There’s an obvious solution to the Gina Rinehart family mess. The key resources assets should be sold. How much does the family need? Well, surely Rinehart would be happy to walk away with $4 billion in cash and the four kids could get by with $500 million each.
The family is obviously concerned about tax liabilities, so it would be handy if these cash holdings could be delivered in after-tax terms.
Given that we are dealing with state-owned coal and iron ore assets and a federal government that is putting the finishing touches to a new resource rent tax, it would be absolutely appropriate for the WA, Queensland and federal governments to get involved in such a transaction.
Especially when you consider that there is a very obvious buyer: David Gonski’s $73 billion Future Fund.
As a patriot of this great nation, surely Rinehart would be proud to see the tenements discovered by her family developed to pay for the pensions of Australia’s valiant Diggers.
After all, people forget that the misnamed Future Fund is really just a glorified and partially funded military pension scheme.
Defence makes up a majority of the current $130 billion in public service superannuation liabilities accrued by the federal government. This is projected to hit $148 billion by 2014-15.
Yet the 2011 budget revealed that the Future Fund only had $56 billion set aside to cover this liability. It also had an additional $18.5 billion in three others funds for projects in health, education and infrastructure, but this will deplete over time with no sign that the Gillard government is committed to providing any more funding as it desperately tries to concoct a budget surplus in 2012-13, an election year.
Out-going chairman David Murray didn’t do much a job plugging the gap over the past years as the Future Fund only delivered annualised returns of 4.2% since it was established in May 2006. In hindsight, it was surprising Murray lasted six years. There was a great opportunity for the Future Fund to use its balance sheet to underwrite capital raisings and pick up dirt check equity and bond holdings during the GFC, but Murray and his team showed little innovation.
So why would Gonski be capable of negotiating a deal for the Future Fund to take over Hancock Prospecting?
Gonski is Australia’s best-connected corporate diplomat. He understands family inheritance issues better than most seeing as Kerry Packer trusted him to be joint executor of his estate.
Only a true diplomat could simultaneously chair Therese Rein’s booming Ingeus job placement business and be embraced by Julia Gillard to deliver her beloved education blueprint and then chair the closest thing Australia has to a sovereign fund.
We know that James Packer is close to Rinehart, so Gonski’s Packer-family connections would provide an obvious way into the family. Gonski is even the man who disastrously put Frank Lowy into Channel Ten, the vehicle in which Packer and Rinehart are now co-investors
Gina’s new PR adviser is my old flat mate and Kennett spin-doctoring college, Ian Smith.
He knows full well that the Rinehart family reputation has been smashed by all these disclosures.
Just getting on with business will go no way to salvaging something from the mess. Labor politicians, jealous business rivals, journalists and the ATO will all come chasing after the family for years into the future.
Think of how all that would change if they suddenly transferred those magnificent mining operations and tenements to the Future Fund at the knock-down price of only $6 billion.
Given the latest Forbes magazine valuation of $US18 billion, it could be portrayed as the bargain of a life-time for all Australians.
The Future Fund would suddenly start delivering better returns, Diggers would feel more secure about their pensions and we would genuinely have something a little closer to a Sovereign Fund.
In terms of portfolio management, David Gonski has given up one of Australia’s most important gigs, chair of the $5.4 billion ASX Ltd, to instead chair a government superannuation scheme, which is far smaller than the funds management operations of Westpac, NAB and CBA.
The Gillard government will have made it perfectly clear that he is not allowed to publicly complain about Labor abandoning contributions to the Future Fund after it plunged into deficit.
However, Gonski does have flexibility in terms of how the current $73 billion held by the Future Fund is invested and to that end he should start devoting his considerable corporate, legal, tax, government and diplomatic skills to getting involved in resolving the Rinehart family mess
*Crikey media commentator Margaret Simons put together a panel debate today from 6.30pm at Readings in Carlton, entitled “Who’s afraid of Gina Rinehart?” Other speakers include Stephen Mayne and Tim Wilson from the IPA. See details here.