The greatest delusion.

Which will it be? According to the Prime Minister the changes to negative gearing  proposed by Labor will “be a wrecking ball”, smashing house prices and reducing the value of every Australian house. On the contrary, says the Assistant Treasurer, house prices will rise, making it even more difficult for first home buyers. It is evident that the Coalition has no idea and, instead of proposing a policy that will assist in budget repair, they’re reverting to what was successful last time, reducing the discussion to a three word slogan.

The situation is further complicated by the Property Council modeling showing 30,000 landlords in Darwin and Alice being affected. NT Director, Ruth Palmer is reported to have said changes to the rules would reduce supply, just as the market was in need of more investors. “Most people who buy an investment property are mums and dads who are trying … not to be a burden on taxpayers”, she said. Firstly, there is no evidence that restricting negative gearing to new housing will reduce supply, the market will simply change to home buyers rather than investors. Secondly, those who speculate in the housing market transfer their income tax liability disproportionately to those who spend all they earn on the necessities [including inflated rents] leaving no surplus to fund a negative geared investment, even if they wanted to.

Some mums and dads, who do not understand negative gearing, may be harmed when the inevitable decrease in capital values occurs if they have been ill advised by investment property spruikers and irresponsible accountants. Anyone who has invested long term in a principal place of residence will not need to sell their home and therefore not suffer any depreciation in value. The only ‘older’ people who will get caned are those greedy individuals who have used their super for speculative investment properties rather than creating an income stream. Falling housing prices may temporarily inconvenience a few but the benefit of making more housing affordable clearly outweighs that inconvenience. In summary, the Grattan Report [upon which the Labor policy is based] concludes that negative gearing had it’s place but now is distorting the property market and making home ownership impossible for those who need it most. The argument against negative gearing then becomes a moral rather than economic issue.

What’s wrong with negative gearing? It’s simply income tax 101, right? This is the real genius of the scam because of the way negative gearing works and its role – effectively making mum and dad investors feel comfortable about carrying loss-making properties – it has become a much discussed topic. And the vested interests that benefit most have worked hard to make sure that it stays at the front of voters minds. In all that energy and hoo-ha around negative gearing, they’ve managed to distract the punters from the real issues involved. As far as the rich and powerful are concerned, there’s no debate. The negative gearing “controversy” is nothing but orchestrated theater. Smoke and mirrors. But if you take a peep inside the magician’s box and get to understand the actual mechanics of the scam, you’ll see how Joe Public’s been taken for a ride. But to appreciate how beautiful the scam is, we need to step back and see it in context.

On a global and historical scale, the past twenty years have been one of the great bull runs of all time. House prices have effectively tripled since the late 80’s. So there has never been a better time to be a property investor… ever… in the history of Australia. All of this should have sparked a virtuous cycle of investment, increased net wealth and economic growth. But it didn’t, creating one of the great puzzles of our times. If these have been the best times to be a property investor in history, why haven’t investors done better? And by better, what is meant, why haven’t they used these conditions to expand and diversify their portfolios, develop passive lifestyle incomes and put their feet up? Household debt is through the roof.

As the rising cost of living and flat wages growth phenomenon intensifies, Australian households are likely to draw down on existing savings to fund their current lifestyle and expenditure commitments, rather than substantially cut back on existing financial commitments.

Approximately $AUD 500 billion of interest interest-only loans which were underwritten during 2013-2016, are expected to come due in the coming four years (i.e. 2018 – 2021). Given the crackdown on interest-only loans by the APRA, many households over the coming four years will be required to convert their interest-only mortgage to a principal and interest loan which will result in an increased mortgage repayment. According to RBA estimates, this conversion from interest-only to principal and interest mortgages will, on average, add $AUD 7000 in additional annual mortgage repayments. For most households without sufficient income to meet these repayment increases, households will be forced to draw down on available savings thus eroding any financial buffer which these households may currently enjoy.

