Turmoil-enomics VII

How many straws will the opposition keep clutching for? Turnbull on last nights 730 Report was abysmal, dreadful – almost a performance worthy of Akerman trying to keep his beloved Heiner Affair afloat.

 

 

So – what will the markets do today? Up? Down? Sideways? Is that possible? Is anything possible? 

I guess we just have to wait and see.

So here is today’s thread for all matters economic.

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92 Responses

  1. …and since that interview he has only gone downhill. He now doesn’t care what Henry or Stevens said or didn’t say, apparently that’s now completely irrelevant (so why did he send nine of his ministers into Senate Estimates to grill Henry mercilessly for nine hours?) the fact apparently is that according to Malcolm, and Malcolm alone, the 10.4 billion dollar guarantee is an abject failure, will lift interest rates (ignoring the fact it’s already done the opposite) and will destroy our economy for good. “You can’t unscramble the egg” he said of the apparent mess Wayne Swan has made of this, and Swan is supposedly running around like a headless chook trying to fix the monumental stuff up he made to our economy that has ruined us all, not withstanding that just one week ago Malcolm fully and unreservedly supported this measure.

    Oh and of course Labor has implemented another tax.

    —————————–
    The Australian is still trying to run the line it is right (especially Shanahan, but you only believe him at your peril) and it uses just one letter from Stevens to Henry with no source and with no context.

    There is one thing about the Right and their media cronies above everything else, it was ingrained in the Howard government and it’s ingrained in the Turnbull opposition, they can never ever admit they are wrong,

  2. This can’t wait for the Frolykz (love that name).

    Liberal Senator George Brandis has come out and lashed John Howard saying things we Howard detractors have known all along about the man but the Howard Huggers refused to acknowledge of their beloved leader.

    This is particularly telling of Howard:

    “a conscious preference for social order above personal freedom, for the attitudes of ‘the mainstream’ above the concerns of the marginalised.”

  3. Shanhan’s defending is just so poor. He just does not understand that the timeline is what is important. The accusations from the Australian (and the opposition) were that there were reservations of the guarantee BEFORE the announcement was made, but that has proven to be wrong! WRONG Dennis.

    The reservations came AFTER the announcement. A F T E R !

    Then again – we forget that not only does The Australian own the polls, it seems that they also own time.

    Afterthought: And notice how Dennis no longer has a blog, where his “analysis” can be exposed.

    😕

  4. I’m trying desperately to find a transcript or link to an ABC Local Radio piece I heard this morning. It was a brilliant philosophical piece on money by Jason Clarke (http://www.mindsatwork.com.au/). One of the best things I’ve heard in a long while. Might have to contact the ABC to find out how to get it, because I can’t find it on their website.

    Another ABC piece by Clarke: http://www.abc.net.au/local/stories/2008/07/01/2291262.htm?site=perth

  5. And overnight the DOW is down 5.69% – and it is no longer headline news. That is how “normal” this turmoil has become.

    In such a short period of time, our senses have been dulled to disasterous news.

  6. Turnbull was back on AM this morning (8am edition) for more. I had to switch it off – the man is mad – evidently Australia’s financial system has gone to hell in the last 2 weeks – all because the guarantee only extends to banks. Has anyone else noticed this? The press (Australia excluded) is pretty quiet.

    The Australia has gone into all out defensive mode trying to find something (hell anything) to defend their WRONG! story. The Sam Maiden early report regarding the Ken Henry “grilling’ completely omitted this aspect of Henry’s evidence to the committee. Her later article did refer to the WRONG comment but framed it as referring to allegations that the RBA and treasurer had communicated regarding the advice rather than correctly reporting that the WRONG statement related specifically to the fallacious Australia article. I’m not holding my breath for a correction.

  7. Further to Adrian’s #2 re George Brandis, of “Rodent” fame, here is another Liberal wanting to disown the Howard era, even the Liberal brand itself …

    Herald Sun, 17 September 2007

    http://www.news.com.au/heraldsun/story/0,21985,22434194-5005961,00.html

    … there was more embarrassment for [former] Environment Minister Malcolm Turnbull after it was revealed he sent voters in his marginal seat a four-page glossy newsletter which did not once mention Mr Howard, the Howard government, or the Liberal Party.

    The latest Liberal leader who may like to boast, “I’ve never voted Liberal in my life!”

  8. Strange that a multi millionaire (once a merchant banker always a merchant banker!) is obsessed with guarantees being extended to what amounts to a virtually unregulated market…wonder where his money is right now?

    How could Turncoat possibly think that 100% bipartisan support last week doesn’t leave some (if not all) of the scrambled egg on his face now. The man is a twit along with Bishop, Payne, Abbott, and the ignoramous Coonan yesterday with her despicable courtier Abetz…

    …the Liberal Senators on the Committe yesterday should hang their heads in shame – medieval was my first impression – Private School Bullies alright – its a wonder Dr Henry didn’t stand up – resign on the spot – and walk out …

    …Alternative Government my arse! These turkeys couldn’t find a smell in a fart factory!

    I notice Mr Rudd & Co are cleverly keeping their faces and comments out of the media – let the Liberal lollipops lick ’emselves out of existence I say!

  9. Boy I’m no Turnbull fan but……

    To reference Kerry O’Brien whilst simultaneously talking down the credibility of the Australian newspaper is kind of hilarious. And for Kerry O’Brien to get into Turnbull for passing legislation then posthumously criticising the process is similarly laughable. If they hadn’t passed the legislation, then there would be all kinds of accusations of them abusing the Senate process etc.

