Banks on way to record profit but no one seems interested
Australia's big four banks may be on their way to collectively reporting a record $27 billion in profits this year but one thing is certain - neither side of politics wants to turn it into an election issue.
While in Europe and the Americas banks are still political footballs, the big banks in Australia expect clear air to well beyond the September election.
Gone are the days when interest rate movements dominated the front page. We prefer to whinge about electricity and gas prices. This is despite bank interest margins representing about a third of a borrower's mortgage rate.
Treasurer Wayne Swan seems to consider his work finished on the banking oligopoly since the 2010 announcement of limited reforms to mortgage exit fees and credit cards.
Bendigo and Adelaide Bank may be moving to snap up a handful of credit unions in New South Wales and Victoria but, other than that, Swan's talk of a fifth force in Australian banking will remain a pipedream. The big banks should feel well pleased with their handiwork. Swan thought they should be generating returns on equity of about 11 per cent. This year they will produce a world-beating 16 per cent. No wonder their share prices are up 30 per cent in the past year.
Meanwhile, any intelligent question about banking reform to soon-to-be treasurer Joe Hockey is batted away by reference to his planned "son of Wallis" review of competition in the banking sector.
Hockey has said he wants to enhance competition in Australia's financial services market while maintaining a "stable, durable, diverse and well-capitalised industry".
"The inquiry will set down a new road map for the development and maintenance of a globally competitive financial system," he has said with some hubris. The requirements of the far more significant Basel III global capital accord don't rate a mention.
For their part, the big banks are largely ambivalent about Hockey's review, which federal Treasury has been pushing for since 2010.
If it proves just another bashing exercise, the banks feel that, with the help of the Reserve Bank, they are in a good position to demonstrate there is sufficient competition in the market.
If they get help with addressing their over-reliance on foreign funding, for instance by reducing the tax impost on household deposits, then all the better.
Following a little-publicised review, former RBA governor Bernie Fraser has already ruled out account portability as too expensive.
Hockey has said he plans to issue the terms of reference of his review within 100 days of gaining office, which means he will probably get a big, glossy report towards the end of the Coalition's first term.
Any legislative outcomes of the review are therefore not expected until well into a second term.
So here's the rub. Apart from a few changes to the Future of Financial Advice reforms proposed by Senator Mathias Cormann, the Coalition has basically committed to not making any big changes to the financial landscape in it first term.
Soon-to-be prime minister Tony Abbott seems to have no interest. Corporate Australia is just not his thing.
The banks feel they have made progress in educating the Coalition, but off a relatively low base.
It seems like a lifetime ago that Hockey was effectively calling for price controls on banks and warning them about expanding offshore.
"I understand banking and I love competition," he now says.
The reality is that Canberra seems incapable of doing anything other than entrenching the banking oligopoly. Small lenders - perennially constrained by a higher cost of funds - just can't get a look in.
When the big banks decide loan pricing they think only of the reaction of the other three majors and any possible damaging reaction from the tabloids. Some feel-good credit union in the suburbs or the local branch of a giant foreign bank in the CBD don't get a mention.