What the data shows is that 95% of investors don’t get past two properties. Of those that do, most don’t do all that much better. Only 2% of investors get to four properties. And less than 1% become portfolio investors with 5 or more properties. The question is why. If these have been the best market conditions in history, why have 95% of investors not been able to get past two properties? Two-thirds of investors report an income loss on their investment properties. The average negatively geared investor loses $10,947 a year or $210.50 a week. Many lose a lot more. … and everybody’s getting screwed. Negative Gearing was sold to investors as a “professional” play. The man in the street thought he was playing with the big boys. It was a clever way to mess with the tax man, and that’s what rich people do, right?

A lot has been written over the years about why negative gearing is a dud strategy – about the way people underestimate the operating losses involved, or the way it leaves them exposed if something goes wrong – like someone losing their job, or banks increasing rates. If all your properties are bleeding cash, at some point the banks are going to stop lending to you. You hit up against a serviceability ceiling. The problem is that macro-economic factors have done a lot to disguise how dangerous negative gearing is. With interest rates on a steady downward run and rents growing at a decent clip, negatively geared properties can become positively geared in a few years. And once they become positively geared you can draw down on the equity and diversify your portfolio. But interest rates are as low as they can go and rental growth is stagnating, so investors can no longer rely on those macro-economic tail-winds going forward. If our obsession with negative gearing continues, two-thirds of property investors are going to find themselves seriously exposed.

Through one of the great property bull runs in history, 95% of investors couldn’t get past two properties. So that raises the question. If it’s not serving individual investors, who is it serving? To understand how the scam works in practice, you need to understand how negative gearing works with the Capital Gains Tax discount. Saving income tax is not really the issue. We’re just made to think it is. This stuff is made dense and boring by design. Saving tax is only a by-product of the scam, it’s really all about capital gain. If the property rises in value more than the accumulated losses then you win: if not [i.e. the negative income exceeds the increase in capital gain], you lose!  It’s difficult to penetrate, which is why it has survived so long. The 50% CGT discount was introduced by the Howard Government in 1999, and it was what allowed negative gearing to be used as a “sheltering tax haven” [in the words of Malcolm Turnbull, back when he was a back-bencher and could say what he liked.] The basic idea is that you arrange your affairs so an individual property is making a loss. You claim the loss against your income, which saves you up to 45 cents in the dollar, [for the average tax payer it’s more like 30 cents] and ideally, drops you down into a lower tax bracket.

You get the money you’ve lost back when the property appreciates in value [makes a capital gain] and you sell it. The 50% CGT discount effectively means you’re only pay tax on half of the gain. The net result? If you play your cards right, you’ve paid half as much tax on that portion of your income than you otherwise would have. Nice.

The reality is that the negative gearing trick is a lot easier to pull off if you have deep pockets. If you have the scope to arrange your affairs in the right way [e.g. use a family trust to manage income]. You can wear rental losses for a long time and you’re not going to get caught out by market declines. Deep pockets and a large portfolio of properties means you can set up the right financing arrangements, and you also have more flexibility around when you enter and exit your trades. We know that a higher portion of negative gearing losses, and negatively geared taxpayers occur at higher taxable income levels:

We know that higher income earners have much higher negative gearing losses. The average loss is about $10,000 a year. But the average loss for people earning more than a million dollars a year is over $45,000. The crux of the distribution of Capital Gains Tax discounts is that almost three-quarters of the benefits go to the top 10% of income earners. The capital gains tax discount overwhelming favors the rich, so the NG trick is a tax dodge for the rich. At last count, it cost the country over $13 billion in lost taxation revenue. And every time this comes up, the same old lines get trotted out – that negative gearing mostly used by mums and dads and “ordinary” investors – policemen and nurses and so on. But which electorate do you reckon uses negative gearing the most? Wentworth, yep, Battler Heartland.

And that’s the thing about the negative gearing debate. So long as there are myths about negative gearing we never get to the crux of the issue. Genius. At the same time, the rich elite have conned an army of mum and dad investors to defend their interests for them. If you’ve got a negatively geared property, you are deeply invested in the negative gearing regime. If negative gearing goes, all you’ve got is a property bleeding you of cash. No one wants that.

