Complaints about the banks are misplaced, Michael Pascoe says. Photo: Jessica Hromas
Like a king tide coinciding with a storm surge, the combination of record bank interim profits and their delay in announcing interest rate reductions that will be less than the RBA's cash rate cut means we're set to be flooded by whingers banging on about bank greed and mortgage burdens.
Inevitably led by politicians who pretend to know no better and whipped along by tabloid media that just don't know, the whingers' tide crests with every profit and interest rate announcement.
Even people who do know better sometimes get caught up in it, an esteemed colleague writing: “Monetary policy is now the domain of the banks, not the RBA.”
Um, no, that's not correct. The RBA targets what people actually pay and adjusts its cash rate with an allowance for the banks' moves to cover increased funding costs. The Governor told us so (http://www.rba.gov.au/media-releases/2012/mr-12-10.html ) just yesterday and it's always been the case.
Not that Wayne Swan or Joe Hockey would ever want to acknowledge that as it would remove a plank from their bank-bashing platform. The political pressure on the banks to pass on the cash rate trimming “in full” is as phoney as all the voices now wanting to take credit for “pushing” the RBA to move by 50 points.
And as to the banks taking a little time to make an important competitive decision about their lending rates, exactly what is wrong with that? There's a game of cat and mouse to be played out by the big four in their marketing positions where each point is worth millions.
Eventually, on average, we'll get an interest rate cut of about the size the RBA wants to see. In the process, hopefully we'll also see a little more differentiation in the banking club, with decisions appropriately reflecting their books and competitive drive.
The ANZ's hairy-chestedness at one end and the NAB's marketing pitch at the other represent a healthy evolution away from the cartel.
Free choice, remember?
We enjoy the great benefits of a more-or-less free market system, a system that depends on making choices from time to time.
The banks' fortunes rise a little or a lot depending on the choices their managements and their customers make. And if any individual's financial health depends on a week here or there on a 38-point mortgage movement, well, they obviously have much bigger financial problems that need dealing with.
The business about whether the banks have been fibbing over their funding costs has become tiresome. If it's a choice between a private bank analyst's guess and the work done by the RBA and APRA with the access they have to the banks' books, I'll go with the RBA.
Joe Hockey's suggested referee on bank funding costs has ruled that the banks' funding costs have indeed risen, but not by a lot and that they may fall again down the track. Or not. It's just unfortunate that the RBA's ruling has been regularly misreported.
There's not a big difference between our main lenders - they're all big, strong and predominantly reflect the health of the Australian economy - but there are differences.
To make the most of those differences, it comes down to the bargaining power and willingness of the individual customers. Some have little or none of either, some do.
In accessing the differences, one of most common mistakes is to look at the published “standard variable mortgage” rate.
It's the figure constantly reported and it actually doesn't mean much at all aside from it being a yardstick for movements in the various shades of discounted loans already outstanding.
Any attempt to compare average interest rates across the years relying on the somewhat mythical standard variable mortgage rate is bound to be flawed as the level of discounting from that rate has also changed.
And then we get to those big banks' big profits.
Don't get envious, get even - own bank shares and enjoy a much higher and more sustainable pre-tax yield than on offer for any deposits. If you don't like paying bank fees, as an average customer you rarely have to as long as you're prepared to bank intelligently.
But it's much easier just to go with the whingers, to take the populist line and try to blame someone, anyone else for perceived troubles. It's a national sport.
Michael Pascoe is a BusinessDay contributing editor whose family super fund happily holds bank shares.