The Aussie Economy Is All Dried Up

Talk of the Banking Royal Commission has been hushed of late.

We’ve heard whispers here and there of chairmen being humiliated at the stand. Along with pages of praise for Rowena Orr and her relentless prowess in the face of smarmy bankers trying to weasel their way out of consequences.

But since the hearings ended last month, the bankers have scurried back to their desks in a bid to forget about this entire fiasco. And the public will likely return to their diet of home renovation and cooking shows, eager to ignore any of the implications the commission has for their financial future.

The light that has been shed on the big four banks and their dirty dealings should ideally have important consequences for how consumers view taking out loans and credit. And also for the banks and how they conduct themselves with the public. But realistically, our minds only have so much memory available. And this $75 million royal commission probably isn’t interesting enough to make the cut.

Former Australian Competition and Consumer Commission (ACCC) chairman Graeme Samuel was one voice quick to warn that the lessons learned from the commission are likely to be short-lived.

As he stated:

 ‘History has shown that lessons — even as harsh as the global financial crisis — have a short memory time span and complacency sets in very quickly.

We will and should see a spurt of cultural and governance reform over the next couple of years, but then there will be a gradual lapse back into the course of misconduct we are now seeing in the royal commission.’

When it comes down to it, financial institutions are made up of people. And people get greedy. Particularly people who choose to pursue a career in finance. I mean c’mon, let’s be real here.

As we found out in the last few hearings, bankers like David Turner (the former chairman of Commonwealth bank) just aren’t satisfied with any less than their salary of $874,000. They will do anything and everything to shirk responsibility and get those fat stacks.

To give a brief overview, Turner refused to give back 40% of his salary which the Commbank board had requested from him. He denied culpability after it had been revealed that Commbank had been charging dead people fees, selling products to customers who couldn’t afford it, and for the toxic profit-driven culture inside the bank itself.

In his mind, he deserved that $874,000. No more, no less. He had done a good job, and shareholders had no reason to know about this entire disaster.

Clearly, greed, lies and deception are the name of the game. And integrity and compassion are stuffed away in seldom-touched cabinets ­­— along with all of those customer documents which showed that they couldn’t afford the financial products they’d been sold.

As Graeme Samuel (the former Consumer Competition Tsar) stated when asked by banking executives how they should change the dominant public opinion that ‘banks are bastards’:

The first thing I said was: “stop being bastards.”

But before I get too carried away, let’s get back to the Aussie economy.

Geopolitics and global markets hurting Aussie economy

The misconduct uncovered by the royal commission, in tandem with the US–China trade war and a falling US economy, has had a detrimental effect on the Aussie market.

Amid this global stock sell-off, the Aussie share market has dived to near two-year lows and has left many investors feeling the heat.

On Wednesday, the benchmark S&P/ASX200 index was down 63.5 points, or 1.12%, to 5,608.3. And the All Ordinaries was down 68.2 points, or 1.18%, to 5,691.0.

Free Guide: Australia’s ‘Unstoppable’ Economy. Download now.

Moreover, with oil prices plummeting due to global uncertainty in equities, Aussie energy stocks have been on a rapid downward spiral.

Earlier this week, Origin and Worley Parsons fell more than 5%, Beach Energy fell 7.51%, Whitehaven Coal more than 3% and Santos more than 4%.

And as reports, the falls don’t stop there.

The big four banks were all down, with the losses led by ANZ, which posted a 0.77 per cent drop to $25.105.

Tech shares continued to fall, losing more than 2.8 per cent early, with telco stocks also down.

Telstra lost 1.16 per cent to $2.975.

Coles shares are due to float at 1100 AEDT, with Wesfarmers down 28.77 per cent to $31.50 without the supermarket in its stable.’

Overall, the Aussie market has been awash with uncertainty and volatility. And our newfound distrust in the financial sector doesn’t help things one bit.

But if there’s one person who is happy that the public is finally waking up to the failing economy, that’s Jason Stevenson.

Jason has been writing about a coming global crisis for a while now. And is convinced that gold stocks are the ones to own to protect your wealth during the storm.

He has a new report coming out on Tuesday which outlines the stocks he recommends holding during this time. So keep your eyes peeled and I’ll cover more on this next week. 

This week in Markets & Money

Property in Australia has seen some insane price increases in recent years. This is in part due to high levels of immigration. But as Selva wrote on Monday, it’s mainly due to easy access to credit. But recently, regulators have been putting on the brakes. And it could have a major impact on the economy…

To read more, click here.

Is bitcoin dying? It is a much different scene for cryptos this November compared to a year ago. Last year, around this time, bitcoin was rising…and rising. But things have slowed down since then. But as Selva wrote on Tuesday, behind the scenes, the technology is still buzzing…

To read the full story, click here.

Saudi Arabia has a dangerous addiction to oil. The truth is that oil has shaped the country’s economy. But as Selva wrote on Wednesday, with the Saudis ramping up their oil production ahead of the US midterm elections, this could have a major impact on the oil price…

To learn more, click here.

The Australian government is looking to solve Australia’s rapid population growth by reducing immigration. But as Selva questioned on Thursday, is that really a good idea?

To find out, click here.

Back in 2008, high household debt and the subprime market brought a collapse. Today, household debt is 21% higher than back then. And both consumer and government debt is high. Is this going to bring about another collapse? Well, as Selva wrote on Friday, that outcome is very likely.

To read the full article, click here.

Until next week,

Katie Johnson,
Editor, Markets & Money

Katherine Johnson, usually going by just ‘Katie’, is a member of Port Phillip Publishing’s editorial team, as well as the Editor of the Saturday edition of Markets & Money. Katie works with all of your editors to maintain the quality of their research and analysis. In her Saturday Markets & Money articles she specialises in cryptocurrency and technology stories, and brings you a recap of the week from your other Markets and Money editors.

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