Financial services royal commission vs Federal ICAC
First things first: Australian needs a Federal ICAC. If Malcolm Turnbull wants to trump Bill Shorten's bank royal commission he should commit to the Federal anti-corruption body which the cross-bench has been calling out for in recent times.
But that doesn't mean a financial services royal commission won't also be useful. Australia has a unique financial services industry courtesy of having $1.5 trillion in compulsory super, four big vertically integrated banks, vertically integrated unions offering financial services and the world's most indebted households.
There has been a few banking scandals and there is excessive pay, but Australia has generally been well served by its financial services sector since the HIH collapse more than a decade ago. Risk management has been pretty good but Australians still suffer from one of the world's most concentrated and expensive banking systems. How do the Big Four banks spend $37 billion a year running their Australian and NZ franchises and what sort of competitive market structure allows them to generate about $40 billion a year in pre-tax profits?
Financial services is hugely material to the Australian economy and investors, so a Royal Commission may produce some worthwhile reforms, such as getting the Big Banks out of wealth management to reduce complexity and conflicts of interest.
From an investor point of view, the biggest mistake anyone has made in the past 25 years has been selling the Big Four banks, unless you did it over the past year.
The Big Four are today capitalised at $347 billion, having dropped almost $150 billion from their collective peak 12 months ago.
The Weekend Australian ranks the top 150 by market capitalisation each Saturday citing 12 month highs and lows. Here is the data from Saturday's paper:
CBA: 12 month high $95.27, Friday close $70.76: current market cap: $121 billion
Westpac: 12 month high $39.85, Friday close $28.52: current market cap: $95.1 billion
NAB: 12 month high $37.75, Friday close $25.13: current market cap: $66.5 billion
ANZ: 12 month high $37.25, Friday close $22.28: current market cap: $65 billion
As things stand today, Gail Kelly and Mike Smith are the geniuses of the financial system, timing their exits to perfection. Each walked away from Westpac and ANZ respectively with about $80 million in gross salary, bonuses and equity holdings. Taxpayers have collected more than $30 million from each, which is a pretty tidy contribution as well.
There has already been a lot commentary about the bank Royal Commission and I'm particularly enjoying this recently published book by Craig Ferguson, one of the best analysts I've come across in Australia.It's called Debt, Defaults, Disinflation & Demographics: How to survive and prosper during the market meltdown of 2016-17.
If Ferguson's gloomy outlook comes to pass, bank share prices have a lot further to fall and the Royal Commission will be a most unwanted distraction during tough times for global financial markets and Australian investors.
City of Melbourne transparency update as Federal ICAC push gains momentum
The transparency and accountability push at the City of Melbourne continues apace and it was nice to get some recognition from Tony Walker, International Editor of The AFR, when he wrote the following in his Saturday column:
In Melbourne this past week the Melbourne City Council – at the urging of councillor and shareholder activist Stephen Mayne – backed the establishment of a federal independent anti-corruption commission.
Mayne should be given credit for his campaign to improve transparency in council deliberations, and for his role in seeking to encourage public debate about the need for a federal anti-corruption body.
He has got the issue on the agenda for a meeting of the municipal councils of Victoria on May 13, and from June 19-22 when some 300 local government bodies meet in Canberra and at which Turnbull and Shorten are expected.
Finally, an alarming slippage in Australia's rating on the International Corruption Index should not go un-remedied. Since 2012 Australia has dropped six places in Transparency International's ratings to 13th place from seventh – with further to fall.
This is not good enough.
At City of Melbourne, we all voted at the start of our current term to have a goal of making our operation one of the most open and transparency councils in Australia. So when is Bill Shorten and Malcolm Turnbull going to get together and declare that they both aspire to have Australia regarded as one of the least corrupt countries in the world? This tumbling corruption rating is most disappointing for Australia.
Cranking up the fight against corruption is certainly not an aspiration shared by grumpy old Gerard Henderson, if you can be bothered getting to the bottom of his latest nasty Friday rant on The Australian's website.
When it comes to accountability, remember anyone can come along on the first or third Tuesday of the month and ask a question at the start and the end of City of Melbourne committee meetings.
And check out this list of the 50-plus transparency reforms that City of Melbourne has implemented over the past 3 years.
4 Corners weighing in on campaign finance reform
I've previously been a critic (see recent Crikey story) of the ABC for failing to cover Australia's woeful campaign finance laws, so it was great to hear on the grapevine last week that 4 Corners has unleashed gun reporter Quentin McDermott to have a look at the issue for a program which talent is being told is likely to air some time in late May or early June.
Part of the challenge with this issue is the refusal of donors and the major parties to speak on camera.
Surely, the Lib-Lab duopoly won't be able to get away with refusing to offer up a talking head to Australia's premier investigative television program leading into a double dissolution election where governance and corruption are front and centre in the debate.
If anyone out there reading this wants to provide some input or offer themselves up for an interview, go here on the 4 Corners web page.
And don't miss tonight's episode which is likely to finish off Clive Palmer, although it would take a lot to save his reputation.