If you think the banking royal commission’s damning report means you’ll never again be overcharged or otherwise mistreated by a bank, you’re being a bit naive. If you’re hoping to witness leading bankers being dragged off to chokey, you’ll be waiting a while.
But if you think that, once the dust has settled, we’ll find little has changed, you haven’t been paying attention.
I think we’ll look back on this week and see it as the start of the era of re-regulation of the economy. The time it became clear our politicians were no longer willing to give big business an easy ride, to assume it would only ever act in the best interests of its customers and that nothing should ever be done to displease the big end of town, for fear this would damage the economy.
And I’m talking about a lot more than banking, superannuation and insurance. Many other industries have been treating their customers or employees badly, and they too will find governments getting tough with wrongdoers.
Why the change of heart? Because, in so many cases, the 30-year experiment with deregulation, privatisation and outsourcing is now seen to have ended badly.
Recent years have revealed many businesses breaking the law while government regulatory bodies fail to bring them to justice: firms paying their employees less than their legal entitlements, firms taking advantage of foreign students and others on temporary work visas, private providers of vocational education inducing youngsters to sign up for inappropriate courses, irrigators illegally extracting water from the Murray-Darling river system, private inspectors certifying high-rise apartment blocks later found to be seriously defective, and many more.
Big business may have power and money, but customers and employees have votes. And when voters experience mistreatment at the hand of business – or just read about the mistreatment of others – they tend to blame the politicians, who were supposed to ensure such things happened only rarely.
Commissioner Kenneth Hayne has found that almost all the misbehaviour by banks and other institutions he uncovered was already illegal.
He makes the point that “the primary responsibility for misconduct in the financial services industry lies with the entities concerned and those who managed and controlled those entities”.
But, he adds, “too often, financial services entities that broke the law were not properly held to account.
“The Australian community expects, and is entitled to expect, that if an entity breaks the law and causes damage to customers, it will compensate those affected customers. But the community also expects that financial services entities that break the law will be held to account.”
And when the Australian community realises this hasn’t happened, who does it blame? Who does it seek most to punish? The government of the day. Even though the genesis of the policy problem lies in decisions made by governments long gone.
Do you see now why the worm has turned on deregulation?
Former Labor and Coalition governments’ naive faith that “market forces” would oblige businesses to do the right thing has proved badly misplaced. In their scramble for higher profits and pay, seemingly respectable businesses have taken advantage of their greater freedom, knowingly breaking the law whenever they thought they wouldn’t be caught.
And now the chickens have come home, who’s most at risk of losing their jobs? Not the bosses of offending businesses, not the regulators asleep at the wheel, but the government of the day. That’s the rough justice of democracies. Voters hit out at those they have the power to hit – those they elect.
It was business that had the fun, but it’s politicians in most immediate danger of paying the price. Do you really think they’ll be going easy on their former business mates who’ve been dudding them behind their backs?
But what’s a threat to the government is an opportunity for the opposition. Competition between the two parties will ensure the Hayne commission’s recommendations are acted on.
And, whichever side wins the election, the next term will see a tightening of the regulation of many industries beside financial services.
Commissioner Hayne was highly critical of the two main financial regulators, the Australian Securities and Investment Commission and the Australian Prudential Regulation Authority. Why did they allow so much wrongdoing to get past them?
Partly because they succumbed to the ailment threatening all regulators: “capture” by the industry they were supposed to be regulating. They allowed themselves to become too matey with the industry, seeing its point of view more clearly than the interests of its customers.
But there’s more to it. During the decades in which politicians and some economists convinced themselves that the more lightly businesses were regulated the better they’d serve the rest of us, the regulatory authorities were left intact more for appearances than function.
They soon got the message that their political masters – from either side of politics – wanted them to go easy on business. Both sides went for years reinforcing the message by repeatedly cutting the regulators’ funding.
But all that’s changed. The politicians, claiming to be shocked by the regulators’ dereliction, are now pumping in taxpayers’ money as fast as they can go. Life won’t be the same for big business.
