Government warns banks

Australia’s banks would be unwise to ignore a warning that the government is giving them.

This follows reports of reckless lending by Australia’s banks.

A union that represents bank workers, says a survey it conducted has shown that 60 per cent of members, who work as loan officers, have reported that they are under pressure to expand their lending into doubtful territory.

That, of course, is just how US banks got themselves into so much trouble, precipitating a crisis on world financial markets.

A report on the ABC television program Four Corners, last night showed – at least – that similar practices do occur in Australia.

But how widespread are they?

And will the Australian banks – and other lenders learn – in time – from the bitter US experience?

The new Rudd government is closely watching the banks’ behaviour.

The Treasurer, Wayne Swan, made that absolutely clear, in a warning he gave to the banks about reckless lending.

That warning was low key, but Mr Swan chose his words very carefully.

“If this were widespread,” he said, “I would be very concerned.”

Australia’s banks have long been suspicious of Labor governments.

They have never quite forgotten Labor’s unsuccessful attempt to nationalise them, in the immediate post war years.

The government does not want to revive all that.

But it does have a responsibility to maintain the stability of Australia’s financial system.

So it would act, if necessary.

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