And so even though the benefits of the trick overwhelmingly go to the rich, and even though negative gearing has hamstrung a generation of investors, the most vocal defenders of the system are the ones the system is failing to serve. None of this was an accident. The ignorant voters are getting played like a fiddle. One of the amazing things about this campaign to protect the trick is the amount of misinformation produced by the PCA and the real estate industry. Here’s a couple of myths:

Negative Gearing helps bring Supply to the market

The truth is that 93% of investors buy existing properties. Only 7% buy new properties that increase the housing stock – owner-occupiers do much more heavy lifting here.

Removing Negative Gearing will cause House Prices to Fall

This is inconsistent with the first claim, but it doesn’t stop those with a vested interest trotting them out in the same breath. If the first is true, then removing negative gearing should reduce housing supply, and prices should actually rise. But the first isn’t true, and it seems negative gearing does little for supply. That means it should have little impact on prices… or rents…

Rents soared last time we removed negative gearing.

This is one of the most popular myths, and refers to the time Labor removed negative gearing between 1985-1987. The truth of it is that it was a mixed bag across the states during this time. Rents rose in Sydney and Perth, but fell in every other capital city, leaving the national market flat over all. If negative gearing had any impact on rents, it certainly wasn’t consistent from city to city, and you can’t see it here in the data. But if it wasn’t about the so called ‘landlord strike’, why did Labor reinstate it after just two years..? Remember the powerful vested interests! An analysis of the Parliamentary members interest register shows that practically every politician has negatively geared properties; the previous Member for Solomon had 14! Not dodging tax she is reputed to have said, simply providing for my retirement.

It’s only temporary, it’s the bottom of the cycle, things will pick up soon.

It might be tempting to say, so the rich are screwing the poor. That always happens. At least no one got hurt. And that’s true to an extent, as it ever was. The last decade was as good as it gets, interest rates were low, rental yields were high. That made the negative gearing strategy look a lot better than it actually is. But the good times are evaporating.  Interest rates have fallen steadily over the past decade or so, to a 50 year low. But they can’t go any further. As a small open economy we can’t go to zero like the big boys, so that means once you’ve hit rock bottom, there’s only one way rates can go: up.

Or take rents. In a low interest rate environment – the yield on assets is also low, since the first is a foundation for the second. We’re seeing that with rental yields, that have also fallen to historical lows in recent years. This is keeping downward pressure on rental growth. That leaves wages growth to do the heavy lifting in driving rents, but wages are going nowhere. And so rental growth has been falling since the GFC. In fact, in the detached housing market, rental growth has recently turned negative for the first time since records began. Rents are already falling.

This has serious implications for a negative gearing strategy. If interest rates hold, and rents go nowhere, then a negatively geared property remains negatively geared  … indefinitely. So for the time being, that means investors can’t rely on macro-economic forces turning their negatively geared duds into positively geared cash flow performers. But imagine if rates rise [in reality, the only direction they can go] or if rents fall!. That means a negatively geared property starts bleeding more cash. How long can the ‘ordinary investor – you know, the nurses and police’ support it? The rich folks will be alright. They’ll just ride it out or rearrange their affairs. But the little people will be bleeding from a wound that they can’t heal. To top it all off, what will happen when the letter comes from the bank telling Mr and Mrs Average that their interest only loan has been converted to capital plus interest and will cost an extra $7,000 per year?

It’s the story of ordinary investors being mobilized to defend a system designed by the rich to benefit the rich. But don’t jump the gun. If you’re still in the construction phase of your portfolio – if you are still acquiring assets and establishing an income stream to give you a bit of distance from the 9 to 5, then stay the hell away from negative gearing, it was not designed to serve you. In fact, it was designed to make investors nervous about their position and more easily mobilized into political action.

