Morrison is banning cash so Australians can’t escape bail-in, negative interest rates

The fight against “bail-in” is on! The Morrison government has released for consultation a new law that bans cash transactions over $10,000. The pretext for this law is to crack down on money laundering and tax evasion in the “black economy”. This is a shameless lie! The formal recommendation to ban cash comes from “big four” global accounting firm KPMG, which is an accomplice of the world’s biggest money launderers and tax evaders. The real purpose for the cash ban is to trap Australians in the banking system, so they cannot escape negative interest rates or having their bank deposits “bailed in”.

Scott Morrison first announced this measure in the 2018 budget, originally to come into force this month, but now scheduled for January 2020. It was recommended in the October 2017 Black Economy Taskforce Report by Michael Andrew AO (who died last month), a former chief of global accounting giant KPMG. The report revealed that the strategy is to: “Move people and businesses out of cash and into the banking system, which makes economic activity more visible, auditable and efficient.” (Emphasis added.) It gives the game away by noting that it may benefit “financial stability and the effectiveness of monetary policy”—code for policies like bail-in and negative interest rates. To achieve this it recommended: “Moving to a near cash free economy. A $10,000 economy-wide cash limit should be introduced.” But $10,000 is just the beginning: in June 2018, just after Morrison announced it, KPMG was already lobbying Treasury to lower the limit to $5,000 or even $2,000.

Deception and stealth

When Morrison released the exposure draft of his bail-in law in 2017, he did so on a Friday afternoon when there would be no media attention. Only a sharp-eyed CEC staffer spotted it and recognised it as bail-in, enabling the CEC to mobilise a massive nationwide campaign against it which continues to this day. The government is being equally sneaky with this law. Treasurer Josh Frydenberg quietly released the exposure draft of the legislation, called the Currency (Restrictions on the Use of Cash) Bill 2019, last Friday afternoon, 26 July, and has allowed only two weeks for public comment.

The exposure draft of the bill has two notable features:

  1. It bans ALL cash transactions over $10,000, enforced with a penalty of two years jail;
  2. Division 2 is blank, containing only the words “To be inserted”.

What is the government hiding by releasing an incomplete draft, on a Friday afternoon, and allowing only two weeks for public consultation?

The deception doesn’t end there. In its explanation of the law, the government has sought to make it palatable by emphasising that there will be exemptions to the cash ban, including depositing and withdrawing cash in banks, and, curiously, most consumer-to-consumer transactions, such as for a second-hand car. However, the exemptions are not in the legislation. They are in a separate regulatory instrument to be issued by the Minister after the legislation is passed. This means that they are not permanent, but that in the future, the Minister will be able to scrap the exemptions without requiring new legislation. This is the “salami tactic”: first pass the law in a form that is politically palatable, and then slice off key changes. In a bail-in scenario, for instance, under the current regulation people fearing bail-in may withdraw all of their money from the bank, but the Minister will be able to issue a new regulation that suddenly stops people from withdrawing more than $10,000.

Not about money laundering

This law is emphatically not about controlling money laundering and the black economy. The vast majority of money laundering and tax evasion is done by banks and corporations, not individuals. And who helps banks and corporations do it? The big four global accounting firms, including KPMG, whose boss Michael Andrew recommended this cash ban! The big four literally write the tax laws that enable corporations to evade tax, and dominate the offshore tax havens like the Cayman Islands that exist for tax evasion and money laundering. When Michael Andrew was the global boss of KPMG—the only Australian ever to lead the worldwide operations of a big four firm—two of KPMG’s biggest clients, British banks HSBC and Standard Chartered, were caught in 2012 by US authorities in massive money laundering operations. In other words, KPMG assisted its clients to launder money, but is using money laundering as the excuse to take away the rights of Australians to use cash!

The real reason: bail-in and negative interest rates

Money laundering and tax evasion are nothing new, that they would suddenly require this “solution”. What is new is the plunge in the public’s confidence in the banks, especially since the global financial crisis. But instead of properly reforming the banks to restore the public’s confidence, through policies such as Glass-Steagall, which separates normal banking from the financial gambling that causes crises, authorities around the world have resorted to insane and in fact criminal measures that further destroy confidence in the banks.

