Who’s this General Seato? It was a nostalgia night at the National Press Club last night as former Sydney Daily Mirror journalist, Gough Whitlam press secretary and still-practising lobbyist Eric Walsh was awarded the annual golden gong given to a practitioner of those black arts of political consulting. Among a host of reminiscences of 50 years of Canberra political life was the delightful memory of former Liberal Prime Minister John Gorton giving a press conference in those days when there was still such a thing as the South East Asian Treaty Organisation. Having just been to visit war ravaged Vietnam, a journalist asked our Prime Minister: “And what is the general SEATO position on Vietnam?” To which Gorton replied: “Who’s this General Seato?”
Ah, they don’t make politicians like that anymore.
Concentrating power in Canberra. The idea floated by Prime Minister Kevin Rudd yesterday that a Federal Government should perhaps raise the money that states need to pay for infrastructure is yet another sign of the increasingly diminished role of the states in the Australian federal system. And forget about that absurd headline in The Oz about a Kevlani bank. If there are savings for taxpayers to be had in one government doing the international borrowing instead of nine, then I’m sure those taxpayers will be all in favour of it. The only losers will be the banking sharpies from whose ranks Liberal Leader Malcolm Turnbull only recently departed.
Not waiting for Fair Work Australia. Julia Gillard is not waiting around for the Opposition amendments to her Fair Work Australia proposals when they come before the Senate next year to display her tough side. The Deputy Prime Minister is having a preliminary canter in the game of bluff with the Senate with her legislation to introduce a uniform education curriculum. Linking the curriculum to multi-million dollar payments to independent schools was the act of a very determined politician. And how could any reasonable person object to her insistence that independent schools are committed to a national curriculum in the same way as government ones? If private schools want public funding, they should abide by public criteria.
Get Crikey FREE to your inbox every weekday morning with the Crikey Worm.
Controlling the earnings of bankers. There was nothing really original in the comments last night by the former Reserve Bank Governor Ian MacFarlane that a complex system of perverse incentives that had rewarded those who chased high returns and chose to “ignore or downplay the risks” was at the heart of the world’s current financial turmoil. The Australian Prudential Regulatory Authority (APRA) was making similar comments last year before the crisis was a crisis.
The men at APRA, like MacFarlane, drew attention to the danger that multi-million dollar bonuses encouraged risk taking. The regulator gave a warning to the boards of financial institutions to look carefully at the incentives it offered executives, but what it did not do was suggest to the then Coalition government that they should be allowed to take actions if their words were ignored. Perhaps this blunt judgment looking backwards by Mr MacFarlane will give the Labor Treasurer Wayne Swan the courage to act that his predecessor Peter Costello lacked:
The biggest misdirected incentive was the performance-based pay structures which awarded massive bonuses to the management of financial institutions on the basis of short-term profit results. Annual bonuses in the millions or tens of millions of dollars were available to the most successful profit earners, and, of course, were not returnable when the short-term profits were lost in subsequent years.
Labor should first of all take up the suggestion by the Leader of the Opposition Malcolm Turnbull that would allow shareholders to pass binding resolutions on executive pay. In the case of institutions supervised by APRA, shareholders should be encouraged to use this power by backing it up with regulations allowing the regulator to insist on higher capital requirements when payments are considered to be risky. The consequent decline in an institution’s profitability would concentrate the minds of shareholders wonderfully.
No sign of public panic. The pundits who make guesstimates at these kind of things were round about the mark with the GDP figure out yesterday. The median estimate of growth in the September quarter in the sample taken by Bloomberg was 0.2 per cent and the figure came in at 0.1. And as the consensus was that the quarter would probably mark a low point because of the impact of Reserve Bank interest rate rises that occurred during it, there is no real evidence that things are going to get markedly worse. The Australian economy, as anticipated, is doing markedly better than that of most other developed economies, which have been declining rather than growing.
Since the beginning of this current quarter, the Reserve Bank has knocked a couple of percentage points off interest rates and all government welfare recipients are about to receive a handy pre-Christmas cash bonus. The last retail trade figures suggest that consumers are spending on other things what they are now saving on reduced petrol prices. While some of the interest rate savings will probably go to reducing the size of the family mortgage, consumer demand is sure to be boosted enough to prevent the December quarter economic outcome becoming negative.
Looking into next year, the Federal Government has already given a considerable boost to the spending capacity of local government with the money to go towards projects with a short lead time. Prime Minister Kevin Rudd and Treasurer Wayne Swan have both indicated a preparedness to do more if they see signs of a serious growth decline continuing. With inflationary pressures now well and truly gone, there is scope too for the Reserve Bank to cut interest rates again.
So, being a betting man, I will put my money on Australia avoiding a recession and say there is every chance that the country might even avoid one quarter with a negative GDP figure.