So when you read the REINT rant about Labor’s plan to change negative gearing [changes that will not harm existing ‘investors’] or the PCA predicting the sky will fall in, recognize it as myth, bullshit designed to protect the rich and the vested interests. God forbid the real estate salesmen will have to live on a paltry $200,000 derived from the commission extracted from the poor ignorant investors who never really understood the negative gearing trick. If you start campaigning for political change you’re going up against some powerful vested interests and change isn’t going to come easily. But send a copy of this to your local MP demanding the system change to protect the little bloke. And in the mean time, protect yourself and your family. Because negative gearing isn’t the real villain here. Ignorance is.

https://www.youtube.com/watch?v=CiaHiU6Otk8 

You are no doubt aware that many thousands of Territorians are now, or will soon will be, in severe mortgage stress. The worst effected are those ‘little’ people who were seduced by the hype and invested in a DHA house that has now decreased in value. The solution for the Territory is relatively simple. Several papers by AHURI have been produced over the last decade which have identified the problem and proposed solutions. The Territory is better placed than most of the states because of the focus on regional development and with the proceeds of the sale of TIO, the NAIF and the recently announced Cities Deal, the capital necessary to seed the rescue vehicle is available. Time is of the essence! If the NTG is unable to put together a rescue before March 2019 the exit from the Territory to places with lower rents will reach a flood, the residential property market here will fall into the abyss and turn into a panic where the only winners will be the banks and those who can afford to pick up the pieces for a song. If politicians don’t put together a rescue the very fabric of the Territory will be torn, perhaps irrevocably – send this video to your MP and beg them to save the property market.

Another BIG 4 cheats.

Michael West February 16, 2018

Following on from the revelations about the venality of the BIG 4 Banks, it appears that their partners in perfidy are another cartel of professionals, the big four accounting firms. The numbers are staggering. The Big Four accounting firms have picked up at least $2.6 billion in fees from the Australian government over the past ten years. Addressing the National Press Club, the Minister for Social Services, Christian Porter, unveiled a PwC report which put Australia’s “future lifetime welfare cost” at $4.8 trillion. No matter they confected the highest number they possibly could to scare the daylights out of people, when it came to those dastardly welfare bludgers, the die had been cast. The Murdoch press and the TV ran long and hard with welfare bludger stories. The narrative was in train. It was lifters and leaners all over again. All that was needed was the imprimatur of a Big Four accounting firm to ennoble the assault on poor people.

This is not to say welfare reform should be ignored. There is much fat in the system; and entrenched welfare dependency which passes from generation to generation. But there there is more fat elsewhere. When it comes to leaners look no further than PwC itself which has picked up $760 million over the past ten years from the Commonwealth; more than $3/4 billion in taxpayer money for doing reports – providing advice, paper shuffling. Let’s not forget Ernst & Young, which banked $525m for writing stuff, and Deloitte with its $416 m the lowest of the Big Four leaners but nonetheless a leaner par excellence.

It is KPMG though which takes first prize in the corporate welfare stakes, $934m of the taxpayer’s dollars, clipping almost $100 million a year, leaning like a test rugby pack. All four have been big donors to the major political parties. All four are the architects of global tax avoidance. All four, while sermonizing to government on tax policy, are busy advising their multinational clients how to skulk out of paying tax.
If there is a welfare system out of control, it is the corporate welfare system. As George Rozvany, the former Big Four tax lawyer and head of tax for insurance giant Allianz Australia, pondered this week, “What made PwC such an expert on welfare bludgers anyway? Maybe somebody at PwC knows somebody who has a relative on welfare, or they might pass one on the way to lunch”.

High in their splendid eyries above Clarence and Collins streets, scores of tax advisers from EY, KPMG, PwC and Deloitte have been cooking up fancy new loopholes, plotting how to beat the system. For the government has just announced a “crackdown” on gas companies rorting the Petroleum Resource Rent Tax (PRRT). This is how they “game” the system; the government changes the law and the Big Four promptly figure out how to undermine it. While they rake in billions from lavish taxpayer consultancy gigs, the Big Four simultaneously orchestrate the annual billion dollar rip-off of every taxpayer, indeed all 26 million Australians, by designing aggressive tax schemes for their multinational clients.