    The timeline is certainly important, but I guess the question is whether the Governor of the RBA changed his position after the event. He now wants a cap, was this his position prior to the meeting on Sunday? Did the government know his position prior to Sunday? I think it’s perfectly appropriate to be bipartisan in response to a crisis, but it’s equally appropriate to question the decision making process after the event. From the evidence we have so far, and the government aren’t exactly opening the books for all to see, there are good reasons for the questions.

  10. James, sometimes its not in the asking but in the method of asking…Dr Henry is not a politician and therefore does not have the “privileges” and legal protection of a politician.

    Whether he has since reviewed his position is irrelevant – the decision had to be made and quickly – based upon the available information.

    The economy is at best dynamic at worst extremely fluid (Dow Jones down over 541 points again last night.

    The questions have been asked (and very crudely) over and over – the answers obviously won’t change how ever much you ask – harrassment is not questioning it is interrogating. I suspect Dr Henry is far more aware of what he is doing than any of the people trying to intimidate him!

    The senior Liberal politicians are damaging the credibility of our senior economic advisors in the middle of the most serious financial crisis we have seen in our lifetimes for political and personal gain…

    …we pay them to serve the people and our country this sort of nonsense can do us all a lot of damage – time to stop and move on…

  11. 9. James of North Melbourne | October 23, 2008 at 9:44 am

    To reference Kerry O’Brien whilst simultaneously talking down the credibility of the Australian newspaper is kind of hilarious. And for Kerry O’Brien to get into Turnbull for passing legislation then posthumously criticising the process is similarly laughable. If they hadn’t passed the legislation, then there would be all kinds of accusations of them abusing the Senate process.

    So are you now saying that on matters of great national importance, no in fact on any matter, the Senate if it has the numbers should not block or seek amendment of government legislation because they will be accused of abusing the Senate process?

    So for the sake of appearances you throw out your principals and belief that damage is being done to the country to pass what you believe (but won’t publicly state) is detrimental policy and say you fully and reservedly support it only to attack it and disown it one week after it has been released.

    Then what the hell was their blocking of the Alcopops levy and luxury car tax about, surely they should have supported them fully and then disowned them a week later?

    Nah that line of excuse for the opposition’s terrible performance and constant direction changing in this matter doesn’t wash.

  12. TB, it was Stevens’ position, not Henry’s I was referring to.

    Adrian, don’t insult me with that “principals” crap. Then compare it to alcopops. The ALP latched onto a perceived crisis and introduced a tax to “save our youth”. Whilst knowing full well that it would have negligible effect on the alcohol consumption of young people.

    Turnbull’s position, if you listened to him rather than simply cheer O’Brien on his clever cross examination (yeah, got him there, Kezza) was that in a time of crisis, you need to take the government on trust. Don’t pretend that you wouldn’t have been the first calling for a DD if the Coalition had blocked this package. They are equally entitled to question the process after the fact and from what I can tell, the process was flawed. Turnbull is asking if the potential consequences were addressed by the advisers. It appears they can’t get a straight answer on that one. Fair enough to pursue them on it then.

  13. But James – it is the timeline. The RBA and Treasury have stated very clearly that they DID NOT NOT HAVE THE RESERVATIONS on the guarantee until AFTER the announcement.

    You know – they changed their opinion after more information was available. Just like Turnbull and Bishop have.

    The coalitions inability to accept this is making them look like fools.

  14. ASX down by 3.75% at 1030am…. oh well, it’s only money.

    But the fact that the market is down has nothing to do with international affairs, it is purely only and exclusively due to the fact that the government did not listen to Turnbull. F-A-C-T-! or is it?

  15. James, Steven’s and Henry’s communication (joint in particular) either verbal (“oral” says Ms Coonan…) or written BEFORE the decision to guarantee is at the heart of the Opposition’s concern.

    The Opposition claimed they were not privy to covert communication between Stevens and Henry expressing doubt about a blanket guarantee to the big four banks but none to the relatively unregulated financial institutions. Some of which were already placing limits on withdrawals BEFORE the guarantee from the government.

    Dr Henry repeated more than once yesterday that there was UNITY between he and Mr Stevens – tha’ts it, end of story – finito – this all from a newspaper story with obvious right wing leanings (or an anti government stance) that cannot be substantiated and was called by Dr Henry (more than once) WRONG!

    At this stage all that the Opposition is doing is calling Dr Henry (and Stevens by implication) a liar – that’s not only offensive it is under other circumstances (without parliamentary priveleges) slanderous. This is detrimental to the professionalism of both men and therefore their ability to advise not only the government but the rest of us in a very serious time in history.

    This is one of the reasons that Labor governments are often in power when we have a national crisis – not – as some believe -because they created it but because they can deal with it!

  16. TB: “Labor governments are often in power when we have a national crisis – not – as some believe -because they created it but because they can deal with it!”…

    I don’t think I’d go that far. Any government of the day has to react to and deal with the problems of the day. We just need governments AND oppositions that act in the best interest of the country and not just for political gain.

  17. TB of Queensland at number 10 wrote:

    The senior Liberal politicians are damaging the credibility of our senior economic advisors in the middle of the most serious financial crisis we have seen in our lifetimes for political and personal gain…

    …we pay them to serve the people and our country this sort of nonsense can do us all a lot of damage

    Yes, well said. They are despicable. They showed that in office, during the election, and now in opposition.

