The Satchel Review - Friday 17th February

The Big Four banks came out in force this week to defend their variable home loan rate rises on the grounds that they are facing unprecedented economic pressures, while the ANZ, Qantas and Billabong announced job cuts, Air Australia grounded its fleet and left 300 people without jobs and many more passengers stranded, and Whitney Houston passed away leaving legions of fans mourning the tragic loss of a talented lady.

"There are simply not the facts to sustain an argument that Australian banks are far more profitable than other global banks," Commonwealth Bank chief executive Ian Narev told The Australian Financial Review in response to treasurer Wayne Swan's scathing assessment of the banking sector's highway robbery. "Our margins are not pre-GFC levels."

As noted by AFR, the CBA is Australia's second largest company and third-largest tax payer, so it does play its part in propping up our public services and infrastructure. As demonstrated by a nifty pie chart, CBA incurs $4.2bn of expenses in delivering its services and $1.1bn in loan impairment; pays $4.8bn in employee salaries, $3.2bn in taxes and $5.1bn in shareholder dividends, and has $2bn in its pockets for capital growth. In a utopian world, it would also have funds allocated for 'passing on savings to loyal customers who pay our exorbitant fees'.

It's a good time for smaller lenders and credit union to capitalise on the big banks' greed and trumpet their commitment to Aussie families, and they have wasted no time in doing so (while the ANZ, who will cut 1000 jobs, runs pricey ads featuring the handsome Simon Baker). Whether customers will be bothered with shifting their business is another matter.

"Customer inertia when it comes to switching banks is one thing. It's a hassle. But how to explain why four in five new loans in Australia continue to be written by the big four banks?" asked Jessica Irvine in The Sydney Morning Herald, listing just a few of the 170 alternatives lenders we have access to.

"Australia's mortgage market might lack a truly competitive dynamic, but the big four have no natural monopoly over the supply of money to borrowers. The banks are simply opportunistic oligopolists who erect and maintain barriers to entry against competitors in several deliberate ways... One Dollarmites account and you're trapped for life."

Or not. Our choice. Habits can take forever to change – but, in the event of a shock like a heart attack, it's more likely we will resolve to do the right thing. This could be the heart attack we need to wake up to the manifold options outside the Big Four and disperse our banking dollars further afield – in the end the taxes end up in the same coffers, so why not share the love? Here I come, Suncorp.

Still, we can be grateful that we are not in the position of the Greeks, who now face tighter austerity measures because those in positions of power to change the nature of the country's economy left it too late. Greek parliament approved a package of stringent spending measures, which include a 22 per cent cut to minimum wages, reductions in pensions and the loss of 150,000 government jobs.

This is based on conditions set by the European Union, IMF and European Central Bank and aims at ensuring the economy doesn't fully implode, taking the whole EU down with it, and ensuring services such as hospitals and schools, keep running albeit at a curtailed capacity.

Greece has already seen business collapse, employment rise and hopes dashed. What has resulted is all-out warfare on the streets. If you can't feed your family and have no job to go to, of course you will be miffed. And the Greeks are projecting their dismay at the state of affairs onto Germany, which has been all too high and mighty in its strict approach to support.

Meanwhile, President Obama has clamped down on discretionary spending and raised taxes for the rich (dubbed the "Buffet Rule") in the US in order to raise US$1.5 trillion as the economy faces a US$1.3 trillion deficit for fiscal year 2012. After America's second richest man, Warren Buffet, went public last year with his comment that his secretary paid a greater ratio of tax than he did, households earning more than US$1 million a year will now have a minimum tax rate of 30 per cent.

In the land of meritocracy, this might be a tough act to swallow. But like a vaccine that keeps disease from spreading, sometimes we need to suck it up and take the jab for the greater good.

Girl With a Satchel