The first week of the unofficial election campaign has been wasted in a throwback class war against the banks from the party that once wanted to nationalise them. Labor's reckless plan for a royal commission into Australia's banking sector, one of the world's strongest, has not been even remotely called for by any of the regulators that oversee one of the most scrutinised of industries. But it has served its purpose of distracting from the genuine systemic corruption and criminality in parts of the trade union movement. And it has thrown up a Senator Dastyari-style smokescreen of populism in front of the genuine economic problem that Labor is largely responsible for causing. This is that Australia is living beyond its means as a result of the poison-pill spending commitments of the Rudd and Gillard governments. Unless this is fixed, the international rating agencies will mark down Australia's AAA credit rating which, in turn, would threaten the banks' AA rating. The strength of the big banks helped shield capital-importing Australia from a financial crisis and recession in 2009. Now Labor is moving on multiple fronts to weaken these defences.

Bill Shorten's populist bank bashing draws from the more bone-headed end of Australia's mostly-admirable egalitarianism. Labor has form on this, after dredging up yellow peril-era fear of foreign investors during the NSW power privatisation election of 2015. It rolls easily into loose talk of tax dodging and the Panama papers, and a crusade against the "big end of town". So much of the debate is phoney, with Treasurer Scott Morrison forced to step up with concocted outrage of his own: he would "be furious" if banks did not absorb the cost of the new user-pays regime for regulating them by the Australian Securities and Investments Commission. It's all of 0.1 per cent of the big banks' profits, which will be little more than a rounding error that will disappear in the market competition that determines bank margins and profits. Any consumer business lives with a barrage of customer complaints. But some bank customers have been blatantly fleeced or fallen victim to sharp practice. For that reason, ASIC has been beefed up this week with extra budget and resources to take a more aggressive supervisory role, as the Financial System Inquiry headed by David Murray recommended.

Playing defensive politics, Malcolm Turnbull called in the big bank bosses on Thursday to reminded them that banking was not like any other business, and depends on trust more than most. Yet that is why the banks already are regulated, supervised and scrutinised more closely than just about any other industry. The heightened political risk whipped up by Labor will simply add to the increased capital requirements, the competitive threat from fintech upstarts and the inevitable upswing in bad debts to undermine their healthy profits and, in turn, the dividends that many retirees rely on. So, for multiple reasons, the banks would provide less of a cushion if Australia gets hit by another global crisis.

Prime Minister Malcolm Turnbull and Opposition Leader Bill Shorten arrive for the opening of the second session of the 44th Parliament on Monday. Alex Ellinghausen

That underlines the suggestions from CBA chief executive Ian Narev that the number one issue that should be dominating the election campaign is how to get the economy out of its sub-par growth trap. So this week has been a classic case of Labor seeking to undermine this debate. Mr Shorten rightly talks about the importance of health and education serves, but as a way of ignoring the hard questions about what is needed to generate the economic growth and prosperity that pays for those things. He pumps up a populist campaign against the banks as a way to campaign against cutting Australia's high company tax rate that is reducing workers' wages by penalising capital inflow. An incentive-based economy, supported by healthy banks, is what this election campaign should be about. Week one has been a fail in that respect.