    During the pre-election period Howard and Costello were prepared to drive up inflation and interest rates with their massive pork-barrel spendathon.

    They didn’t give a tinkers cuss about “the economy”, though all they ever talked about was their management of the economy. Two-faced rats.

    For the Liberals it’s all about politics and only about politics.

    Sure hardens one’s resolve against them.

  18. Michelle Grattan, The Age, 13 November 2007

    http://www.theage.com.au/news/national/prime-minister-splurges-to-close-poll-gap/2007/11/12/1194766590319.html?page=fullpage#contentSwap1

    The big-spending [Liberal Party 2007 election campaign] launch — bringing total Coalition promises to more than $60 billion — came despite the latest warning from the Reserve Bank that excessive spending in the economy is fuelling inflation and increasing the risk of further interest rate rises.

    Vandals.

  19. Come off it. Treasury and the RBA only decided to address the “detail”, such as potential consequences, after the event? Give me a break. This is what the Libs are getting at. It smells of either bullshit or abject incompetence.

  20. James,

    The Government has acknowledged that there are problems and that fine detail was required to make this work – this was stated in the second reading speech for the Bill when it entered Parliament – they are addressing the problems. With this knowledge, what the hell is Turnbull prattling on about.

    The Libs initial line was that they support the package – unreservedly. They could have suggested amendments in the upper house but they didn’t. They then picked up on an article from the Australian that the RBA had reservations about the uncapped nature of the guarantee and used that to bash the Government up for ignoring the advie – The Australian story was wrong it seems and so their argument then shifted to criticising the Government for taking the head of treasury on trust that he was correctly conveying the RBAs comments, thiswas what Kerry O’Brian was grilling Turnbull about because Turnbull was, in essentially saying that the Government should trust the Head of Treasury to accurately pass on the views of the RBA. Turnbull’s position was stupid, had no substance, and undermined the credibility of the very institutions the Government has to rely on to provide honest advice on the correct way to deal with this crisis. O’Brian was also correct to point out that the Libs did now have a policy position on how this should be dealt with other than ‘not the way it has been done. The argument this morning appears to be that the guarantee fee/ tax is bad, inflationary and will place pressure on interest rates (no idea or reasons why but Malcolm says it is so it must be so) and we have a financial crisis created by the Government because people are fleeing mortgage backed securities and cash management funds which are not regulated by APRA and not covered by the Guarantee. The Libs did not, and still have not, suggested that the guarantee should be extended to these securities. Their only evidence that people are withdrawing money from these and putting them into banks is anecdotal and based on Challenger placing a freeze on one of their funds (which they had previously done previously before the guarantee was announced. This is not a financial crisis and it wasn’t a big problem until the Libs started making it one.

    We still have no clear policy position from Turnbull and his and the other Libs’ attacks are so disjointed and unclear that it is casting uncertainty on the response by the Government at a time when confidence is at a premium. I have no problem with the opposition raising concerns with the approach, but the way they are doing it is unconstructive and damaging.

  21. So you are calling the RBA and Treasury heads either liars or incompetent.

    And – if they had waited to make the decision with full analysis – the opposition would have been screaming that Rudd was doing nothing.

    Either way, they could not lose. But in the end, the ones who are looking like fools are not the govt, Treasury or RBA…. it is…. um…. the “bipartisan” coalition.

  22. I was listening to question time yesterday on the way to Dubbo and I think it is a joke from both sides. As far as I am concerned if they cannot shut up and listen then kick them out, The number of times the speaker calls order shows that our politicians are no better than 2 year olds with tantrums. What a disgrace.

    Having said that I also learned the following.

    1) If the Liberal Party guarantee limited to $100,000 is implemented then 40% of deposits or 750,000 will have no guarantee.

    2) That means total deposit numbers are 1,875,000

    3) The Liberals are screaming about a premium ( it is not a tax but rather an insurance premium for protection) on deposits over $1,000,000 yet these only comprise 0.5% or 9,375 depositors.

    4) So the liberals would rather not guarantee 750,000 deposit holders to save the precious 9,375 from a premium who have over $1,000,000

    5) If I had over $1,000,000 in bank deposits and the government offered to guarantee them for a one off premium then I would be more than happy to pay the premium. After all I still earn the interest.

    6) Lets ask Ozzies do they want all deposits of any value guaranteed or only 60% of them. I have no doubt they would say all of them because to guarantee some and not others in the same financial institutions would be the height of hypocrisy and unfairness.

  23. Caney @ 17… I love the term “tinkers cuss”. Everytime I hear it I see John Cleese saying it. 😀

  24. Hi Joni, is it possible for you to fix up my formatting error in #17? I failed to blockquote TB’s quote.

  25. Caney @ 24… done

  26. Hi guys and gals

    I was out all day yesterday Coonabarabran, Binnaway and Dubbo last night and it is amazing how many blogs and responses you miss. Far too many for me to read. Is there anything amazing or outstanding I should know from them all ?

  27. Thanks 🙂

  28. …and the ASX drops its bundle another 152 points!

    😥

  29. Shane
    Summary of most of them on the economics threads:

    The Libs are in disarray, Bishop has crazy blinky eyes and no idea, Turnbull is all over the place.

