Sunday, November 14, 2010

Australian Greens: Populism 1, Economic Credibility 0

Laurie Oakes interviewed Green's leader Bob Brown this morning.  Full transcript here.

We will amend any Government bill or else introduce our own discreet legislation to put a 24-month lid on the banks doing what they've done in the last week again. We think that they should be prevented from going beyond the Reserve Bank increases in the coming 24 months. Or if the Reserve Bank puts the interest rates down, they should be required to go at least as far down as the Reserve Bank...

...Let's make it for 24 months. It can be reviewed then. It's reasonable. I think Australians would welcome it. The banks are going to continue to flourish. But let them be tied to what the Reserve Bank judges as a fair and reasonable interest rate rise, or drop, in the coming 24 months. I challenge both the big parties to get behind the Greens this week in Parliament to put this in to law.

Kiss goodbye to any pretence of the Green's adopting responsible and credible economic policy as a 'balance of power' Party.  Preventing banks from setting the risk margin on loans for housing loans is the epitome of inefficient government intervention, and will have significant knock-on consequences (not least of which will be the transfer of net interest margin to other sectors of the economy such as SME lending).  Brown also shows extreme (deliberate?) ignorance in stating that the RBA decides what a "fair and reasonable interest rate rise" is.  What hogwash.


Update - just saw this potential legal assault on the banks variable margins for 'uncertainty'.  This might well be legally valid (indeed common sense would indicate it is), but again the consequences of this will simply be to require borrowers to be charged even HIGHER margins to compensate for the funding risk the banks run in funding a mortgage book.  This would be catastrophic for Australian banks whom are so dependent on offshore funding sources, and compound the withdrawal of lending in the already challenged Aussie housing market.


  1. This one episode alone should ensure no one ever takes the Greens seriously...Bob Brown and the shallowness of his ideology will become evident to all as he tries to compete with the major parties on serious policies.

    Where is the mainstream media attackng Brown on this mistake...???

  2. I think you underestimate the intelligence of the average Australian person.
    Even if you were to explain basic economics to everyone, people will be biased towards their own circumstances. Quite rightly too, people care more about their own financial situation then the countries.
    This is why we have a government to act for the greater good, unfortunately our system of democracy is not perfect.
    Bob Brown has probably won a lot of votes because of this. Anyone can see the stupidity of it all probably never voted for the greens in the first place.