The two most egregious measures are the criminal bail-in policy and the insane move to negative interest rates; bail-in steals deposits to prop up failing banks, while negative interest rates force customers to pay to keep their money in the bank. Both are coming to Australia. Morrison snuck his bail-in law through the Senate in February 2018 with only eight senators present in the chamber and no recorded vote. The Reserve Bank of Australia has aggressively slashed interest rates to 1 per cent, and in the banking crisis that is brewing right now they will feel compelled to follow countries like Japan and Switzerland down past zero and into negative territory, as the International Monetary Fund is recommending.

Both bail-in and negative interest rates destroy confidence in the security of bank deposits, which motivates people to take their money out of the bank and hold it in cash. This is the experience in Japan and Europe. So like some European countries, Australia is banning cash to force people to use the banking system so they cannot escape these policies, under threat of two years jail.

Fascism is the use of state power to benefit private corporations; by definition, this is a fascist assault on the freedom of Australians to use cash and not private banks. The CEC is calling on all concerned Australians to demand the government scrap this law and reform the banking system instead!

What you can do

The government has allowed only two weeks for submissions, in order to avoid scrutiny. Don’t let them get away with it! We have until 12 August to swamp Treasury with letters and emails, demanding they drop this law. Write an email or letter today to the Treasury: state your objection to any law that removes your right to use cash, and demand the government restore confidence in the banking system by properly reforming the system, not by trapping people in the system so they can’t escape policies like bail-in.

Email: with the subject line:
Submission: Exposure Draft—Currency (Restrictions on the Use of Cash) Bill 2019

Address written submissions to:
Black Economy Division
Langton Cres
Parkes ACT 2600

Financial Newsletter – From a person I know…

Last week I published the July issue of The Hard Truth. The issue was on the new crypto currency created by Facebook called Libra. I think what Facebook did with the creation of Libra is very cool. They created an actual crypto currency that will act as money. Meaning that the currency will have solid assets backing it up and it will be able to be used for the purchase of goods and services and will provide the ability to send money across the planet as if you were sending a text. Bitcoin and other crypto “currencies” are not really currencies. They have become investment assets like gold or silver. What merchant is going to accept Bitcoin in payment of say, a car, when the price of Bitcoin can fluctuate as much as $1,000 a day? The person pays the dealer in Bitcoin for a new Mercedes and the currency has fallen $1,000 before the car gets off the lot. Now, I thought it was very clever how they structured Libra as money and if you read the issue, you’ll see what I mean – I got some very nice acknowledgments on the issue, which is always appreciated, but also got a few emails from people who think that I have the confront of Mary Poppins. I was upbraided for seemingly not understanding that the CIA “created” Facebook or that Facebook users were subject to government surveillance. I didn’t paint the potential dark side of Libra in the issue because I thought it was a work of considerable skill. It bypassed banks and governments and remained a stable digital currency – and still do. But for those who think I was promoting Facebook as the savior of the global financial system or that I am unaware of the gift that such a currency would provide the US intelligence spooks, please think again and subscribe to The Hard Truthand read some of our other issues. In the first two issues of The Hard TruthI dealt with the Snowden disclosures in great depth. We described Stellar Wind the CIA’s program that is plugged into the routing equipment of the major telecom companies and captures virtually all U.S. telecom and email traffic and “sniffs” it for “bad” words, sending offending phone traffic to the FBI, and the rest to a million square foot, billion dollar digital storage facility in Utah to be sniffed in more depth later. The NSA’s PRISM program monitors traffic to the social media world, including Facebook, Twitter, Instagram, etc. as well as Google, Apple, and rest of the cyber hierarchy. We also covered X-Key Score, the CIA program that combines Stellar Wind and PRISM with your bank account to create a digital portrait of US citizens. In addition, subscribers that have been with us a while would have received in issue #9 an in-depth article on how CIA, NSA and DARPA (the Dr. Strangelove of military weaponry) funded the initial research for the Google algorithm when Sergei Bryn and Larry Paige were doing their PhD research at Stanford. That issue also covers the migration of top government spooks from DARPA and the CIA to the stock-rich executive suites at Google. And how Google is a front for government intelligence. That issue also covers the meetings of the infamous Highland Forum, the unseen hand of government intelligence. Issue #9 is my favorite. If you want to get a peek at the activities of U.S. government intelligence and have an eyepopping look at the new American Police State, a subscription not only gets you the new “controversial” issue on Libra, but all published issues: subscribe here for the article on Libra and the entire archive. And in case you read the recent issue of The Hard Truth and were under the impression that I was unaware of the extent of government intelligence surveillance activities and their digital fingers in social media or the clear intention by the Bank for International Settlements and the IMF to turn the global financial system into an internationally controlled monetary system of zeros and ones…. think again. The Hard Truth is primarily a financial newsletter. But periodically, I venture into government, politics and help expose some of the dark corners of government surveillance. Solutions are available in the articles. At $34.95 it’s a hell of a deal. John Truman Wolfe

