“For at least another hundred years we must pretend to ourselves and to everyone that fair is foul and foul is fair; for foul is useful and fair is not. Avarice and usury and precaution must be our gods for a little longer still.”
John Maynard Keynes, Economic Opportunities for our Grandchildren, 1930
Written at the outset of the Great Depression, Keynes was being neither glib nor disingenuous. Christ may have expelled the money lenders for fouling the temple, however society, housing and the entire fabric of the fiction of banking (that gold and silver is held safely against promissory notes and loans outstanding) is unfathomable without credit. As necessity developed with trade in the middle ages, credit became a way of life. Usury, defined in most common parlance as the extension of credit with unreasonably high rates of interest, however, is regarded with scorn; such lenders are subject to popular outrage; from Shylock to Chifley. As Day suggests[i], the Labor party might have scraped by in the 1951 federal election, but for the ‘last minute and astute intervention’ of nemesis Jack Lang’s revelation that during the Depression, though acting as a trustee for his wife, Chifley extended credit in the form of mortgages to a number of the townsfolk of his native Bathurst for rates considerably higher than those offered by the mainstream private banks. The fact in Chifley’s case, and in that of many loans to people of low income, is that credit would otherwise not have been given from mainstream sources. This saga provides an interesting point of irony in itself (and for the later thesis of this paper): but for Chifley’s ‘gotcha moment’ as a private lender, had he triumphed in 1951, he would almost certainly have nationalised the private banks and vanquished Menzies for good. In so doing, seventy years on we might be left with a wholly different arena for the provision of credit to low income people than that where we stand today, at the outset of a new ‘Great’ economic challenge.
This paper is not about housing, but rather small loans to vulnerable people attached to high charges and rates of interest. There is a tsunami of debt soon to befall tens of thousands of Australians with less access to capital because of reduced employment. Housing will remain stubborn and consumption is already inflation-affected. Many new borrowers will seek ‘payday loans’, so-called because when one lives week to week and unexpected expenditure or shortfall affects household circumstances, short-term credit can be sought to get the borrower through to the next payday. ‘Small amount credit contracts’ as they are termed in legislation and institutional practice are expensive financial products accepted grudgingly as a fact of life in Australia’s low-income landscape. Their existence is for many, the only way certain expenses might be met or families fed, however when left unpaid, as human nature allows, they become a perilous avenue into destructive debt cycles. Many of a newly-needy class of citizen would not require recourse to such credit but for their un(der)employment caused by restrictions via government edicts and lockdowns.
Payday lending was an import to Australia in the late 1990s regulated by the states. The relatively high rates of interest soon attracted media attention. Then Howard Government Financial Services Minister Joe Hockey dubbed the industry “an insidious practice that targets the less prosperous men and women of our society, the less financially savvy and the people who can least handle spiralling debt.”