  30. Shane – One other thing – James doesn’t think the Libs are doing too bad and have some valid points. I’ll stress that this appears to be James’ (and the Australian’s) view only though.

    How’s it looking out Coona way?

  31. The Libs have been screaming for the Treasury and RBA advice from day 1. There are minor details and there are major ones. Potential runs on deposits from financial institutions is a major one. I cannot believe that all of you who were demanding open and transparent government a year ago are quite happy to simply let this slide. Where was the Governor? Why was he not at the meeting? What was his specific advice? Did he give any specific advice? Those are not difficult or unreasonable questions. Answering them is hardly an issue of national security.

  32. Shane… and reb is MIA so far today. Me thinks it was a good night down in Hobart.

    Apart from that – everyone is getting new avatars, and there is a link in the blogoFAQ for putting smileys into comments.

  33. Dave

    Coona looks great actually as they have had a number of showers, nothing drought breaking of course but good rain for the area. While at Binnaway yesterday the cold front with cloud moved over and the wind was almost cyclonic I had great trouble opening my car door in the main st to be able to drive to the next customer. Was actually looking for Dorothy and Toto down the st :). The temperature plunged by around 15 to 20 degrees in a matter of mins.

    Despite this I am still a global warming believer a couple of cold days won’t change my mind just like a couple of hot days won,t change the non believers.

    LOL Bishop has always had startled eyes, she looks shocked all the time, wonder how they would look if you gave her a real shock.

  34. James

    Did you listen to question time yesterday ?

    Have you read my post at 10.58am ? these were the FACTS provided by both sides.

    Now tell me in YOUR words not the Liberal Parties words why their option is better ?

  35. Shane – next time you see Dorothy, say hi for me. She is a friend.

    hehe

  36. 12. James of North Melbourne | October 23, 2008 at 10:22 am

    You miss the point and I wasn’t comparing it to alcopops directly but the process, which is the same. The opposition had every opportunity to state their reservations about the guarantee legislation during the process even if they supported it. They didn’t, they made a statement of full and unreserved support quoting the rapid changing situation of the economic climate as the reason to do so.

    The government also used the reasoning of the rapid changing economic situation to do what they did and said the situation would change (as it is almost daily now) after the legislation is introduced. The opposition is now trying to score cheap political points above logical reasoning after the fact (as they always do) because the situation is changing, which is what Treasury and the RBA have been discussing. Turnbull has repeatedly called for the government to instil confidence in the economy but then he constantly does the opposite, and attacking the head of Treasury (a person he has a history of confrontation with) and calling for his sacking does not instil confidence, at least not in the opposition.

    Currently the ones who look calm and in control are the government, and the ones who look panicked and grasping at straws are the opposition. That may not be a true indication of the situation on the ground but the opposition have only themselves to blame for that perception, and constantly changing their position from one week to the next, like fully supporting major emergency legislation, then one week later calling for its abolition stating it will destroy the Australian economy, is not helping them one bit.

    Another example of policy introduction is the NTER. When Howard bought that in as emergency legislation (more to win votes and wedge the opposition as history has shown) Labor supported it in principal but not without reservation. They didn’t unreservedly support the NTER policy and stated they wanted to visit it down the track after it had been bedded and reserved the right to point out flaws and suggest amendments when they saw the detail. When the NTER detail had been released (policy written over two nights by just a handful of senior ministers) Labor rightly attacked aspects of it. That is not what Turnbull did with the emergency bank deposit guarantee legislation so it’s a bit pat that he now kicks up such a fuss after the fact.

  37. joni

    Dororthy is only a friend of yours because you borrow her red shoes 🙂

  38. I resemble that remark…. and I have heard from reb, and yes, he is “recovering”…

    And I work in the Sydney CBD, and my mates and myself have noticed that there are a lot less people crowding the pubs/bars ar lunchtime recently. We wonder if it is connected to the state of the markets?

  39. joni

    I am hearing and seeing that even in the country at the moment. The local bowlo at Coona had 4 people in it on Sunday when i went for a beer and they said it had been deathly quiet for a few weeks now. When people worry the first thing to drop off is the latte set and then meals and recreational activities that cost money.

    Will probably see a lot more people at beaches and national and local parks for holidays as you do not need to pay (or very little) for these types of outings. Can pack and bring your own drinks and meals.

  40. Ken Henry’s estimates grilling: senatorial wheel spinning

    Wednesday, 22 October 2008

    Not a Bernard Keane fan but the truth of it all and note this point:

    This confirmed what we’d previously heard from Laura Tingle in The AFR – that there were no Treasury forecasts – not even preliminary ones – that formed the basis of the Government’s bank guarantee and economic stimulus measures. Instead, Gruen explained, it was better to consider the likely risks to growth rather than wasting time trying to churn out forecasts that didn’t add anything useful to our understanding of the situation.

    Then read the paragraph that follows it.

    This is not about an opposition attempting to find the truth about a situation that is rapidly changing, and there is little or no truth really to be had because of that, but all about cheap political point scoring at all costs by a dysfunctional opposition doing badly in the polls, and at the moment the cost is being borne by the opposition in lost respect and credibility, that’s the truth.

  41. And now another Liberal MP has attacked Glenn Stevens. Don Randall has said:

    They are having to bring down their rates as a result of the world conditions and the fact that (Reserve Bank Governor) Glenn Stevens has been caught out…

    http://news.smh.com.au/national/stevens-caught-out-on-rates-says-oppn-20081023-56wp.html

    Oh dear… they just cannot help themselves.

