Malcolm Turnbull's empty confidence busting outbursts are the enemy of mortgage trust investors and the economy as a whole.
Any consumer of the news media during the past week - from channel 9 news to The Insiders would reasonably have drawn the following conclusions -
* That the Government's guarantee of bank deposits was made without proper consultation with Treasury and the Reserve Bank.
* That this same guarantee precipitated the freeze in mortgage funds that has occurred during the past week.
Neither of these conclusions are true.
While the first was comprehensively refuted by both Ken Henry and Glenn Stevens last week, the prevailing impression of the week remains, without a shred of evidence, that somehow, the Government, the Treasury and the Reserve Bank colluded to deceive the general public about the level of agreement upon which the guarantee policy was founded. The Australian newspaper, which created the myth on its front page, remains unrepentant in spite of the comprehensive debunking of it by those at the centre of the story.
As for the other prevailing myth that the guarantee has precipitated the freeze of mortgage funds, consider this analogy. A fire burns in two buildings. Building A contains the fundamental supplies and assets of the community. Building B is sprawling and contains some of the community's other assets - important these are - but not near as fundamental to the community's survival as those in building A. The fire brigades arrive and use all resources to extinguish the fire burning in building A with its essential supplies. Meanwhile, damage is inflicted to building B before the fire brigades can allocate resources to quelling the blaze.
Do we blame the fire brigade?
Like all analogies, this one is clumsy in parts. But there are some irrefutable points that get virtually no media attention.
* The run on mortgage funds is the result of the financial crisis - the fire. Mortage fund investors feel insecure like all investors in non-cash assets the world over. While "putting out the fire" in bank deposits made them a more a attractive asset to hold, the inherently risky nature of mortgage funds has always been a feature of these assets - and it's a feature that has brought investors higher returns in the past than boring bank deposits.
* The Government's action to sure up the banks has made every speculative instrument less attractive - mortgage funds, shares, derivatives and commercial and residential property. Should the Government be moving towards guaranteeing these financial instruments as well?
Malcolm Turnbull has revealed the reckless damage that he is ready to inflict on Australia for his political gain. If Mr Turnbull had a genuine disagreement with the Government's position in matters of such grave consequence, he would be compelled as opposition leader to voice this disagreement and advocate some alternatives. He has done no such thing. Instead he has sat on the sidelines as Wrecker in Chief destroying confidence and adding nothing to the real policy discussion.
Of course the Government should and is taking steps to try and improve the liquidity of mortgage funds but any Government actions are likely to be of minimal consequence until there is increased confidence in the basic assets of mortgage funds. Malcolm Turnbull has consistently and wilfully undermined confidence in his comments over the past few weeks.
It has been interesting to see the extent to which the opposition leader has become the champion of the victims of the frozen mortgage funds. You would think from the furore that these funds are lost. They are not. They are tied up in property which is by definition less liquid than cash.
You would also think that these investors are the only Australian victims to date of the economic crisis.
There would be few people who have not experienced a decline in wealth during the past twelve months through falling superannuation, shares property and a collapsing dollar.
Malcolm's empathy with mortgage fund investors springs from his ability to distort their misfortune to score a political point.
Many Australians have been experiencing the bitter taste of the previous decade of reckless lending and speculation for more than a year now. They weren't so lucky as to have excess liquidity available to invest in mortgage funds or shares. No, they're the people in the less privileged suburbs of Australia who have negative equity in their homes or who have had their properties repossessed.
Malcolm hasn't been able to voice any empathy for them as this might impugn him, his investment banking past and the previous Government. He's quite content to trash the confidence in our system and institutions at a time where confidence is everything. Malcolm is the enemy of confidence. He's the mortage fund investor's illusory friend.
NOTES -
Paul Kelly's piece in the Weekend Australian was rational and Kerry O'Brien's interview with Malcolm was the first I've seen to expose the ruthless political animal dressed up in a lawyer's eloquence and pre-crisis banker's self confidence. The AFR coverage was also measured.
