A royal commission into Australia’s banking industry has just been announced by Prime Minister Malcolm Turnbull.
After some waffling, the Greens threw their support behind Labor. And Labor had enough backing from crossbenchers and rebellious Nationals, to push their vaunted banking inquiry through.
The issue has created a serious headache for Malcolm Turnbull. The prime minister was adamantly opposed to the measure. But his hand has been forced.
Earlier this week, David Murray sounded off in support of Turnbull’s position against an inquiry. You’ll likely remember Murray from his time as head of the 2014 Financial System Inquiry.
Here’s what Murray told Fairfax Media:
‘What are the self interests driving this? It just begs the question. I think it would be a very bad look for Australia, with the fundamentals of the financial system being so sound, and with the rest of the world being our net creditor.’
The financial services sector provides around 10% of Australia’s GDP (gross domestic product). That’s bigger than the mining industry. And as noted by The Sydney Morning Herald, it has already been through 18 government reviews and inquiries.
Now we’re no cheerleaders for the big banks or insurance companies. Far from it. But we’re also not fans of excessive government red tape. Or expensive, taxpayer funded royal commissions.
Banks stocks were up across the board in yesterday’s trading.
Yet mere speculation of a banking enquiry has already put the big banks’ share prices under pressure in recent weeks. And in the lead up to the enquiry, banking stocks could suffer a good deal more.
How much is hard to predict. But investor uncertainty could cause falls of 10% or more.
And whether you know it or not, you most likely own the banks’ shares. At least if you’ve parked your money in a managed super account.