  42. Adrian, the only similarity between alcopops and this situation is that they were both presented as crises and have both resulted in extra revenue being raised, for little apparent good. As for the NTER, well the ALP did have the benefit of the full disclosure of info prior to backing the legislation, something the Libs have sought but have constantly been denied. Once again, it appears that your stated desire for open and honest government has gone the way of your criticism of profligate government spending. And it appeared to occur around November last year.

    Shane, I did look at your post and will take it as presented. What you don’t mention, though, is those institutions to whom the guarantee doesn’t apply. What of the effect on them? Was it considered? If not, why not?

    You know what I reckon? I reckon Stevens thought a cap was so obvious that it didn’t warrant mention. When the policy was presented he got on the blower and said “What the fark are you guys doing? No caps? Jesus, I go to one family wedding (insert reason for absence here) and you guys do this? Now here’s how to fix it.” Then to his broker “Get me the hell out of any shares in non-bank financial institutions!” 😉

  43. James

    The institutions that are not guaranteed are institutions which are not governed by APRA. This is a silly thing on behalf of the opposition. We ALL know and knew when we lodged our money with other institutions that they are not governned by APRA and were looking for higher returns from higher risk investments. Guaranteeing each and every institution would be the same as guaranteeing each and every shareholding on the stock market. A ludicrous proposal.

    When you invest in an APRA regulated institution you are somewhat reassured that a government body is controlling the companies activities to some extent and as a result you will earn less in depositing into those institutiutions by way of bank accounts or term deposits. When you invest outside an APRA governing institution you are trying to earn as much return as possible and as such at a higher risk.

    It is ludicrous to expect those to be guaranteed as well, however to calm the market it is prudent to guarantee deposits in APRA governed institutions.

    If we did not guarantee any amount we risked flight of funds overseas to countries where moeny was guaranteed by their respective governments.

    The Liberal party would not even guarantee those being made redundant during their 12 years of rule their full entitlements.

    My shares are losing over 50% but that was my choice for risk not the governments. It is however nice to know that the money I put on term deposit as a saver is gauranteed even if the rest goes to the wall.

  44. Thanks, Shane, but if govt policy causes a run on these institutions don’t you think that’s a little more than a “detail” to be considered later?

  45. James

    There has always been an implied guarantee of money in banks, never in these other investment funds. If these other funds fail people will lose money – but the financial system won’t come crashing down. If the banks fail, it will. This guarantee isn’t about protecting our money, it’s about protecting the banks and the financial industry.

    The reality is, there had to be a guarantee for banks up to some point to stop money going to OS banks where there were guarantees. Our banks are pretty safe and the chance of them going under is pretty low (almost zilch) so the risk to the Government is extremely low. This risk is low primarily because of the oversight from APRA and other banking regulations. Not so with these other investment funds which have demonstrated liquidity problems in the past. The fee that the Government wan’t to levy cannot be characterised as a guarantee fee but rather a regulation levy to cover the administrative costs of regulating the banking system and keeping it safe. As a guarantee or insurance levy, it would be a joke because there is no way the Government could hold enough reserves to cover the likely loses if one of the majors fail. But as a regulatory levy, it is entirely sensible.

  46. James – but the run on the institutions started before the guarantee.

  47. James

    If it causes a run on these institutions so be it, Exactly the same as a run on the stock exchange, what is the difference? I don’t hear screaming to guarantee the stock exchange.Funds were invested in those other institutions by people looking for higher returns. They know ( or should have known) the risks involved.

    Once again guaranteeing the institutions controlled by a government body is the completely correct thing to do. Guaranteeing funds to institutions who are not or choose not to be governed by the body should be left to their own devices in the free market. Why should they now be guaranteed when the sole purpose of their creation was to aim for higher returns above and beyond and outside those provided by APRA governed institutions. You cannot have it both ways.

  48. James

    You also need to understand that many of these non APRA governed institutions were created in a way to avoid capture under APRA regulations, so they could go their own merry way in trading and raising capital without having any restrictions. Why now all the hooplah about protecting them when they went out of their way to be created to avoid APRA regulation.

  49. Apparently foreign banks operating in Australia, also not under APRA, are asking for the Australian government to guarantee them.

  50. The difference, Shane, is that cash is a very different investment class to shares, as you well know. Another difference is that many many people have pensions paid to them out of CMTs and the consequent freezing of these CMTs results in their losing their income. I am not advocating that guarantees be placed necessarily on anything. What I am advocating is that due consideration be given to the consequences of political decisions. Finally I am advocating that when bipartisanship is sought, then there should be a frank exchange of up to date information. I think the government have abused the political process in a way that their predecessors could only dream about, and that the loudest advocates for open and frank government have been strangely silent on the issue since, oh, about November last year.

  51. 41. joni | October 23, 2008 at 11:56 am

    What’s with this Liberal opposition, are they in total denial through the shock of losing the election or are they really that disconnected from reality.

    The RBA raised rates before the last election Don because it had repeatedly warned your government about spending too much to stimulate the economy and encouraging personal debt, a warning your leader chose to continuously ignore, the result of which was ever increasing inflation. If the RBA hadn’t acted as it did back then, which was apparently your want, then we would be looking at inflation several points higher than the current figure.

