Deputy Liberal leader Julie Bishop missed the vote and rogue Nationals MP George Christensen was strong-armed by colleagues Scott Morrison and Barnaby Joyce against crossing the floor, the vote was tied at 70 votes apiece. For the second time this term, Speaker Tony Smith was forced to use his casting vote to prevent the bill being debated further and voted on.

The bill remains in the Parliament and Labor, the Greens and others have vowed not to give up either trying to resuscitate it down the track or use some other tactic, meaning the government, with its one-seat majority, will need to stay vigilant until the next election.

The inquiry, which is like a royal commission except it is established by the Parliament, would examine executive pay, "vertically integrated" business models and penalties for misconduct.

Thursday's push confirms the appetite among Labor, the Greens and independents to keep going after the banks has not been sated by the anti-bank measures in the budget.

These include a Productivity Commission inquiry and the $6.2 billion bank tax, the legislation for which will pass the Senate next week so the tax can begin as scheduled on July 1.

On Friday, the Australian Bankers' Association, the big four plus Macquarie Group will have one last chance to voice their concerns when they appear before a half-day Senate inquiry in to the tax.

In submissions to the Senate hearing posted on Thursday, the banks were uniform in their anger against tax.

All accepted the imposition of the tax but the submissions argued variously that the tax should also apply to foreign banks, that it should be repealed when the budget was back in surplus and that it should be waived if a bank found itself under duress.

ANZ Bank was the most conciliatory saying while the tax was "regrettable" it was also a consequence of the poor standing of banks. The bank "is committed to rebuilding trust with the Parliament and the community and we accept that the levy will pass into law".

The ABA argued the imposition of the tax without a sunset clause "leaves open the possibility that its base will be broadened and the rate lifted by future governments, thereby increasing the impact and possibly extending to other banks".

In a point echoed by individual banks, the ABA argued "the levy cannot be absorbed as some suggest".

"The imposition of a new levy on institutions that are profitable and successful sets a worrying precedent for other successful Australian businesses."

During parliamentary debate over the Greens bill, the language by Labor, the Greens and others was as hostile as before the budget, suggesting that should there be a change of government, there will be a royal commission.

Labor leader Bill Shorten took after Mr Christensen as a fraud for talking tough against the banks but not following through.

"He's a lion in Mackay and a mouse in Canberra," he said.

Should the House of Representatives ever pass legislation to establish the commission of inquiry, it could double as a vote of no confidence in the government and trigger an election.

The last time the government lost a vote on legislation in the House of Representatives was in 1929. This doubled as a no confidence vote and forced prime minister Stanley Bruce to call an election, which he lost.

The inquiry was supported in the Senate by Labor, One Nation, Derryn Hinch, Jacqui Lambie, the Nick Xenophon Team and Nationals Senator John Williams.