Place at forefront of reversal no surprise

SYDNEY: Australia’s moneymaking banks and supercharged housing market played a big part in the country’s recent economic good times, so it only made sense they would be at the fore when things started to look less rosy this year.

The USChina trade spat, overseas rate rises, the UK’s messy Brexit negotiations and US sharemarket wobbles have meant not all problems were homegrown, but falling home values in Australia’s two largest housing markets and bank misconduct have loomed large during a testing 12 months.

The four big banks and the federal Government finally submitted to the royal commission they had long resisted, resulting in the public airing of customer complaints and admissions by lenders of serial misconduct.

Suddenly, a decade or so of rising profits stalled as banks set aside millions for refunds and compensation over scandals that included charging dead people for advice.

AMP went into meltdown — losing its chief executive, chairman and half its market value when it became clear the 169yearold firm had compounded its wrongdoing by lying to regulators — and the heavyweight financial sector slumped. As a result the ASX200 is headed for just its second year of losses since the global financial crisis.

Even before the Commonwealth Bank of Australia, National Australia Bank, Westpac and ANZ were hauled over the coals at the royal commission, CBA had changed chief executive and been slammed by regulators over its internal culture.

The lenders reacted to unprecedented scrutiny, increased intervention, rising funding costs and frothy housing markets by making loans more expensive and harder to come by — with predictable consequences.

Sydney house prices that had been inflated by cheap, easy credit headed have south and are certain to hit record declines early in 2019, while No 2 market Melbourne — which peaked after Sydney — is not far behind.

Meanwhile, those increased mortgage rates have reduced the amount of cash in customers’ pockets.

Slowed consumer

spending growth combined with stubbornly low wage growth, a housing construction slowdown and the east coast drought resulted in the economy expanding by less than predicted by the Reserve Bank of Australia.

So, while central banks overseas raised rates, the RBA left the cash rate at a record low of 1.5% for a second straight calendar year.

Some economists are now convinced the RBA will be forced to sit on its hands, not only through 2019, but through 2020 as well.

Those lighter consumer pockets hit Australian retailers hard during a year in which Amazon slowly started to up its local game despite the federal Government now forcing overseas firms to charge GST on all imports.

Menswear retailer Roger David closed its doors for good after 76 years, Laura Ashley went into administration and Toys R Us collapsed, showing that even the biggest companies aren’t immune to changing spending habits and mismanagement.

Myer slumped to a $A486 million ($NZ513.5 million) loss, took yet more impairments and dumped its chief executive as the once grand department store chain struggled to turn things around in the age of fierce competition and online shopping.

Billionaire businessman Solomon Lew has spent 2018 in the same way he spent much of 2017, sniping from the sidelines in an attempt to persuade fellow shareholders to force change in the Myer boardroom.

The Premier

Investments chairman got the second strike he wanted on executive pay, but not the numbers for a board spill, leaving chairman Garry Hounsell and new chief executive John King to fight on.

Myer’s strife came among a big increase in strikes on executive pay as investors — feeling the pinch from slow wage growth and declining property values — turned on those they perceived to be pocketing healthy bonuses while overseeing falling returns.

More than 60% of Telstra shareholders opposed the telco’s remuneration report despite a preemptive cut in executive bonuses following a 30% cut in dividends, an 8.4% fall in profit, network outages and 8000 job cuts.

Things could get tougher for Telstra after August’s announce ment by TPG Telecom — which this month avoided a second strike — and Vodafone Australia of plans to merge into a single $A15 billion telecommunications giant.

The most highprofile merger of this year was that of Nine Entertainment with Fairfax, a move that created a new media giant with TV, online, newspaper and property assets, but one that spelled the end of the 175yearold Fairfax name and has already led to nearly 100 redundancies.

Elsewhere, Wesfarmers spun off Coles supermarkets and ended its disastrous UK hardware venture after burning through $A1.5 billion, Gina Rinehart got hold of ASXlisted Atlas Iron and Viva Energy floated on the ASX in Australia’s largest IPO since 2014. — AAP