  52. How do you know that, Adrian? Did they “go public” with their advice?

  53. James

    Finally I am advocating that when bipartisanship is sought, then there should be a frank exchange of up to date information.

    But the Government didn’t seek bipartisan support – the Libs did but Labor ignored the offer – The Libs then agreed to support the package.

    I agree, that if this was a bipartisan approach to a problem then the Government and Opposition should share the information available – as in a war cabinet situation. But this isn’t what is occurring here.

    The Libs have forgotten that they aren’t in power and have to face reality. This is Labor’s problem to handle and they have shown that they are capable of handling the problem on their own with the advice of APRA, the RBA and Treasury so far.

  54. James

    “Strangely silent since, oh, about November last year”

    This comment shows your bias since the last election.

    If a pensioner has placed their funds in anything other than a secure income stream after retirement then that is ludicrous. Many of them did so more as a matter of greed expecting larger returns.

    I told my own parents to put their money in term deposits many years ago when they retired because they no longer need the stress of changing financial markets at their age. They did not make as much as the sharemarket, nor did they stress like others over the asia crisis, the 9/11 crisis or the one we are in now.

    I do not believe any pensioner should be in any risk investment unless they are aware they could lose the money. Financial Planners have a lot to answer for in this regard. If these CMTs are outside APRA then they were always a greater risk. What about pensioners who have shares relying on income from dividends as their income stream?. Once agian pensioners should not be in risk investments unless they are prepared to suffer the consequences like the rest of us and this is where many of them may have been misled or simply wanted bigger returns.

    My own retirement plan is to have 90% of my super in cash by the time I am 65 and is a strategy all should aspire to rather than expecting higher returns when oyu can no longer contrigute to your funds by way of employment.

    Many, many times over the last 12 years we saw the previous Government making decisions without any consultation. We saw legislation absolutely rammed through the senate as soon as they got the numbers because they no longer needed consensus or support. No debate, scant information and rammed through.

    The government needed to make a decision and do it quickly. It has broad support from the business community and the community at large.

  55. #50. James of North Melbourne | October 23, 2008 at 1:11 pm

    [i]I think the government have abused the political process in a way that their predecessors could only dream about, and that the loudest advocates for open and frank government have been strangely silent on the issue since, oh, about November last year[/i]

    .
    Oh come off it James, nobody abused the political process more than Howard and what has recently occurred doesn’t even get close. And just what has the government done to abuse the process so badly, certainly not flood a Senate Estimates with their own members to waste nine hours grilling someone with the same few questions over and over? You want to have a look at an abuse of the political process go no further than Coonan, Eggleston, Brandis, Fifield, Ronaldson, Abetz, Parry, Joyce, Boswell and Bushby. then lets add Nick Xenophon and Bob Brown to that lot as well all there in an attempt to pin some minor point onto the government and so they could say they didn’t get it wrong when they incorrectly believed an article from their media spokes piece The Australian.

    All of a sudden bipartisanship must be considered even when it is done for purely a political reason, yet when offered by a Labor opposition (also for political reasons) it was always scorned and made out as a joke.

    What did the opposition have to bring to this discussion, especially considering their terrible performance since becoming the opposition?

  56. #52. James of North Melbourne | October 23, 2008 at 1:23 pm

    How do you know that, Adrian? Did they “go public” with their advice?

    Pardon, just what are you on about?

    The RBA remember now releases a statement as to the reasons they raise, lower or keep interest rates the same. Something bought in under the Howard government and universally praised.

    So yes they did go public as to why in an unprecedented move they raised their rates during an election campaign and they went public for the times before that, and yes they did go public with their advice to the Howard government about its profligacy.

    Howard chose to ignore that advice but now people from that same political party are demanding this government religiously and without deviation follow RBA advice. Do you see the problem here James, it’s the double standards yet again being practiced by the opposition and this is why they are doing so poorly, along with the fact they’ve lost touch with reality and believe they are the government by proxy and the real government should instantly do everything they demand.

  57. Shane, if you’re going to have 90% of your super in cash at age 65, and expect it to last until your death, then you’d better have a few million at least or be prepared for a diet of potatos. Mostly you sound reasonably sensible, but that post was simply ignorant. Get onto your excel spreadsheet, apply a discount rate of, say, 5% (to allow for inflation), give yourself an interest rate of (let’s be generous) 7%, no make it 8%, then put in some reasonable retirement income. Extrapolate that out over 20 years and come back to me with the result. Financial advisors have a lot to answer for indeed! Fark me swingin’, you have no idea!

  58. James – isn’t the idea of super that you do not have a lot of growth after you retire – because you draw down on the capital? And the hard part is making sure you have enough to last you until you go to the choir invisible?

  59. Adrian, the simple fact is that if the parties were reversed you’d be screaming about policy on the run, decisions written on the back of envelopes, non-disclosure, blah blah blah. Just as you were defending Russia in South Ossettia (have they left yet?), just as you’re the blog’s great authority on Climate Change (yet only link to sites that support your left position (never mind that they celebrate the lives of anarchists, cave clan types) and won’t answer the most simple logical questions on the subject. When I started on this new blog, I gave a detailed statement of position and interest. If it’s conservative, it’s bad, if it’s socialist, it’s good.

    Editor Comment (joni): James – we all appreciate your comments. But having a different opinion, we all examine our POV, and try to come up with arguements to support our positions. I know that I definately learn from your posts. But let’s not get personal – play the ball not the man (hmmm… man… balls…. stop it joni, stay on topic).