The big announcement was showcased grandiloquently in the press:
The Age/SMH: “Oil and gas giants hit with $6 billion tax hike”.
AFR: “PRRT crackdown to impact $US50 billion of gas projects”
The Australian: “Oil, gas firms face $6bn hit over next decade  …”

This is no “crackdown”, merely the lowering in the rate of an already generous tax deduction. And now it is the task of the Big Four to chart a fresh course of loopholes to ensure their multinational clients can keep paying little or no income tax despite billions in annual revenue. The PRRT is a failed tax. It never worked. And lowering the uplift rate – the central plank of the latest brainstorm – won’t suddenly make it work either. This is because it remains a profit-based tax and the tax giants are past-masters at eliminating profits [they funnel them offshore mostly by making big loans to themselves] so as to eliminate tax. The more complicated the scheme, the more easily it is gamed.

With the sort of revenue which would be raised by a simple royalty and penalty regime, Australia could afford to set up a sovereign wealth fund like Norway. Instead, we have been collecting $800 million in tax compared with Qatar’s $26 billion for roughly the same amount of gas. The broader context to all this is corporate welfare: mates deals, tax breaks peculiar to exploration, special exemptions, official failure to enforce tax laws such as Part IVA, a craven media and big-ticket lobbying.

If there were any doubt that Australia is giving its gas away to foreigners for free, it is worth considering as it contains this stunning quote by ACIL Allen, an industry-based consultant famed for its pro-gas industry reports:

“ACIL Allen executive director WA and NT, Mr John Nicolaou, said that even under the highest oil price considered, his company forecast that the Ichthys project would pay no Petroleum Resource Rent Tax.”

Five new offshore gas projects are coming on-line: Gorgon, Wheatstone, Ichthys, Pluto and Prelude. When these are running at full production capacity they are unlikely to pay any PRRT for many years to come – the companies themselves concede it will be 2029 – and no royalties apply. Only 13% of this new gas capacity is owned by an Australian based company, Woodside, which counts Shell as its key shareholder with 13%. Unless prices spike higher, however, these five monster projects may never pay a cent in royalties or Petroleum Resource Rent Tax (PRRT). Unless the aggressive tax structuring of the oil majors is met with equally aggressive enforcement by government, the world’s biggest oil companies – Chevron, Exxon, BP and Shell – will pay very little in income tax too. Billions each year in profit from extracting Australia’s natural resources will be funneled offshore.

How could this happen?

Chevron, the biggest player in the space and operator of Gorgon and Wheatstone LNG projects, dusted off an old report it had commissioned from ACIL Allen Consulting. This claimed its contribution to government coffers between 2009 and 2040 would be $338 billion. Although he did not reject the ACIL report as being old, managing director Nigel Hearn predicted the PRRT payments from Gorgon [now producing] and Wheatstone [to start producing soon] would be between $60 billion and $140 billion. Unless the price of oil and gas jumps sharply higher, however, the more plausible figure is zero as PRRT won’t be paid for years, and perhaps not at all. Zero to $338 billion. So how believable are the claims of the gas lobby?

In its submission, the ATO estimated the sector had amassed $238 billion in PRRT credits, offsets the companies could use for years before they started to pay significant amounts in PRRT. Further, under the PRRT as it is presently structured, exploration losses are transferable, so they can be offset against income on other projects. The $34 billion in carried-forward tax losses to offset against income tax are mostly held between the major players – Chevron, Shell, Inpex, ExxonMobil and Total – which can deploy the credits in further reducing any income tax they may owe. In defense of these companies, they were not expecting the price of oil to halve and the present specter of a global gas glut. The economics of the projects were based on higher commodity prices. As was the PRRT. According to an analysis conducted for the government, the gas giants would pay $US7 billion in PRRT payments over the life of the five emerging gas projects.

The other issue with the PRRT regime is that exploration credits are 100% transferable. The ATO has identified this as a problem because the oil companies had already banked $238 billion in PRRT tax credits. Transferability is presumably why ExxonMobil Australia pays half of what BHP pays in PRRT on gas production in the Bass Strait. Jason Ward told the committee: APPEA’s (oil and gas peak body the Australian Petroleum Production & Exploration Association) modeling shows that at an oil price of $US80 a barrel Gorgon would pay a little, but at $US60, it would pay no PRRT. Why are we giving away our resources for free to the world’s largest multinationals while the government raises taxes on working people?