Politicians who deny economic reality destroy their constituents


The local mayor, state MP and federal MP for Mandurah, Western Australia, have attacked the Interests Of The People (IOTP) show “The Economic Massacre of Mandurah” for exposing that their city is the leading edge of Australia’s housing and economic crisis.

The show featured independent economist John Adams and CEC Research Director Robert Barwick briefing host Martin North on their recent visit to Mandurah, where they witnessed streets littered with For Sale signs, and were informed by locals of the area’s serious economic and social problems, including the worst drug problem in the state. Martin North shared his comprehensive survey data of Mandurah’s 30 per cent house price falls, and more than 40 per cent unemployment and underemployment.

In the 17 July Mandurah Coastal Times, Federal Liberal MP for Canning, Andrew Hastie, attacked the show as “over the top”.

By contrast, the show struck a chord among WA locals, with many expressing that they know the show is right. “We’re seeing exactly what they say as fact in this town”, said local sport store owner Hayden Burbidge to Perth’s biggest radio station, 6PR, on 12 July.

The online Daily Mail also covered the show, in an 18 July article headlined “Economists drive through WA town counting endless ‘for sale’ signs on properties revealing the true extent of Australia’s housing crisis”.

The problem for Andrew Hastie, who is known to be personally very concerned about the situation in Mandurah, is that if he publicly acknowledges the crisis, he will be contradicting the claims of his own government. The Morrison Coalition government is both denying the crisis, and hustling the population to scam them into thinking that another housing boom is about to start and so they should rush out and buy houses.

They are preying on young households in particular, to lure them into thinking now is the right time to buy their first home. To do so, Assistant Treasurer and Housing Minister Michael Sukkar is trying to spread fear among young families—fear of missing out!

He is urging them to rush out and buy their first home now, before the government’s 5 per cent deposit scheme starts in January. Prices will skyrocket, Sukkar is implying.

“Housing Minister Michael Sukkar has urged first-home buyers to try to snap up a property now, ahead of the government’s signature loan deposit scheme starting next year, warning that housing prices are likely to increase”, Rosie Lewis reported in The Australian on 18 July.

“If you’ve got an opportunity to get a foot in the market before then you should take it, given I think the market is starting to improve,” Mr Sukkar told The Australian. “People who buy now I don’t think will regret it at all. A re-elected Morrison government has put a lot more confidence into the market. We’re seeing green shoots in Melbourne and Sydney in the last quarter and I think with low interest rates, with APRA reducing service-ability buffers, all those factors combine to confirm that optimism.” (Emphasis added.)

Sukkar might be confused. There are green shoots in the housing market—green shoots of weeds taking over abandoned greenfield developments in Sydney and Melbourne from the more than 25 per cent defaults from people walking away from their deposits, unable or unwilling to pay the balance and start building a home.

More likely, Sukkar is not confused, but along with the rest of the government is desperate to con people into the market, in the hope that a rush of buyers will start pushing up prices again.

The question is, if it doesn’t work to drive up prices, and the thousands of buyers who’ve followed Sukkar’s advice find themselves trapped in negative equity, will the Morrison government pay their debts for them?