  60. James

    I am amazed at your comments when you are the one screaming about pensioners. You cannot have it both ways, you either have risk and face a loss or you dont there is no in between.

    Are you a financial planner ?

    My own Financial Planner is of the same opinion as myself when it comes to pensioners.

    My parents never lived on a diet of potatoes, you are now becoming unrealistic and somewhat snide in your remarks simply because we disagree.

    How on earth do you know what inflation will be in 20 years time or even over the next 20 years and how do you know what rates will be.

    It is a gradual change to 90% too James not to 90% tomorrow. I currently have 2% of my super in cash with 20 years to retirement.

    Figures and percentages are meaningless if you lose all your money trying to achieve them.

  61. James,

    I have come to the conclusion that I am a conservative environmental socialist…there is no political party that represents my ideology.

  62. Not exactly, Joni, though that would be nice. Given that we all live too bloody long these days, you simply can’t rely on savings alone as inflation has too much of a devaluation effect. A good rule of thumb is to put enough in cash to fund a few years of income and get the rest invested. 20+ years is a long time in retirement and well diversified growth portfolios (shares, property etc) are your best bet to ensure that the real value of your capital is maintained over the period. This is a general comment and should not be taken as specific advice. Everyone’s situation is different. I have to put in a disclaimer by law.

  63. James – appreciate the feedback. And as a worker in a financial institution, we do need to stress that we are giving personal opinions – not financial advice.

  64. Shane, I took you as meaning at retirement. But if you retire at 65 you will on average live for over 20 years. Inflation over the last 20 years has been low, right? Well ask yourself what you would have paid for a litre of petrol 20 years ago, or a litre of milk, or a loaf of bread, or a cold beer. Everyone is different, but I reckon in my 15 years in the game, I would have seen perhaps 6 clients whose capital + interest alone would see them out. You called me politically biased, then had a go at my profession. So don’t give me snide. Go to your adviser, and ask him how much you would need at retirement, assuming it was today, to keep you going for 20 years on interest alone. If he agrees with your proposition, then I would dispute his advice as it would relate to most of the population. As I said before, we are waaay oversimplifying fairly complex and diverse issues, but I have to respond in simple terms.

  65. James

    So I gather you are a financial adviser ?

    I still believe a lot of Financial Adviers have a lot to answer for.

    I am a Mortgage Broker and believe a lot of them and the Banks have much to answer for as well.

    That is my own opinion and generalisation.

    In your 15 years in the game things would be vastly differnet now than when you started. Especially given the compulsory superannuation within the employment industry which was introduced by Paul Keating. I doubt that many people would have any superannuation funds for your industry if that legislation was not introduced as very few people I know contribute anything above the mandated levy. And unless you were employed by Government Departments or Large Corporations beforehand you did nothing.

    In addition the sums would be vastly higher had it been allowed to continue to the 15% originally planned which the previous Liberal Government stopped even through what is now referred to as the 15 years of wonderful growth in our economy. I would consider that a far greater detriment to the overall final balances of retirees when they hit 65.

    Pensioners want simple lives not comlex and diverse ones. They have been there and done that now is the time for them to relax stress free especially about their money.

    I was informed that the average life expectancy after you retire at age 65 is 7 years. Is your 20 years correct or is that based on a different retiring age?

  66. Darn

    All Ords now at 3,947, needs to be 4,023 or higher by end of trading tomorrow for my prediction to come true. Just thought I would give these figures if anyone was interested.

  67. http://www.abs.gov.au/AUSSTATS/abs@.nsf/DetailsPage/3302.0.55.0012006?OpenDocument

    This is the link.

    The super legislation is great, and one of the reasons why there shouldn’t be too much panic in the market, given the institutions have mandated minimums that must be invested. I have said often, and no-one seems to comment much on this, that Costello’s removal of the tax on lump sum super withdrawals was a shocking piece of legislation. I don’t know whether contributions should be 15%. It would be better for retirees if it were, but what would that do to employers and workers’ take home pay?

    Some advisers do have a lot to answer for, as do some institutions and especially some financial commentators, who seem to have the freedom to say what they wish to at will with little consequence (I have to write a 30 page document to make a basic super recommendation). Many advisers are dictated to by their institution employers. It was institutions pushing the $1 million contributions last year, to the detriment of many.

    No pensioner is the same. Some millionaires want access to the pension, and will do anything to get it, some will retire with an income of 20k and that’s more than they need, some need 100k +. Some want to spend the kid’s inheritance, others want to maintain their capital values entirely. As an adviser, beyond a bit of guidance, it’s not for me to tell them what they want, but to try to achieve it as best as possible, within reason.

  68. “It was institutions pushing the $1 million contributions last year, to the detriment of many”

    It was not just the ‘institutions’. Just about every financial adviser I know was pushing their clients to do it – and none of them are institutional advisers. I know of financial advisers suggesting that client’s sell propeties to take advantage of the $1m contribution even though the benefits were unlikely to offset the costs of selling.

  69. Well I can only say, Polly, that I resigned one six figure position and knocked back another (effectively) over that very issue. In my own group of adviser mates, there were very few who pushed it. Again, it’s a complicated issue and I should never have got into this discussion, but in some cases it was absolutely appropriate, but in most cases not.

  70. James, we know that it is complicated – too complicated, probably, for just blogging, but I am sure that everyone appreciates your comments.