At least with the LNG producers at Gladstone, the Queensland government gets a 10% royalty. Even then, Japan collects more tax on imported Australian LNG than Australia collects in PRRT on all LNG production, and the price of Australian gas is often cheaper in Japan. There are no royalties on the new offshore gas projects. At the heart of the problem is that tax or royalties based on profit rather than volume are easily gamed. Profit can be manipulated, whereas sales and production cannot. Unless the PRRT is reformed, billions in royalties and taxes may never be forthcoming.

Australia’s gas cartel comprises six players: Santos, BHP, Exxon, Origin, Arrow Energy and Shell. However, as BHP and Exxon enjoy joint marketing arrangements and Shell acquired Arrow Energy, it is really more like a cartel of four. These companies are not required by government to disclose the extent of their resources, nor the prices at which they contract to export their gas. And that is a large part of the reason why Australians, the owners of the resources, have to pay among the world’s highest prices even though this country has enormous reserves and is headed to become the world’s largest exporter.

Oil and gas leviathan Exxon Mobil has managed to pay zero tax in Australia for two years, despite making $18 billion in sales. While East Coast commercial and industrial gas customers have been getting slugged astronomical prices of $12-$15 a gigajoule for long-term supply contracts, Exxon shareholders have been pocketing record dividends.
The best known of these is Donald Trump’s Secretary of State Rex Tillerson who struck business deals with Russian President Vladimir Putin. Until last year, Tillerson was chief executive of Exxon until last year and holds $2.5 million Exxon shares which last traded at $US82.07 a share. Exxon paid a dividend in 2014, one of the years it paid no tax in Australia, of $14.9 billion.

For the third year on the trot, Shell service stations generated billions of dollars and revenue but not a cent in company tax. In fact the owners of the sunny yellow servos reported tax benefits in all three years despite total sales which may be in excess of $60 billion. It is true that petrol refining and retailing are high-volume low-margin businesses and that Shell and its peers cannot be expected to make a profit every year. Yet it is also true that the scope for transfer pricing is high as it purchases billions in product from related companies every year in Singapore and, bottom line, this enormous business appears to pay no income tax in Australia.

Shell is not alone in transactions which are designed to aggressively reduce tax. The Senate can make significant inroads if it poses the right questions on agency and the structure of executive remuneration. Shell used to be called Shell Australia. Now it is Shell in Australia. It used to publish accounts, now – like others – it quietly files only the absolute minimum of statutory disclosures with the corporate regulator. Transparency is a first step, and perhaps the easiest one, for the inquiry. Multinationals will kick and scream if any demands for more transparency are foisted upon them but increased disclosure is key to easing the scourge of multinational tax avoidance.

Nowhere is the impotence of politicians and regulators more costly than in their failure to stand up to multinational corporations dodging tax. The poachers are not merely in charge of the game park, they are running amok. The Tax Office now publishes an annual list of Australia’s 1,900 largest companies which shows their revenue, profit and tax expense. Only 600 of the entities on this list actually pay income tax at the statutory rate of 30 per cent. More than 600 of the entities on the list pay no tax at all: zero tax on $330 billion worth of income. The list is a good thing, transparency is a good thing. Yet there are serious deficiencies with this ATO data, deficiencies caused by the failure of companies to lodge proper financial statements.

Consider a couple of companies from the list and analysis of their financial statements [entities which show an income tax rate of zero over the past two years], the local offshoot of Wall Street banking giant and the nation’s biggest brewer SABMiller.  Goldman Sachs generated $634 million in annual total income. This holding company displays the usual signs of a tax dodging multinational including:

(1) ownership through Hong Kong;
(2) a subsidiary in the Cayman islands;
(3) the creation of a new holding company at the top of the group followed by a mega-million dollar return of capital;
(4) related party transactions and balances with next to no disclosure of their financial effects; and
(5) false or misleading financial statements and disclosures provide the the corporate regulator, ASIC.