WA shows that negative equity is a very real danger from these low-deposit schemes. The state’s Keystart program helps people into the housing market with a 2 per cent deposit, but a higher introductory interest rate. After a few years of building equity, the borrowers would refinance at a lower rate with a commercial bank. It worked for years… while prices were going up. Since prices have been plunging, however, all it is doing is trapping borrowers in negative equity and high interest rates, because commercial banks are unwilling to refinance their loans if they have no equity.

The insanity of the Morrison government’s approach is that it is trying to put off a crash by reinflating an already overstretched bubble. In reality, the bubble will burst, and it must burst, and house prices must fall a very long way so that once again they become truly affordable, without households chaining themselves to huge, unpayable debts. The longer politicians put it off, the worse the eventual crash will be, and they will destroy their constituents.


What politicians should be doing is implementing economic solutions before the crash. The CEC has drafted a number of pieces of legislation:

to reform the banks and protect their customers through a Glass-Steagall separation of banking from speculation;
to put a freeze on foreclosures on family homes and family farms while the unpayable mortgage debt is reorganised and written down to affordable levels matching the true value of the property;
to direct the Auditor-General to urgently audit the banks to ascertain their true exposure to this crisis, and what needs to be done to clean up their books; and
a national bank to invest in productive infrastructure and industries, in order to restructure the economy away from its current focus on financial services, housing construction and raw materials exports, and back to being a powerhouse of manufacturing and agricultural production. 

To fight for these solutions, join the CEC!

Click here to watch the IOTP response: The Mandurah Establishment Attacks Adams and North

Why has New Zealand suddenly guaranteed bank deposits?

Australians and New Zealanders alike should be very concerned about what’s happening in NZ’s banks, which are owned by Australia’s.

In a special episode of the CEC Report, Robert Barwick has interviewed real estate and financial expert Joe Wilkes, a veteran of the 2008 financial crisis in London now living in NZ, who is sounding the alarm about the NZ property market and banks. Click here to watch: What the hell is going on in Kiwi banks?

The New Zealand government has suddenly announced it will establish a guarantee for retail bank deposits, up to a limit of between NZ$30,000 and NZ$50,000. New Zealand has never had a deposit guarantee, except for a temporary one during the 2008 global financial crisis. The Reserve Bank of New Zealand (RBNZ) has always taken a hard line against a guarantee due to fears of “moral hazard”—that guaranteed banks would take more risks.

So why implement a guarantee now? Is it for the same reason the Reserve Bank of Australia slashed interest rates twice in two months to a new all-time low of 1 per cent? Is it an emergency response to a crisis they don’t want to publicly acknowledge?

Bail-in capital of the world

The guarantee is especially significant, as NZ is the bail-in capital of the world. It has the most explicit bail-in scheme to confiscate deposits to prop up failing banks, called Open Bank Resolution (OBR).

The RBNZ prides itself on its hard-line insistence on strict “market” discipline for the banks. It justifies the OBR bail-in system, for instance, by defining a depositor not as someone who has entrusted their money to the bank for safekeeping, but as an “investor” who has “freely invested in a private institution and has enjoyed a return on that investment whilst accepting the risks associated with the investment”.

This definition does not reflect how bank customers understand the relationship, which is one based on trust; moreover, it is a joke when assessing the “return” the “investors” have supposedly “enjoyed”: miserly deposit interest rates in no way compensate for the risk of bail-in. Worse, most Kiwis have no idea that their deposits can be bailed in (just as they had no idea that their deposits weren’t guaranteed), so how can they be expected to make a proper assessment of risk?

Unfortunately, Kiwis should not assume that the new guarantee will protect their deposits from bail-in. Unless it states so explicitly in legislation, the guarantee is only for paying out depositors when a bank fails, whereas bail-in is imposed before a bank fails.

Once-in-200-year event!

While the OBR bail-in system has been in place for several years, the RBNZ has also recently taken emergency measures to shore up the banks.

Earlier this year the RBNZ announced it wants the banks to dramatically increase their tier-1 capital—their buffer against losses—from 8.5 per cent, to 16 per cent. RBNZ governor Adrian Orr justified this steep increase by saying he wants the banks to be able to survive a once-in-200-year event.

The question is, just what sort of event does Orr anticipate?

