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Tempers are beginning to fray in Australia, with voters ready to punish ruling parties amid anger fuelled by massive profits emerging from banks whose interest rates have hammered the nation's ailing mortgage belt.
Prime Minister Kevin Rudd, who intends helping the state Labor government campaign in next month's Western Australian election after the bruising the party took in the Northern Territory, is facing defeat in the Senate over plans for a national petrol price monitoring scheme. His rival, Opposition leader Brendan Nelson, this week plumbed new depths of unpopularity as the Coalition continued to slide in the polls.
And the Reserve Bank has warned that 100,000 jobs may be lost in the coming year as companies prune staff and unemployment rises.
Yesterday's announcement of a A$4.79 billion ($6 billion) profit by the Commonwealth Bank - up 7 per cent on last year - has further focused fury on the major lenders.
Church welfare agency Anglicare Victoria demanded that the bank, Australia's biggest, reduce interest rates.
"After announcing a profit of A$4.79 billion we have to ask if the bank is putting the interests of a relatively small number of investors over the thousands of families struggling to meet their loan repayments and put food on the table," acting chief executive John Blewonski said.
So far none of the four major banks has given any undertakings on future reductions in mortgage rates - not even to pass on the full extent of any easing in the Reserve Bank's official rate. All increased their loan rates above Reserve Bank increases, claiming higher costs and uncertainties.
This week an Essential Research poll reported that 82 per cent of Australians wanted the federal Government to pass laws forcing banks to reduce their rates in line with Reserve Bank movements. The Government has said it expects the banks to pass the saving on, but will not go further.
"I don't think legislation is the way to do it," Acting Prime Minister Julia Gillard told Sydney 2GB radio.
The Reserve Bank is widely expected to prune the official interest rate as a result of figures showing the economy is slowing faster than expected, pulling down economic growth and inflation, and pushing up unemployment.
After predictions in the May federal Budget of job losses of more than 130,000, the bank said this week it expected unemployment to climb from the present 4.3 per cent to at least 5 per cent.
Yesterday, assistant governor (financial systems) Philip Lowe said that with recent falls in the global cost of funds, there was no obvious reason the banks could not pass on any reductions in the official interest rate.
Lowe said that in contrast to banks in the United States and Europe, the Australian financial system remained highly profitable by international standards.
In the most recent six-month reporting period, the after-tax profits of the five largest banks had risen by 12.5 per cent over the previous year, and were double those of five years ago. Even with higher costs, forecasts by the major banks suggested that after-tax return on equity in the second half of this financial year would still be about 15 per cent.
The soaring cost of living remains a crucial issue for the Government, whose handling of the economy is coming under increasing attack.
It has won some small relief from the recent fall in petrol prices that has lifted consumer confidence from a 16-year low.
But even this boost left yesterday's Westpac-Melbourne Institute index of consumer sentiment hovering at the gloomy levels of 1993, and pensioners are demanding an increase in benefits after a federal review confirming that most cannot live on their present payments.
Rudd also faces a major and embarrassing defeat in the Senate, with two senators warning that they will not support his internet-based petrol price monitoring scheme.
The scheme was touted by the Government as a key weapon in its bid to force down the cost of living. South Australian independent Nick Xenophon and Family First Senator Steve Fielding reject the scheme because of fears it will rebound and increase the price monopoly of the oil majors. Xenophon and Fielding hold the balance of power in the Senate with the Greens, who have also expressed concerns.
Consumer Affairs Minister Chris Bowen yesterday conceded that the Government would now have to negotiate to pass the legislation.
