Turnbull's banking royal commission back flip is about survival
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Turnbull's banking royal commission back flip is about survival

It's hard to disagree with Green's leader, Richard Di Natale, when he says Malcolm Turnbull's decision to proceed with a Royal Commission into the banking sector is all about shoring up confidence in his own leadership, not the banks themselves.

"This announcement was years in the making but I doubt it would have ever happened without the PM facing down the threat of losing a vote on the floor of the house and that's a threat that the Greens, together with the Nationals, put in motion," Dr Di Natale said.

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He is also correct in identifying one of the most unlikely political alliances to emerge in Australia in recent times.

There is absolutely no doubt that in the event renegade Nationals such as Barry O'Sullivan, George Christensen and "Wacka" Williams floated a bill calling for a commission next week and then went on to cross the floor in support of it, it would have been passed with a full house of Greens, ALP and cross bench votes.

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The only real surprise was Wednesday night's letter, signed by the heads of all of the four big banks, calling for a commission.

Even that makes a perverse kind of sense when you consider the banks, like the Prime Minister and the Treasurer, would have also been able to see the writing on the wall.

It is better for both the Government and the big banks to be a participant in the process, in the hope of exercising some control over the form the Royal Commission will take, than to have it's structure and terms of reference dictated to them by others.

This was made quite clear in the banks' letter to Scott Morrison which stated: "A properly constituted inquiry must have several significant characteristics... to avoid confusion and inconsistency, the inquiry must to the most practical extent replace other ongoing inquiries."

The letter noted there were 12 reviews, including the hearings being conducted by the House of Representatives economics committee before which the CEOs are required to appear, in progress.

While Thursday's announcement represents Mr Turnbull's most remarkable, and potentially damaging, back flip to date, he has had to choose between the lesser of two evils.

Yes, there is no doubt agreeing to an inquiry he has opposed for so long is a major embarrassment that highlight's the weakness of his hold on the leadership of the Liberal Party.

But, on the other hand, this is nowhere near as embarrassing as it would have been for the government defeated on the floor of the house as a result of members of the Coalition minor partner crossing the floor in what would effectively be a vote of no confidence.

Even if that didn't bring down the Government it would certainly have ended Mr Turnbull's leadership.

The real question, that will likely be answered before the end of the year, is whether or not this backflip is sufficient to save him from the right wingers determined to win back control of the Government.