  71. James at 3.33pm

    I agree with a hell of a lot that you said. We may disagree on some aspects James but there is always opportunity to find common ground as well.

  72. Joni, I hope I don’t sound aloof or condescending with that, but I’ve just started up on my own, and the compliance mob have given me some pretty hefty warnings about the delivery of advice. And here I go straight away breaking the rules online, well sort of. But it’s Dave55’s fault. His mob’ll sue if someone acts on my advice;)

  73. From what I remember on compliance, as long as you are giving general advice, you should be OK. And I am sure that no-one would actually take the opinions that we write here and go and invest all their money that way…. if we took each other literally, we’d all be drunk gay dog-owning retirees who pay too much attention to politics.

  74. James

    In my opinion what you gave was very general and in no way could be taken to be personal advice to any of us.

  75. joni

    Touche

  76. Liberal MP apologises.

    http://www.news.com.au/business/story/0,27753,24541251-31037,00.html

    They all need to calm down instead of all this squabbling which can only lead to further angst in the current climate.

  77. James,

    Mate, I know what you mean. I actually hate telling people that I’m a lawyer (a bit like those St George – I’m a banker ads) because of the sharks in the industry who push dodgy negligence claims. It pisses me off that people don’t take responsibility for their own actions these days.

    In my defence, I’m actually an environmental/mining/ OH&S lawyer but … tarred with the same brush and all that …

    Good luck out there on your own. Like Shane, I agree with a lot of what you say and the financial investment comments you make seem sensible to me – it’s just your propensity to accept a lot of what the opposition says as being gospel gets to me at times. I think it might be a a failure to recognise the difference between economics and financial management/ accounting and perhaps a lot of us make that mistake (myself included). For example – just because a person made some money and worked for a merchant bank doesn’t mean that that he has any idea about economics.

  78. With the close of the ASX the all ords has to close up by at least 57.20 points tomorrow for me to have any credibility with my prediction.

  79. Shane,

    Any idea why the apology was table by Albanese?

  80. Dave

    You mean I have befriended a lawyer?
    oh the company we keep.
    LOL

  81. Dave

    No not at the moment it was breaking news

  82. shane

    😳

  83. “I resigned one six figure position and knocked back another (effectively) over that very issue.”

    Well, good on you James.

    ” In my own group of adviser mates, there were very few who pushed it.”

    And good on those mates of yours who didn’t push it in inappropriate circumstances. But that is not the same as saying ‘insitutions’ were the ones doing so. Especially when you then that you know advisers who did. Were they institutional advisers?

    “Again, it’s a complicated issue and I should never have got into this discussion, but in some cases it was absolutely appropriate, but in most cases not.”

    Don’t remember writnig that it wasn’t complicated. Nor do I recall writing that it was inappropriate in all cases.

    Merely tried to correct your inference that ‘institutions’ were the only ones who pushed it and that independent advisers didn’t.

    And don’t even get me started on the ‘dinner party’ advisers. I always hate conversations with clients that start ” I was at a dinner party…’. I’m sure you get your share of them as well.

  84. Now I see how apt your pic is, made me laugh out loud. Im not the brightest bulb in the fitting.

  85. Dave,

    Turnbull got to where he is financially riding on his wife’s back.

    Check him out in interviews…an empty seed pod!

  86. empty seed pod – I like that. Or it could be one of those old seed pods which rattle – makes a lot of noise when shaken but the contents are useless and will never bear fruit.

  87. That is on the money…no fruit but a bacteria that inflicts a blight on the conservative party!

    Regardless of the opinion polls, Nelson was the better option without the undermining of the seed pod faction.

  88. And another fund has just frozen withdrawals. But is this a cause or effect?

    Is it because of the turmoil and uncertainty that the coalition has created over the guarantee?

    Or is it because of the guarantee?

    If the fund is safe and secure – why would people be wanting to withdraw their funds?

    I wonder if the managers are playing a game with the government to extract some concessions?

    http://business.smh.com.au/business/perpetual-backlash-for-rudd-20081023-577y.html

  89. Isn’t it telling joni that many of these investment houses, mortgage funds and foreign banks lure investors by claiming to be strong and safe with investors money being secure in their institutions. Of course they make these claims when things are going well and now the bottom has fallen out of the market they refuse to guarantee their investors funds with the pretence of strength and security being thrown out the door as they go cap in hand to the taxpayer to help them out.

    Btw the wasn’t Turnbull one angry ant in parliament today with the entire opposition a gibbering and bellicose rabble.

  90. Adrian, how do you reckon the big banks would go if all depositors pulled their funds at once? And how do you reckon the govt would go with their guarantee? What the govt have done is pull the rug out from under these other institutions (and a search of what I’ve written even in this subject would hardly define me as an advocate for them) and they are now in deep deep shit because of it, both the govt and the institutions. And I’ll say it again, I reckon Stevens never backed it, and I doubt Henry did either. Finance works on a system of broad trust, and Rudd and Swan have made a massive mistake. Probably Turnbull too, although it remains to be proven whether he was stupid or playing a devious political game. But he’s not the one in govt.

  91. “Dave

    You mean I have befriended a lawyer?
    oh the company we keep.”

    Shane, I’m marrying one, and a divorce one at that! And I have the hide to call politicians stupid???

  92. James @ 99

    But the banks are regulated by APRA, whereas a lot of the funds that are looking for protection are not.

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