Here is an organisation which helps itself, whenever it can, to government mandates, but claims nobody except itself has an interest in viewing its financials. For its part, SABMiller in Australia is six times the size of Goldman Sachs. It churns out $3.5 billion in total income selling Australian beer to Australians. One of the tools of trade of the multinational tax avoider is keeping a low profile, keeping stakeholders, including the Tax Office, in the dark while maintaining the pretense that everything is legal. The financial statements of the holding companies of both Goldman Sachs and SABMiller in Australia are frankly useless. While claiming to follow the accounting standards, they conceal the true state of the financial affairs of the group.

These “special purpose” accounts are a favored device of the Big Four accounting firms. Dozens of companies which formerly lodged proper “general purpose” financial statements, quietly switched to the inadequate special purpose accounting regime in recent years. Goldman Sachs and SABMiller, and their auditor PwC, take the implausible view that the financial statements of a holding company which controls billions of dollars in assets is unaccountable to the public for the activities of the group, including its subsidiaries. Both holding companies – and bear in mind eBay, and a host of other multinationals do the same – have deliberately chosen not to file audited consolidated financial statements with ASIC. The decision not to consolidate means there is no audit or assurance of accounting balances which might otherwise be relied upon by the Tax Office in its enforcement activities.

In filing special purpose accounts, the directors of these holding companies are claiming that nobody other than their masters in the United States and the UK are entitled to access audited financial information. It is a hollow claim but one also ordained by the Big Four accounting firms, EY, Deloitte, KPMG and PwC. PWC, the auditor of SABMiller Australia [as well as Goldman], opines that “our [2016 audit] report is intended solely for the members of SABMIller Australia and should not be distributed to or used by parties other than SABMIller Australia and the members”.

If this is so, why does Australian law require that the financial report and audit report be made available for public consumption on ASIC’s database? Can PwC not be relied upon to conduct a statutory audit? “Its all legal,” is the catch-cry. Yet Australia’s company law put a stop to non-consolidation by holding companies in the early 1990s following the corporate crash of Adelaide Steamships. Nonetheless, the accounting firms have sneakily brought back the non-consolidation ruse for their billion-dollar multinational clients.

So it is now up to the government to change the law to make it clear – no loopholes – that Australian holding companies of multinationals with billions in assets or income must prepare and lodge audited consolidated financial statements. Section 297 of the Corporations Act requires that financial statements give a true and fair view. SABMiller Australia reported income of $0.0001 billion in its statutory accounts for 2015 but $3.5 billion to the Tax Office. The difference is largely attributable to non-consolidation of subsidiaries in the financial statements lodged with ASIC. ASIC could rule on this today, enforce the present laws by insisting on proper financial reporting. Or if amendments were required, legislation would be a simple process. Its only impediment is political courage in the face of powerful vested interests striving to conceal their true financial state of affairs.

Michael West. May 27, 2018 |

The biggest taxpayer in Australia is Commonwealth Bank, which showered the national coffers with an humongous $9.3 billion over three years. Between them, the Big Four banks recorded $31 billion in tax payable. These are not the “best” taxpayers. That prize goes to Platinum Asset Management, followed by the ASX and Magellan, however the banks are the biggest taxpayers, thanks to the sheer size of their income. It is a perverse truth, perhaps unpalatable for many, that the profits arising from the systemic corruption by the banks and AMP on display at the Royal Commission, has delivered a boost to the budget. It is also ironic that, despite noisy calls by the business lobby for a cut in the tax rate from 30 per cent to 20 per cent, none of the banks actually pays the full statutory rate of 30 per cent anyway. Nonetheless, at least as far as funding public services via their income tax goes, the banks have undeniably, in the parlance of footy commentary, “Done good”.

The question should therefore be asked, why should taxpayers present them with the gift of a 16 per cent cut in the tax rate when they are so fabulously profitable, protected by sovereign guarantee and so often engaged in criminal behavior? Arguably, Wesfarmers and Woolworths – although ranking below the banks and the two biggest mining companies are better taxpayers. If you look at their profit margins of 5.2 per cent and 5.5 per cent respectively and then look at the profitability of the banks, whose margins are roughly five times fatter, it is clear that the supermarket duo is in a far tougher environment in terms of logistics, costs and competition. There is a huge difference between making 5c and 27c for every dollar of revenue. The supermarkets are by far the two biggest companies in terms of total income.

