Will the bank bashers unseat Swan?

The Bank Reform Party is an added threat to both major parties in key seats, and its refined policy attack on uncompetitiveness could do some real damage at the September polls.

Tony Abbott has been trying to put the wind up Bob Katter in the past couple of days – not an easy thing to do – by threatening to run a top-notch candidate against the fiery independent member for Kennedy in the September 14 election.

All pretty predictable really, given the usual animosity between the Coalition and fallen angels of the National Party – Katter, Tony Windsor and Rob Oakeshott being the most prominent. Their electorates' voters are largely conservative, and the in the case of Windsor and Oakeshott, not too friendly towards their MPs' support for Labor's key policy of carbon pricing.

So why not put extra resources into the electorates of Kennedy, New England and Lyne respectively? The Coalition is likely to win them, and even if it loses it's fighting the good fight for loyal Nationals everywhere.

And in Katter's case, they're trying to kill off Katter's Australia Party by cutting off its head.

Then again, politics should never be personal. It's numbers that count, and a new threat beyond Katter's Australia Party is emerging to both Coalition and Labor numbers that the national media seem to be disregarding – the Bank Reform Party.

When I wrote about this party nearly a year ago (The new party with banks in its sights, May 2012) there was a general outpouring of scorn from readers. This is understandable, as the then half-formed, and still unregistered party was entirely focused on banks, and had problems in its early list of policies – most noticeably, it was running a populist line that banks should follow RBA cash rate moves, even though around 40 per cent of their funding is sourced in global wholesale markets.

It also failed to address one of the big sources of uncompetitive behaviour in our four-pillars banking policy – the implied guarantee all four enjoy above and beyond smaller credit institutions. During the GFC a number of smaller banks had to pay more for the government to guarantee their deposits, and after the worst part of the crisis, several of those smaller players were snapped up by the big four. None of that's very competitive.

But nearly a year on from the BRP raising its head, this upstart of a political party has signed up well over the 500 members it needed to complete its registration with the AEC, and, according to founder Adrian Bradley, is closer to 1,000 members.

He's targeting SME owners in particular as potential members, or funding donors, as he sees them as being hardest hit by failing competition policy in Australia.

And as predicted by Business Spectator last May, the Bank Reform Party is now also wanting to raise the profile of uncompetitive regulatory structures in supermarkets and petrol too.

That's a pretty broad populist platform. Many punters think they're being screwed by cartel-like behaviour between petrol retailers and Coles/Woolies, and are generally grumpy with banks who fail to 'pass on rate cuts', despite bank funding models being far from that simple.

And dropping a few populist candidates into key seats can do a lot of damage to the major parties. Besides looking to run senate candidates – and Bradley thinks his party has a good chance in WA, Queensland, NSW and Victoria – he says the party is considering running candidates in Joe Hockey and Wayne Swan's electorates. With Swan in particular in danger of losing his seat, BRP preferences could help tip the balance.

But let's return to the criticisms from Business Spectator readers last May. They were mainly that 'bank bashing' is an easy way to attract votes, but not one that stands up to much scrutiny. And secondly, that nice strong banks are just what the nation needs.

On the first point, while appealing to a common mistrust and misunderstanding of banks might not seem very noble, aren't the major parties also engaged in their fair share of dog-whistling?

Tony Abbott has made an artform out of overstating the impact of carbon pricing and boat arrivals, and Labor and the unions are whistling every day about the 'return of WorkChoices'. Add to that a former financial journalist and HBOS employee who understands banking, but who is no doubt secretly happy to pick up some dog-whistled bank-bashers, and the question is really, why not?

On the second point, the general thesis is this: bank profits are good for shareholders, and a large proportion of shareholders (or deposit holders) are self-funded retirees. Without good dividends/deposit rates, they're a bigger burden on public finances. Ergo, uncompetitive banks are a good thing for Australia.

When I spoke with Bradley yesterday, he pointed out the flip-side of the coin: that for banks, supermarkets or any other sector, a lack of competitive pressure means a lack of incentive to innovate. That is, even when profits are modest, or the yield on bank or supermarket shares looks modest, it is a logical fallacy to say "see, the market's working".

Bradley's point of view is that the market is not working, and the big banks and supermarkets, if they faced serious competitive pressure, would improve their own internal processes to deliver more to consumers for every dollar of profit.

That's a message he and his thousand or so friends will try to take to the 2013 election. An uncompetitive Australia is a lazy Australia – and the era in which that was okay is rapidly disappearing.