No surprise, really, that the handout mentality that prospered in Australia during the boom years is coming on even more strongly now that things are more difficult.
The demand by cash management funds and mortgage trusts that they also get a government guarantee is one of the more shameless try-ons in an era of particularly refined rent-seeking. Why don’t we guarantee all listed companies while we’re at it? It would be heartlessness of titanic proportions to dismiss the concerns of shareholders about their investments.
At least finance industry peak body IFSA could have tried to construct a case that the bank guarantee was a significant problem for its members. But beyond the politically-motivated claims emanating from News Ltd, no one has produced any evidence of how much the flight to quality by investors is motivated by the guarantee and how much by the fact that exposure to equity and property markets is a seriously bad idea at the moment. Plenty of money has been flowing out of the sector for months.
Which also begs the question of why we should feel any sympathy for investors with their funds frozen. News Ltd has continued its now well-established practice of citing examples of wealthy individuals who have failed to get something others have got and demanding our sympathy for them. On Saturday The Australian tried to drum up sympathy for “self-funded retiree” Don Reid, who had had his AXA funds frozen and was blaming the government. Yesterday Glenn Milne introduced us to Greg Russell who invested “a large portion” of the sale of his business on mortgage funds, which were now frozen.
Sign up for a FREE 21-day trial and get Crikey straight to your inbox
When so many other people in the last twelve months have bailed out of investment vehicles with exposure to the stock market and property markets, you wonder why these people had failed to do the same. Hadn’t they noticed the brewing financial crisis and stockmarket collapse?
Or did they just not like the idea of taking a lower return on a safer investment? One imagines that if these people received supernormal returns on their investments, they wouldn’t be offering the excess to the taxpayer. But they expect the taxpayer to come to their aid when they have to deal with consequences of their own financial decision-making.
One of them dismissed Wayne Swan’s suggestion that people in financial difficulties approach Centrelink — supposedly, according to Milne, the height of insensitivity — because “there’s pride involved here, as well. Self-funded retirees don’t want to be lining up at Centrelink.”
Unlike all those welfare bludgers and single mums who presumably enjoy lining up at Centrelink.
Investors with their hands out are not alone. A small business peak body on Friday wanted tax relief because small business had been “kind of been left out there” by the government. Car components manufacturers want assistance, with the backing the Coalition, because car sales have slowed. The Government has already indicated it is favourably disposed toward this form of New Protectionism.
There’s a pattern here — resentment that another sector is getting something that you’re not. And that, apparently, just isn’t fair.
After so many years of strong economic growth, you’d think Australian business was well-placed to weather a slowdown. But the first thing a lot of them are doing is running to the government.
It’s not just about ignoring moral hazard, it’s an entire mindset. Australians never like to stray too far from the skirts of government. It can be a big bad world out there.