The NZ banks and their Australian parents aren’t happy. In a submission to RBNZ against the higher capital requirement, the NZ Banking Association (NZBA) decided to side with their depositors, and say that they shouldn’t be required to have more capital for the same reason depositors shouldn’t be bailed in—that the RBNZ is responsible for anticipating crises, and therefore should bail the banks out.

It’s a bit rich that the banks are only defending their depositors against OBR bail-in now that they are being required to raise more capital. After all, OBR has been discussed since 2011 and has been in place for a number of years. Their argument against bail-in, however, is right.

Here’s what the NZBA submitted, in the form of an analysis by the Sapere Research Group:

“We have some concerns that the OBR is being assumed to provide a ‘bail-in’, whereas it seems to us highly unlikely that any government would allow all depositors in a major bank to take a haircut. Depositors would have a right to argue that the Reserve Bank should have seen this coming and that as the government’s designated regulator of the banks, the government should take the hit rather than the depositors. Depositors are poorly placed to monitor the performance of their banks in contrast to the regulators who have better information and a duty of care to the depositors. Requiring banks to hold additional Tier 1 capital would seem unlikely to be the most efficient method for managing these risks.” (Emphasis added.)

While the specific argument against bail-in is spot on, using it to argue against more capital didn’t wash. At a press conference on 29 May, Governor Orr ridiculed this submission as “astounding” and reiterated RBNZ’s insistence on more capital. The bottom line for NZ depositors is: expect to be bailed in, because the NZ authorities are going to need all the money they can get to prop up their banks!

The “once-in-200-year” event that Orr fears could come from multiple sources, or a combination of all of them. New Zealand like Australia is at the mercy of the global financial system, which is threatened by the crisis in Deutsche Bank, the fallout from the US-China trade war, and the US$1.2 quadrillion global derivatives bubble. As of the last time NZ’s bank derivatives were reported, in 2015, the country’s exposure was NZ$2.77 trillion.

New Zealand’s banks are also at the mercy of their Australian parents, which are staring down the barrel of a collapsing housing bubble that will likely bankrupt them; in the event of a crisis in the Australian banks, they are able to raid their NZ subsidiaries for capital, which could trigger a NZ crisis.

And NZ is capable of causing its own crisis, which, as in Australia, is likely to come from the deflating housing bubble that is as big in NZ as in Australia. As Joe Wilkes has often reported on Martin North’s Digital Finance Analytics YouTube channel, Auckland and Wellington had some of the highest prices in the world, but are now falling, and many large developments have ground to a halt. This is as much a crisis for the over-exposed banks as the over-extended borrowers trapped in negative equity. And the signs are especially bad for the largest bank, ANZ, which has most fiercely resisted the higher capital requirements; like its Australian parent it is hiding its derivatives exposure, and has suddenly lost its chief executive in the sort of scandal that seems to happen when a bank is covering up deeper problems.

Like Australia, NZ needs bank reform, starting with a Glass-Steagall separation of deposit-taking banks from speculation. Kiwis should join the Australian campaign for bank separation and contact their NZ MPs to demand they scrap bail-in and instead adopt Glass-Steagall to make the banks safe.

Click here to watch: What the hell is going on in Kiwi banks?

Frydenberg and Hume—the Deutsche Bank dunces in charge of your financial security

As the Citizens Electoral Council has exposed, the Australian government’s extensive police-state powers, which last week were used to raid journalists, are intended not to protect people from terrorism, but to protect the establishment from the people. This is especially true in times when worsening economic conditions drive an anti-establishment backlash.

The reason there is a danger of an anti-establishment backlash is that the ever-arrogant establishment always rigs the system in its favour. In times of economic crisis, the public wises up to this fact. For an example in Australia, look no further than the government ministers in charge of the financial system, Treasurer Josh Frydenberg and Assistant Minister for Superannuation, Financial Services and Financial Technology Senator Jane Hume, both ex-Deutsche Bank executives.

Australia’s bankers have just come through one of the most damaging episodes in their history. The Hayne royal commission exposed the banks as vast criminal enterprises, just like the banks in Wall Street and the City of London etc., except until the royal commission Australia’s banks were supposed to have been the best in the world. The Rudd-Gillard-Rudd-Abbott-Turnbull governments had always said they were the best, and for years denied there was any need for an inquiry. When growing public unrest forced an inquiry, their denials were exposed as lies, and for once, the banks faced real justice. Read the rest of the article here:

Hands off our bank deposits—stop ‘bail-in’!

