Bob Katter (Kennedy, Independent) Share this | Hansard source

I second the motion. There is a very great quote from Henry Bournes Higgins, the father of the Commonwealth Court of Conciliation and Arbitration in Australia. He said—and it was often quoted by Kevin Rudd in this place—that a contact made by one person is not a contract. If you look at every single contract, such as when you buy a house, the contract actually says that they can do anything they like and you have no rights at all. That is not a contract at all—Henry Bournes Higgins was dead right. A contract made by one person, by definition, is not a contract. Every time we take a loan, whether it is for a house, a business venture, a factory or a farm, the bank can do what it likes. If they decide that your industry—whether it is manufacturing of farming—is in trouble they can therefore depreciate the value of your asset and when you go below a certain level on their computer they foreclose—unilaterally, at their discretion.

To me, clearly there should be a common contract that gives rights to the people who are borrowing the money and does not leave all of the rights with the banks. This would be a proper banking system for this country. If you think that there are no problems, well, look no further than the housing industry. In Newcastle, Sydney and Wollongong, which have almost a quarter of Australia's population, the average price of a house is $900,000. The average after-tax income of an Australian is $50,000, so even if there were two people working and living together their combined income would be $100,000 and they would have $90,000 to meet on the house repayments. Clearly, as the honourable member moving this resolution said, something is going to break very shortly, and people close to the banking industry know that there is impending doom out there.

We have people that are supposed to oversight the prudential banking and financial arrangements in this country. I do not know about other members of parliament, but I have never in 43 years as a member of parliament submitted a single complaint concerning a bank to ASIC, the ACCC, the banking ombudsman or all these other people and received satisfaction. The other grave deficiency in the system was realised right at the start in 1903 or 1904 by the founder of the Commonwealth Bank. We had a people's bank. When a market collapse, a drought, a disease outbreak or something occurs—and this is particular true of farming industries—the banks hit the panic button and immediately apply a 2½ per cent endangered area overrider, a 2½ per cent endangered industry overrider and a 2½ per cent endangered person overrider, so instead of paying six per cent, as was agreed upon, you were suddenly paying 12 or 15 per cent. In all of Australian history since 1903 we had a government bank that in that situation accepted there is a roller-coaster and carried the industry through the down cycle.

I speak with authority, because I was the minister that had primary responsibility for the state bank in Queensland. It was decided by the great Sir Leo Hielscher, whose name everybody knows, the Treasurer, William Gunn, and myself, as minister with primary responsibility for the bank, that we would bail out the sugar industry. We had a look at the sugar industry in southern Brazil, and our cost structures were lower, so we knew that in the end we would always win. If the worst came to worst and we had to foreclose, it is valuable land, so we were not going to take losses. We went in and rescued it. The head of the state bank had told me that 30 per cent of the sugar industry, a mainstay of the Queensland economy, had to go. We were under attack from beet sugar from Europe. He knew all about it. Anyway, two weeks later, let us just say he resigned. There may have been some compulsion. The money went out, approximately $800 million, and we, the government, made $250 million profit out of that. If that had been the banks, they would have taken a loss of $100 million, the farmers would have taken a loss of over $1,000 million, and Queensland would have lost something like 15 per cent of its economy, as well as about 20,000 jobs. That is the necessity for a properly operating bank that is not interested in short-term profits but in the long-term interests of the Australian nation and people.

There was a most intriguing occurrence when the banking tax was announced—and we thank the government for the banking tax. The banks said, 'No problem; we'll just pass it on to the consumer.' There is a thing called collusion, and what they have actually admitted is that they collude on pricing. How can they say, 'We can just pass it on to the consumer'? This place is shot to pieces with free marketeers on both sides of the House. I must say my colleagues in the centre here do not subscribe to such stupidities, but if a free market is operating then the banks cannot just say, 'We're going to pass it on.' That can only occur if there is no free market operating. Clearly the statement by the bank means that what we have here is an oligopoly. We do not have a free market system. This is just another reason that we need to have a royal commission, or its equivalent, into the banks.