Showing posts with label Ken Henry. Show all posts
Showing posts with label Ken Henry. Show all posts
Tuesday, October 28, 2008
Thursday, October 23, 2008
MALCOLM'S MOMENT
Malcolm Turnbull got his first real workout as leader of the Opposition last night. He didn't come out well.
It was good watching the unflappable Malcolm Turnbull in a flap last night on the 7.30 Report.
Kerry O'Brien once again proved his skill as journalist - interrogator. As he digs deeper into the whole banking guarantee question and the financial crisis, Turnbull is playing with fire.
At stake is confidence in our banking system and the success of our responses to it. Turnbull's strategy is to test the boundaries here for a political point that looks increasingly flimsy.
The big issue is the one raised by Ken Henry yesterday and concerns the extent to which Turnbull's reckless speculation about the previous $20,000 guarantee covering bank deposits in itself contributed to the need for a hasty but essential response. I for one was surprised and alarmed to discover two weeks ago that the integrity of our savings was being brought into question amidst all of the assurances about strength of our banks. Malcolm Turnbull began that discussion. Everybody knows that when it comes to the banks, perceptions of security are everything. In a time of international turmoil, the sensitivity is heightened.
It should be remembered that Turnbull spent months berating Wayne Swan over the impact of his declarations - proven correct - that the "inflation genie" was out of the bottle in the Australian economy. If there was a self fulfilling element to Swan's inflation references, it was dwarfed by the impact of Malcolm Turnbull's decision to raise questions about the $20,000 guarantee cap at a time of global banking turmoil.
Turnbull revealed his real concerns late in the interview when he said "What about this Kerry, what about someone who's taken their money out of a cash management trust, paid an exit fee, put their money into a bank because they wanted to get the benefit of the Government guarantee.
And they're now going to have to pay a tax to Wayne Swan for doing... for taking advantage of a guarantee Wayne Swan and Kevin Rudd told them on the 12th of October was free?"
As any changes being mooted by the government to the guarantee concern only those holding deposits in excess of one million dollars, Turnbull's comments reflect his real interest. He wasn't able to voice any pleasure at the fact that the bank deposits of the rest of the population were safe. Nor was he able to point the finger at his former investment banking colleagues who created the mess - those same guys who levied the sacred "exit fees" Malcolm refers to. Now he's concerned about his other mates moving their millions to guaranteed bank deposits and expecting it all to be free and easy - and taxpayer funded. Aren't those the attitudes that got us here in the first place?
It was good watching the unflappable Malcolm Turnbull in a flap last night on the 7.30 Report.
Kerry O'Brien once again proved his skill as journalist - interrogator. As he digs deeper into the whole banking guarantee question and the financial crisis, Turnbull is playing with fire.
At stake is confidence in our banking system and the success of our responses to it. Turnbull's strategy is to test the boundaries here for a political point that looks increasingly flimsy.
The big issue is the one raised by Ken Henry yesterday and concerns the extent to which Turnbull's reckless speculation about the previous $20,000 guarantee covering bank deposits in itself contributed to the need for a hasty but essential response. I for one was surprised and alarmed to discover two weeks ago that the integrity of our savings was being brought into question amidst all of the assurances about strength of our banks. Malcolm Turnbull began that discussion. Everybody knows that when it comes to the banks, perceptions of security are everything. In a time of international turmoil, the sensitivity is heightened.
It should be remembered that Turnbull spent months berating Wayne Swan over the impact of his declarations - proven correct - that the "inflation genie" was out of the bottle in the Australian economy. If there was a self fulfilling element to Swan's inflation references, it was dwarfed by the impact of Malcolm Turnbull's decision to raise questions about the $20,000 guarantee cap at a time of global banking turmoil.
Turnbull revealed his real concerns late in the interview when he said "What about this Kerry, what about someone who's taken their money out of a cash management trust, paid an exit fee, put their money into a bank because they wanted to get the benefit of the Government guarantee.
And they're now going to have to pay a tax to Wayne Swan for doing... for taking advantage of a guarantee Wayne Swan and Kevin Rudd told them on the 12th of October was free?"
