Westpac was the last of the big four banks in Australia to announce its annual profit. It made the biggest — a whopping $6.3 billion, 84% higher than 2008-09.
The Commonwealth Bank made the second biggest profit this year, $6.1 billion (up 42%). It was also the first bank to announce it would raise its interest rates for home mortgages more than the latest Reserve Bank interest rate rise.
ANZ made $5 billion (up 53%) and NAB $4.6 billion (up 63%). The big four made a total profit of $23 billion.
The leap in bank profits is a slap in the face to those who are struggling with the rising cost of living. An October 19 Australian Council of Trade Unions study said: “Living costs for working households have risen by 4.5% — well above the overall Consumer Price Index and the rate of pay rises enjoyed by most Australian workers in the past year.”
The study found corporate profits increased “27.5% in the past year — more than 10 times the rate of wages for private sector employees which have risen by just 2.7%”. But the big four banks’ profit rose twice as much as other corporations.
To add insult to injury, the big four rewarded their CEOs with huge pay packages. Commonwealth Bank’s CEO Ralph Norris got $16.2 million, Westpac CEO Gail Kelly $10.6 million, ANZ CEO Mike Smith $10.9 million and NAB CEO Cameron Clyne $5.2 million.
The lowest paid CEO was paid more than 140 times as much as the more than half of Australian households that (according to the Australian Bureau of Statistics) have annual incomes of less than $37,000.
They were more than 240 times as much as the 30% of Australian households with incomes of less than $23,000 a year.
Both major parties are posturing against the banks.
Under pressure, Labor Treasurer Wayne Swan promised on November 2 “a further package of reforms to make our banking system more responsive and to make it more competitive”.
Shadow treasurer Joe Hockey cautiously proposed more public scrutiny and competition between the big four. The most dramatic of Hockey’s proposals would turn Australia Post into a state-owned bank that could offer people an alternative place to deposit their savings.
Even if this measure were implemented, competition wouldn’t be enough to wind back the big four banks’ control of more than 90% of all lending by financial institutions in Australia. The big four banks gained their domination by out-competing smaller banks and other financial institutions and then gobbling them up.
This was sped up by the deregulation of the finance sector, which began under the Hawke Labor government in the 1980s.
Under capitalism, competition leads naturally to greater concentration of ownership and market domination. And the objective of each competing capitalist enterprise, in engaging in such competition, is to increase its profits.
The obscene inequalities that have arisen through this process are just one issue. The bigger problem is that these giant banks — unashamedly running on the principle of insatiable profit greed — are using the collective savings of our society (and bad debts the public may one day be expected to “socialise”) in a totally irresponsible way.
Instead of directing these funds to the urgently needed transition to renewable energy, to public transport, health, housing and education, they are directed to expanding dirty coal and other fossil fuel industries, to enriching mining magnates, and to destructive speculative ventures.
Our society cannot afford to have these decisions carried out on the basis of what makes the big four the most profit. This is why, as socialists, we say: nationalise the banks and democratically run them in the community interest.
This may sound extreme, but just two years ago governments in several major capitalist economies rushed to temporarily nationalise banks to save the capitalist system from itself. These governments are now making their people pay for this by cutting social services and cracking down on wages and conditions.
If banks can be nationalised to save capitalism from itself, surely they can be nationalised to ensure our collective survival?
[Peter Boyle is the national convenor of Socialist Alliance.]