Sir Bob Jones

Commentary on issues of the day from the property tycoon, author and former politician

Bob Jones: Blaming banks for our woes just myth making

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Our major banks are not Australian-owned; rather, they're owned by Australian-based banks, which in turn are owned by the public through superannuation funds and such-like entities, writes Bob Jones.
Our major banks are not Australian-owned; rather, they're owned by Australian-based banks, which in turn are owned by the public through superannuation funds and such-like entities, writes Bob Jones.

A unique human characteristic is myth creation. No other species has the cogitative powers to create myths, many, and particularly religion, often being harmful. Last week, I mentioned American professor Joseph Campbell, who specialises in media myths. He investigated the Sochi Olympics $51 billion cost claim, tracing the journalist who invented it, following which it was repeated in more than 3000 newspapers worldwide within a week. This instant myth-making capability is a serious danger with our amazing global communications technology.

False beliefs are so widespread as to lead to the term "urban myths", first used in 1960 although a fore-runner, "urban legends", traces to the New York Times in 1925. There's a television series debunking urban myths, and books exposing popular wrong beliefs now appear every Christmas. There are also myths peculiar to individual societies, such as our ridiculous No8 fencing wire fable ascribed to our menfolk.

A global myth in recent years involves banks. Following the self-inflicted banking collapse that induced the Global Financial Crisis, the complaint arose that governments had saved unworthy banks while allowing other businesses to go to the wall.

That's rubbish.

They stepped in to save the economic system, banks lying at its heart. Had they not, the world would have descended into anarchy with mass unemployment. It wasn't altruism but survival that motivated the action. Similarly last year, when the Reserve Bank rationed banks' ability to advance 100 per cent mortgages. The motive was not, as commonly portrayed, to save people from being over-indebted, this not being the central bank's business, but to prevent banks from over-exposure to excessive risk and thus threaten our system.

A myth peculiar to New Zealand, promoted by our central bank, some economists and politicians, is that New Zealanders don't save enough and are funded by foreigners' savings. It's arrant nonsense and it's time it stopped. Saving is for mugs; it's investment which counts and we're huge investors in the safest and most useful commodity, namely housing, of which the security factor is why banks avidly pursue mortgage lending.

Nor do we live off others' savings; rather, internet technology allows the instant global collectivisation and utilisation of all surplus cash including from here and amounting to trillions of dollars, which is why our historically low interest rates may become the norm.

A constant gripe is our major banks being Australian-owned, thus the myth of vast profits flowing across the Tasman. A week ago, its brilliant cartoonist Tom Scott being away, the Dominion Post presumably allowed the tea lady to draw its cartoon and out came the erroneous hackneyed theme of the wealth drain across the Tasman from our Australian-owned banks, illustrated by a sow being suckled by piglets. This reflected our biggest myth, namely foreign investment costing us when the opposite is true, which is why all nations seek it.

Our major banks are not Australian-owned; rather, they're owned by Australian-based banks, which in turn are owned by the public through superannuation funds and such-like entities. While it's an ever-changing scene, analysis of their shareholding will show a sizeable New Zealand presence through our super funds, the ACC, et al. It's possible that periodically the New Zealand ownership of these Australian-based banks is disproportionately higher than Australia on a pro-rata population basis.

This depends on the whims of investment managers but if they wished, New Zealand funds certainly have the wherewithal to become majority owners of all our banks' Australian parents. They don't because they spread their investments. This sort of fear-mongering is Gnomes of Zurich mythology, so too the inanities about multinationals.

All large multinationals are primarily owned by mum-and-dad super funds with ever-changing global ownership, including from New Zealand. And to put a cap on the Australians-controlling-New-Zealand-banks myth, our banks are simply passive investments but otherwise totally New Zealand entities with New Zealand boards making their own decisions without interference, these frequently at odds with their parent banks' policies in Australia.

So, too, the silliness about bankers' salaries and bonuses. One change in contemporary banking is the demise of the local bank manager -- a mistake in my view, but that's another matter. Consequently, 95 per cent of bank employees are doing basic clerical tasks and the large deal-making on which banks partly rely is carried out by a small elite force.

The BNZ boss, recently appointed to head its National Bank of Australia parent, came under fire for his $2m salary. This, spread evenly among the bank's 40,000 employees as a pay increase and saved for five weeks, would buy them each a cup of coffee. The only other Western country in which ignorant economic nationalism is as rife is France, no example for any sane nation to follow given its continuing self-inflicted economic woes.

- NZ Herald

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