As any changes being mooted by the government to the guarantee concern only those holding deposits in excess of one million dollars, Turnbull's comments reflect his real interest. He wasn't able to voice any pleasure at the fact that the bank deposits of the rest of the population were safe. Nor was he able to point the finger at his former investment banking colleagues who created the mess - those same guys who levied the sacred "exit fees" Malcolm refers to. Now he's concerned about his other mates moving their millions to guaranteed bank deposits and expecting it all to be free and easy - and taxpayer funded. Aren't those the attitudes that got us here in the first place?
Wednesday, August 08, 2007
THE END OF EXPERTS
John Howard is on a desperate pre-election scramble that shows his real contempt for accountable government and the expertise in government departments and the professions. This week's hospital debacle in Tasmania adds to a long list of policy disasters built on a contempt for specialist expertise and an obsession with tactical politics. The prospects for the massive indigenous intervention can't be good.
On Monday, John Howard told reporters that while he fully acknowledged the crisis outlined in the recent report on child abuse in indigenous communities (read political opportunity), his government felt no obligation to respond to the recommendations of its authors (read, insufficient hysteria, too many complex long term strategies and not enough guns and jeeps).
Howard has used the report as the basis for a massive intervention in indigenous affairs the likes of which we have not seen in his eleven years as Prime Minister. Yet this massive intervention is taking place with minimal consultation and widespread condemnation from the report’s authors, indigenous leaders and communities and experts who have long been dealing with issues of aboriginal health, welfare and development.
Most Australians, including indigenous leaders, would agree that the situation in indigenous Australia is chronic and requires a massive reevaluation. In the past few days, the costs of this intervention have leapt from the originally planned tens of millions to half a billion dollars in its first year. But what form should the intervention take? And what are its prospects of success when it shuns broad consultation with Aboriginal community leaders and many of those with expertise in Aboriginal communities not to mention the Opposition? After decades of failure, what prospect is there that a Government can engineer a policy revolution in indigenous affairs that has any prospect of success in six weeks?
The emergency response to the findings seemed appropriate. Who could argue with a huge, immediate effort to curb child sexual abuse? Minister for Indigenous Affairs Brough said that if you don’t agree with this intervention “you either don’t have a child or you don’t have a soul” (read - you're with us or you're a child abuser). So we now know how to view the broad opposition to the initiative.
It’s a disturbing way for a government to develop policy but it has plenty of precedent. From global warming, the Murray rescue plan, the Iraq War, the war on terror and military deployments in the Pacific and Timor, there is a common trend – condemn the expert.
Expert opinion has been ignored or condemned across most of the Howard government’s major policy blunders. In the long term, Australia will pay.
Experts should be analysed, scrutinised and critiqued. They should be heard. The Prime Minister is right in saying that good leaders will on occasions act against prevailing expert advice. Good leaders however can be entrusted to do so in the best interests of the community. Mr Howard's record on defying expert opinion speaks for itself - a series policy disasters for Australia from Tampa to Iraq and an occasional quick political thrill for the PM.
Many of the country’s most senior public servants know how it feels to be on the wrong side of an argument with the Howard government. When Treasury Secretary Ken Henry was reported to have criticised the government’s Murray Darling Plan, Environment Minister Malcolm Turnbull responded dismissively,
"The Treasury does not know how much it costs to pipe a channel, how much it costs to replace a Dethridge wheel with a computerised flume gate, and how much it costs to line 10 kilometres of leaky pipe along the Murrumbidgee River," he said.
Treasurer Costello added, "Treasury's no water expert; Treasury's good at treasury; Treasury has not been engaged in water,"
The fact of course is that Treasury and Finance are normally involved in every costly policy initiative just as Finance departments would be involved in any major initiative in a corporation. It’s called responsible governance. Treasury knowing about Treasury is enough.
Police Commissioner Mick Kealty is a changed man since his 2004 brush with Howard orthodoxy that Australia’s presence in Iraq in no way impacts our position as a target for terrorists (see my previous post).