If you don’t sign any other petition from me, sign this one. No point in letter the average member of the public prop up the criminal bankers!

With panic breaking out in the financial system, the danger grows that bank customers will have their deposits “bailed in” to save desperate banks. The Citizens Electoral Council is escalating its fight against bail-in with a new petition calling on Parliament to scrap bank regulator APRA’s existing bail-in powers and stop the plans that are under way to legislate stronger bail-in laws.
Sign the electronic version below.

Major parties resort to extreme measures to protect banks

(This is (one of many reasons) why we want the major parties out on their ears!)

On 8 May the Senate Economics Legislation Committee released the report of its inquiry into the Banking System Reform (Separation of Banks) Bill 2019, opposing the policy. On 12 May Prime Minister Scott Morrison announced a scheme for first home buyers to purchase a house with only a five per cent deposit. The Labor Party supported the government on both issues. By these actions, as opposed to their rhetoric, the major parties have confirmed that 1) the economy is heading for disaster; and 2) they remain captive to the banks and will therefore sacrifice the livelihoods of the Australian people and economy to protect the banks and prop them up.

Disaster looming in housing and banks—what’s Canberra going to do about it?

Australia faces an unmitigated disaster in the housing market and, consequently, the banks. Every indicator in the housing market is suddenly very bad. What we are witnessing is shaping to be a bigger property crash than the 1890s depression. And like the 1890s land crash, when most Australian banks failed, the banks today are in deep trouble, from their massive exposure to mortgage lending and derivatives on that lending.

With a federal election under way, why isn’t this an election issue? The political establishment is deliberately ignoring it, assuming that the Reserve Bank will magically solve the problem through various forms of money-printing that will be futile but will, as outspoken economist John Adams charges, “rape the dollar”. But be under no illusion: this coming crisis is also the reason the government and Labor rushed through “bail-in” laws in February 2018, which give bank regulator APRA the power, in coordination with the RBA and the Bank for International Settlements in Switzerland, to prop up the banks that will soon start to fail by confiscating the deposits of their customers.

Housing catastrophe

The only reference to this looming disaster in the election campaign is in relation to Labor’s negative gearing policy, which the Liberals claim will crash the housing market. No, it won’t be the cause of a market crash, because that is already happening—right now!

As of April 2019, CoreLogic’s figures show average price falls from the peak of the market in capital cities are 9.7 per cent. The two biggest markets, Sydney and Melbourne, are down 14.5 per cent and 10.9 per cent respectively. Melbourne’s fall started later than Sydney’s but is going faster—in fact, Melbourne prices are falling the fastest in its history.

CoreLogic, the media and property spruikers have jumped on figures that show the falls are slowing down: the national market was down 0.5 per cent in April compared with 0.7 per cent in March, 0.9 per cent in February and 1.2 per cent per month before that. Headlines proclaim the market is “through the worst”. More likely, however, the figures are being distorted by the rise in unreported sales results. Experienced property analyst Louis Christopher of SQM Research tweeted on 4 May: “Don’t be fooled by the artificially high clearance rates, today. Very high unreported rates meant the real auction clearance rate was considerably lower. I think right now, dwelling prices in Sydney and Melbourne are still falling. There remains much uncertainty out there.”

From all other indicators there is no sign of anything that can halt the plunge:

In April, credit growth into housing dropped to the lowest rate on record—just 4 per cent. Because the housing market is already a bubble, this figure needs to be much higher to push up prices, but following the royal commission banks have tightened their lending standards. For instance, according to CBA’s online “how much can I borrow?” calculator, for an income of $80,000 the bank will now lend around $350,000, compared with $460,000 in November 2017. Prices will only grow if the banks are willing to lend higher and higher amounts, not lower. For that reason, APRA is being lobbied to lower the benchmark interest rate at which loan affordability must be calculated from 7.25 per cent to 6 per cent, but that doesn’t mean that cautious banks will suddenly be willing to lend more.

