The failure of financial services regulation

As we get into 2018, the financial services regulations continue to grow. Government, and by extension the agencies of government, intervene in the day to day running of financial services firms like never before. The core driving principle behind the relentless command and control approach is the desire of all governments, of all political colours, to assume power over all individuals and remove their self-reliance. This drive is endemic across all areas of government – the nanny state is a useful descriptor. It is not unique to Australia but happening throughout the western world.

The history of regulation of financial services in Australia has followed broad themes over the years since the second world war and the unsuccessful attempt by the Chifley led Labor Government to nationalise the banking sector. Since then, the broad themes have been solvency management, consumer disclosure, management scrutiny and consumer needs assessment. Continue reading

To fix bad bank behaviour, the banks must be deregulated. Royal commissions are pointless.

The Royal Commission inquiry into the banks and other financial institutions of Australia was described by the Prime Minister, as he announced his decision to instigate it, as “regrettable”. He said it had become “inevitable”. He also said that Government policy remained policy “until it is changed.” Only the Government can initiate a Royal Commission. So how was it inevitable? If it is regrettable, then why hold it? Continue reading

Relief for the lower paid requires relaxing the Superannuation Guarantee rules, not tightening them

Jane Hume, writing in the June 2017 edition of the Investment Magazine, an Australian publication aimed at institutional investors, argued for the removal of the $450 per month minimum income threshold that governs Superannuation Guarantee (SG) obligations. Her arguments were unconvincing to me. After nearly 30 years of my career in superannuation, as a consultant, actuary and for 12 of those years a trustee director, it is very clear to me that the $450 threshold should be increased, not reduced. Jane would like to see it reduced to zero. I would like to see it increased to $1,500.

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Diversity and inclusion – how to kill the concept

It is quite puzzling.

Look at this piece:




An assertion, without any proof or suggestion of how it may be proved, that the oil well cap blew off the well at the bottom of the Mexican Gulf because of a lack of diversity and inclusion in the executive ranks of the oil industry seems an odd way to promote D&I. What is much more likely is that such a statement will be ridiculed publicly and the concept of D&I will be damaged, probably irreparably.


Compulsory superannuation is driving this mad idea

The Treasurer has been keen, reportedly, on letting younger Australians use some of their superannuation to help fund a purchase of their first home. Goodness knows why the Treasurer thinks this will make housing more affordable, but then again, economic literacy is not strictly a prerequisite for the job.  ScoMo reminds us of this law of the land almost daily.

The only, repeat, only reason that this pops up as a possible policy is due to the compulsory superannuation guarantee law. If the young did not have part of their wages compulsorily diverted by law into a ‘do not touch before age 60’ fund, then they could choose what to do with their money. They could spend it, invest it, buy education, buy property, or whatever they deem fit. I believe that people spending their own money make better decisions than Australian Treasurers dictating to them how to spend their money. Call me old-fashioned.

If the Treasurer thinks more carefully, he would prefer to abolish the SG than let people swap a superannuation asset into a real property asset.

Using superannuation savings to help buy a first home?

Stupid idea. Ridiculous. Mind-bogglingly bad.

The Treasurer was contemplating, according to media reports, allowing those who have not yet entered the residential property market a relaxation of the superannuation preservation rules. They would be allowed to withdraw an amount from superannuation to help fund a first home purchase.

The unaffordable house prices in Australian capital cities are not caused by a lack of demand. They are caused by a lack of supply. Throwing more money at the existing supply will increase the house prices, not reduce them.

At the same time, the embryonic retirement savings of the young will be set backwards.

And this man is Treasurer.

Apartments in Melbourne

I’ve been contemplating the apartment market in Melbourne, with a view towards possible investment. Are apartments overpriced now and so should I defer? Are they fairly priced? Anyone with inside knowledge is invited to pontificate in the comments.

Palpable incredulity in the cockpit pulpit

The Chairman of Qantas Ltd, Mr Leigh Clifford, wrote a letter to the Australian newspaper in response to criticism from a minister of the cloth that he, Mr Clifford, and other business leaders were publicly advocating changing the definition of marriage. The existence of such criticism seemed to surprise him. Mr Clifford’s incredulity was palpable. He said “Apparently, companies have no business expressing a view on social issues” and “By this logic, should companies scrap all of their corporate social responsibility programs?” (An image of Rik Mayall in The Young Ones delivering those lines with exaggerated irony just floated across my mind.) It probably was an attempt by Mr Clifford to use irony to dismiss his critics, although I doubt it worked.

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How’s that compulsory superannuation working out, then?

Given the chance, Paul Keating, and to a lesser extent Bill Kelty and Garry Weaven, those relics of Australian labour politics and the union movement from the 1980s, champion the Australian compulsory superannuation system as a huge win for the average worker. They claim credit for winning an industrial battle to grant superannuation to the workers. Prior to their glorious victory, they viewed super as a privilege for a wealthy few. I suppose they keep banging on about it because they could be fearful of the average worker finding out one or two home truths about compulsory superannuation that are perhaps not so glorious after all.

Every $10 of wage otherwise payable to an average income worker, when paid as a superannuation contribution makes the average worker worse off. Wages are about 50% more valuable to an average worker than superannuation contributions. Continue reading