The Howard government’s oft recited contempt for elites includes the “elite” minds of its own military, science, economics, foreign policy, intelligence, police and other areas of the public service establishment. The Iraq War and climate change may be the most glaring cases of wilful disregard of widely expressed expert views. There are many others. And the quality of our most important analysts must have suffered terribly under this culture.
With the same pig headed “shock and awe” mindset being applied to the indigenous intervention, it will take a miracle for it to succeed.
On Monday, John Howard told reporters that while he fully acknowledged the crisis outlined in the recent report on child abuse in indigenous communities (read political opportunity), his government felt no obligation to respond to the recommendations of its authors (read, insufficient hysteria, too many complex long term strategies and not enough guns and jeeps).
Howard has used the report as the basis for a massive intervention in indigenous affairs the likes of which we have not seen in his eleven years as Prime Minister. Yet this massive intervention is taking place with minimal consultation and widespread condemnation from the report’s authors, indigenous leaders and communities and experts who have long been dealing with issues of aboriginal health, welfare and development.
Most Australians, including indigenous leaders, would agree that the situation in indigenous Australia is chronic and requires a massive reevaluation. In the past few days, the costs of this intervention have leapt from the originally planned tens of millions to half a billion dollars in its first year. But what form should the intervention take? And what are its prospects of success when it shuns broad consultation with Aboriginal community leaders and many of those with expertise in Aboriginal communities not to mention the Opposition? After decades of failure, what prospect is there that a Government can engineer a policy revolution in indigenous affairs that has any prospect of success in six weeks?
The emergency response to the findings seemed appropriate. Who could argue with a huge, immediate effort to curb child sexual abuse? Minister for Indigenous Affairs Brough said that if you don’t agree with this intervention “you either don’t have a child or you don’t have a soul” (read - you're with us or you're a child abuser). So we now know how to view the broad opposition to the initiative.
It’s a disturbing way for a government to develop policy but it has plenty of precedent. From global warming, the Murray rescue plan, the Iraq War, the war on terror and military deployments in the Pacific and Timor, there is a common trend – condemn the expert.
Expert opinion has been ignored or condemned across most of the Howard government’s major policy blunders. In the long term, Australia will pay.
Experts should be analysed, scrutinised and critiqued. They should be heard. The Prime Minister is right in saying that good leaders will on occasions act against prevailing expert advice. Good leaders however can be entrusted to do so in the best interests of the community. Mr Howard's record on defying expert opinion speaks for itself - a series policy disasters for Australia from Tampa to Iraq and an occasional quick political thrill for the PM.
Many of the country’s most senior public servants know how it feels to be on the wrong side of an argument with the Howard government. When Treasury Secretary Ken Henry was reported to have criticised the government’s Murray Darling Plan, Environment Minister Malcolm Turnbull responded dismissively,
"The Treasury does not know how much it costs to pipe a channel, how much it costs to replace a Dethridge wheel with a computerised flume gate, and how much it costs to line 10 kilometres of leaky pipe along the Murrumbidgee River," he said.
Treasurer Costello added, "Treasury's no water expert; Treasury's good at treasury; Treasury has not been engaged in water,"
The fact of course is that Treasury and Finance are normally involved in every costly policy initiative just as Finance departments would be involved in any major initiative in a corporation. It’s called responsible governance. Treasury knowing about Treasury is enough.
Police Commissioner Mick Kealty is a changed man since his 2004 brush with Howard orthodoxy that Australia’s presence in Iraq in no way impacts our position as a target for terrorists (see my previous post).
The Howard government’s oft recited contempt for elites includes the “elite” minds of its own military, science, economics, foreign policy, intelligence, police and other areas of the public service establishment. The Iraq War and climate change may be the most glaring cases of wilful disregard of widely expressed expert views. There are many others. And the quality of our most important analysts must have suffered terribly under this culture.
With the same pig headed “shock and awe” mindset being applied to the indigenous intervention, it will take a miracle for it to succeed.
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