Defaults on greenfield development lots in Melbourne soared to 27 per cent in the March quarter, up from 2 per cent a year ago, and 12 per cent before Christmas; Sydney is almost as bad at 26 per cent. These are investors running away from their deposits, rather than paying the balance on lots that are plunging in value. Ground Zero for the looming crisis in new developments could be the far northern Melbourne suburb of Donnybrook, which has the highest mortgage stress in Victoria and where sales in 2019 have fallen off a cliff—multiple greenfield developments are being laid out along Donnybrook Road that someone has to pay for. Click here to watch John Adams and Martin North’s newest video post: Heaven Help the Poor Souls of Donnybrook!

Dwelling approvals in March 2019 fell by 27.3 per cent from March 2018, and 15.5 per cent from February 2019.

Mortgage stress and mortgage delinquencies are on the rise, despite low interest rates and, supposedly, low unemployment and inflation. ANZ admitted last week to an inexplicable jump in 30-day and 90-day arrears on repayments, with the biggest 90-day increase in Western Australia. Establishment economist Christopher Joye proclaimed in his 25 March great debate with John Adams that “mortgage repayments as a share of income are actually quite low” and that record mortgage “debt serviceability, at this point in time, is perfectly fine”. But a few weeks later Joye revealed on the professional social media platform LinkedIn that his analysis for his clients was that risks on residential mortgage-backed securities (RMBS) are “rapidly rising” and that mortgages have “the highest arrears rates since the GFC”. Meanwhile, over a million households are in mortgage stress, which means they are struggling to meet monthly repayments that are way over 30 per cent of their income.

The number of households in negative equity, meaning that they owe more on their mortgage than their home is now worth, is also soaring. This doesn’t just leave households underwater, but it has a knock-on reverse “wealth effect”, as much consumer spending of recent decades came from homeowners borrowing against the equity in their homes, which they can no longer do. Contrary to the statistics, real inflation as seen in the rising cost of living is not low, and neither is real unemployment when underemployment is taken into account, so the drop-off in consumer spending is going to be devastating to the already fragile economy.

Australia’s major banks have concentrated around 65 per cent of their lending in mortgages, far higher than any other banks in the world. On top of that, they have made trillions of dollars of derivatives bets on those mortgages, which three of the Big Four are trying to hide. They are in near danger of a massive crash, but the only preparation that authorities have made is the bail-in laws they snuck through Parliament in February 2018 so APRA can seize deposits in an emergency to try to prop the banks up.

The government should be tackling this crisis head on, drawing on the lessons of the 2008 crash in places such as Ireland and the United States. If the authorities in those countries could have acted before the crash to avert a disaster, what would they have done?

First, accept the necessity for a major government intervention into the banks, which the government will have to bail out anyway.

Impose a firewall between the banks and the real economy with a Glass-Steagall separation of normal commercial banking from the speculative investment banking where the banks hold their dangerous derivatives—that way the investment banking side can collapse without impacting the real economy.

Scrap any plans for bail-in, and place the banks under government administration to fully protect depositors and the daily business of banking while they are thoroughly cleaned out and reorganised.

Direct the Auditor-General to audit the banks in depth, to ascertain the true size of the bad mortgages and other bad debts, and the nature of the derivatives contracts that will need to be unwound and cancelled.

Enact a moratorium on foreclosures and repossessions of family homes to avert a social catastrophe until house prices stabilise and mortgage debts can be written down to reflect the new, much lower prices.

Start planning and executing changes to the general economy to move beyond its present concentration in housing bubble-related construction and financial services, beginning with a nation-building infrastructure construction program, financed by a national bank, which can revive and revitalise regional industries and towns and draw population growth away from the overcrowded capital cities. 

These are policy solutions the Citizens Electoral Council is fighting for, in this election campaign and beyond. Either ignore the crisis at your own peril, or join the CEC today in fighting for these solutions.

What you can do

With the election under way, contact all of the candidates in your electorate to ask:

What are you doing about the housing and banking crash?

Will you oppose and repeal bail-in?

Will you support the CEC’s Banking System Reform (Separation of Banks) Bill 2019, which is currently before the Senate, to break up the banks?