Finance Finance News It’s confession time and there’s much for the government to confess

It’s confession time and there’s much for the government to confess

The Treasury team under Joe Hockey that tried to wind back financial advice reforms.
The Treasury team under Joe Hockey that tried to wind back financial advice reforms. Photo: AAP
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If confession is good for the soul, key government figures should be mightily uplifted by the admissions now pouring out of them, however obliquely.

There’s no requirement for politicians to tell the truth, no Australian Consumer and Competition Commission vetting for misleading conduct or outright lies. Given that the only apparent point of politics is to grab the keys to the Lodge, it’s no surprise then that they mislead and lie.

In quick order, Treasurer Scott Morrison has confessed the Coalition has been, er, “fibbing” for years about the NDIS being unfunded. Prime Minister Malcolm Turnbull has confessed he was wrong to vehemently oppose setting up the banking royal commission. Finance Minister Mathias Cormann has confessed the government was wrong to prolong the egregious behaviour detailed by the royal commission and to try to limit the RC. The Financial Services Minister, Kelly O’Dwyer, has confessed she was wrong to – oh, no, she hasn’t. She must have missed the memo.

Of course, none of the above would quite admit he was confessing his sins so openly, but that’s what the past few days have boiled down to.

Mr Morrison’s sudden discovery of spare billions pouring into the Treasury amounts to an admission that the Coalition had concocted its story of being saddled with momentous unfunded liabilities. The miraculous tax loaves and fishes, scrapping the need for the Medicare levy increase and enabling income tax cuts promises for the election, were always there – as long as Treasury believed Australia’s economic growth would return to trend and wages rise.

Governments of both stripes have been predicting for the past eight budgets that everything was about to be hunky dory and net debt would turn down any day now. A bit of good fortune with commodity prices and income tax gains from jobs growth means it could be eighth time lucky.

ScoMo’s election budget magic pudding comes while Australia’s GDP growth remains subpar. To be able to afford the company and income tax cuts while returning to surplus, the pud relies on growth rising to an above-trend 3+ per cent next year and staying there for a while.

While it’s a risk betting your budget on an international trade environment under threat from a spoilt toddler in the White House, there’s plenty of leeway in the government’s odd self-imposed revenue ceiling anyway. But that’s another story.

Meanwhile it’s the same growth assumption the previous government was relying on – thus all the fibs about the “unfunded” NDIS. That has been a political construct swept away now by political imperatives. As a confession, it’s rather like Peta Credlin admitting the Coalition’s anti-carbon tax campaign was all about the Lodge, not economics and certainly not climate change.

The government’s political narrative from here to the election is simple: “We cut taxes, Labor increases them.” The Medicare levy increase was an embarrassment that had to go.

Then there is Mr Turnbull’s begrudging confession that opposing the royal commission was “politically” wrong. It was more than politically wrong, it was politically stupid. Ditto Senator Cormann’s belated assurance the commission can have more time than the 12 months the government was dragged into allotting.

Senator Cormann’s position looks all the worse when it’s recalled how he fought long and hard to specifically allow the worst financial planner behaviour to continue.

An immediate priority for the Coalition when it won the 2013 election was to unwind Labor’s Future of Financial Advice (FOFA) legislation that substantially addressed the worst of the financial planning rorting.

The then-assistant treasurer Arthur Sinodinos had carriage of the FOFA fight until he had to step down while his relationship with the Obeid family’s Australian Water Holdings was investigated by the ICAC. When Senator Sinodinos took his Senate seat in 2011, The Australian’s Christian Kerr wrote with perhaps unwitting prescience that:

“The role he [Sinodinos] is leaving at the National Australia Bank makes him an invaluable link to the top end of town when business has its doubts over the Coalition’s policy integrity.”

I wrote during the FOFA war that perhaps he was more an invaluable link for the top end of town.

The job of neutering FOFA subsequently fell to Senator Cormann. As detailed by Fairfax’s Peter Martin, he proceeded to run interference for the banks. Unable to kill FOFA in the Senate, Senator Cormann and the witless ASIC managed to at least delay its introduction for two years.

As The New Daily‘s Money Editor James Fernyhough has noted, three of the four Coalition assistant-treasurers since 2013 – Senator Sinodinos, Josh Frydenberg and now Ms O’Dwyer – came out of bank jobs into politics. The fourth, Senator Cormann, also was in financial services as an executive with a major private health insurance company.

And MrTurnbull ran the Australian operation of investment bank Goldman Sachs.

Perhaps there’s another confession due: That it’s been a serious mistake to see the financial services industry’s issues through the prism of their former employers.

If there’s another explanation for the government’s FOFA and royal commission stance, I haven’t seen it.

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