Without a banking system that can ride this roller-coaster one would be seeing sugar mills in Queensland closing. As we do not have a state bank, we did see a sugar mill closing every two years, taking 700 or 800 employees for each one that closed. Nine meatworks closed in a similar downturn in North Queensland, each one of them taking down 500 or 600 jobs with it. They have never reopened. Then there are dairy factories. I think there are three out of 50 dairy factories left in Queensland thanks to the free marketeers and their work. But, all the same, they would have been able to survive if there had been a properly operating government bank—and similarly for the wool industry.

There is another issue which very few people take up in this place. When the GFC hit, our prudential regulators said, 'We have magnificent prudential oversight. We have the best banking system in the world.' I think the history books will say that we can thank Kevin Rudd and Wayne Swan for rescuing this nation from the GFC. But the banks were congratulating themselves. They did not have a problem because, unlike almost every other country on earth, Australia is the only country with non-recourse lending.

In America if the banks are going to foreclose they, as well as the borrower, take the loss. They call it 'jingle mail'. If you are in trouble and you cannot make your repayments, you toss the keys to the bank and say, 'It's yours now! Ta-ta! Bye-bye!' In Australia there is no 'Ta-ta! Bye-bye!' The debt follows you. You are a debt slave till the day you die. The bank keeps that debt alive and adds interest to it until the day that you are pushing up daisies—unless you choose bankruptcy.

The only reason that the banks, whose performance in Australia has, quite frankly, been utterly and abominably disgraceful, got out of trouble was that in Australia you take the full blame for the default. In every other country on earth—most certainly in the United States—that default loss is shared by the banks. There is no continuing debt. When they foreclose on the house the debt that you owe the bank is extinguished.

Storm Financial was to some degree a North Queensland phenomenon. The losses were Australia wide, of course, but the epicentre was in North Queensland. At the meeting, Mr Scattini, the lawyer from Slater and Gordon, representing the people who had the losses, said, 'It is in my opinion that the banks made advances to people who could never ever repay them, and the people never had pointed out to them the dangers of the investment.' The investments were made on the basis that housing prices would forever rise, and if housing prices did not forever rise then you all went bankrupt. You all went belly up.

Now who would know this? A bloke working as a fitter and turner in the minefields, doing fly-in mining out of Townsville? Would he know that? Or would the bank know that? Of course the bank would know that, and he wouldn't. So who is more culpable here—the bank or the borrower? Clearly the bank was. Yet, in the Storm Financial case, the banks took negligible pain whereas the people lost hundreds of millions of dollars. And the banks got clean away with it. As the proposer of this inquiry pointed out, they can act in the most irresponsible manner and get away with it. There is no punishment meted out to them.

One of the most important factors here is that both the opposition and the government have said that they will stand behind the majors. They have a government guarantee. Tell me any business in Australia that enjoys a government guarantee outside of the banks. So invest your money in banks, because you know you are never going to lose it—because the government is going to stand behind them. What have the banks given us by way of payment? I would submit that they have repaid us with the most irresponsible behaviour—to quote the bankers themselves when they went before the Senate inquiry, each of them said: 'Mea culpa. I am sorry for what I have done.' Each of them admitted that they had been acting improperly, but what did we do to punish them? Absolutely nothing! In fact, we have given them a government guarantee and rewarded them with the highest interest rates in the world as well.

I had a very lucrative insurance agency in my younger days; I worked very hard and built up a very big business. With the AMP Society, if you had three per cent defaults you lost the agency because it was your job to assess that the person signing the contract could keep up the repayments on the savings plan. It was your responsibility as the agent to see that they could afford it. There is no responsibility, as the proposer has said again and again, on Australian banks to act in a responsible manner. (Time expired)

See this speech in context