An element of “social license to operate” also shines through in these rankings. You see it in the good-tax-paying by the banks and by the two top Australian miners but also in the tobacco companies, Philip Morris and BAT which – if state excises and license fees were included –  would rank near the top. In any case, there is a stark behavioral contrast between the companies on these rankings and the tax dodgers chart where the typical approach to paying tax is “off-shoring profits and on-shoring costs”. The disparities  are also glaring where we find domestic oil and gas player Woodside amongst the top taxpayers whereas, thanks to their massive loans to related parties offshore, US oil majors Exxon and Chevron pay no tax whatsoever.  Although BHP and Rio pay $14 billion between them over the three years,  they are perennially on the hunt for avoidance schemes.

The #1 on the tax dodgers list, Glencore, has been investigated for its Singapore “marketing hubs” – offshore entities designed to buy commodities on the cheap from Australia before jacking the price up for the final buyers. Conspicuously absent from the top taxpayers chart is Australia’s biggest brewer SAB Miller. Apparently SAB can’t make a profit, and therefore pay any tax, even though it sells reservoirs of beer to Australians.

The Senate Economics References Committee recently released the third and final report of its 3½ year inquiry into corporate tax avoidance, Much heat, little light so far. While the Committee might have been hoping to enliven community support and marshal bipartisan political will behind a legislative plan of action, its final recommendations are fairly anodyne.

There are two substantive recommendations:

• that the worldwide gearing ratio should be the only method for determining whether a company is thinly capitalized. and,
• an independent review of transfer pricing rules.

The report stated that:

“the current transfer pricing regime does not serve Australia’s interests well … it allows multinationals to price gouge Australian consumers and send the vast majority of profits offshore while only paying relatively small amounts of corporate income tax to Australian authorities”.

Much of the rest of the report is driven by the idea that disclosure, rather than substantive reform, will be sufficient to address tax compliance. Hence many recommendations are directed to insisting that more tax-related information be made public:

• the system by which the ATO publicly discloses corporate tax information each year should be expanded to include private companies and reduce the reporting threshold from $200m to $100m. This recommendation would undo the effect of amendments deliberately made by the current Government in late 2015;
• a public register should be established which records the ultimate ownership of companies, trusts and other structures.  This is already Government policy –  Treasury released a Consultation Paper in February 2017 – and so presumably will happen once the Government solves the practical difficulties about how to implement it;
• that all companies and trusts above an undetermined size should be required to lodge general purpose financial statements with ASIC;
• that extracts from Country-by-Country reports be made publicly available, free of charge. The EU is currently looking at a similar proposal.
• the voluntary tax transparency code administered by the Board of Taxation should be made mandatory for all corporations of sufficient size operating in Australia; and
• the ATO include details in its Annual Report on the number and value of any settlements of tax disputes exceeding $50m.

There remains much to do. While the report elaborates nicely on the obfuscation of the Big Pharma before the Inquiry, and sheds more light generally on the ploys of avoidance, no new anti-avoidance measures are recommended. There is obviously a political element to this, namely that the major parties are loath to “up the ante” on tax policy before the federal election. Labor has a stronger policy than the Coalition. It at least is calling for the “thin cap” threshold to be lowered to the debt-to-equity level of the offshore parent. The elephant in the room is a recognition of the role of the “Big Four”, that is Ernst & Young, PwC, KPMG and Deloitte, in orchestrating tax avoidance globally. The Big Four may reasonably argue they act within the law, but so does Mossack Fonseca. All five structure aggressive schemes for their clients through tax havens. The difference is that Mossack Fonseca is smaller and does not pontificate to governments on tax policy.

What is to be done?

With acknowledgement to Vladimir Ilyich Ulyanov who wrote a pamphlet with the same title, and who used the ideas propounded in it to change the world.

The financial services industry is being rocked by the Royal Commission into its behaviour and practices. The Commission has published in its interim report, many concerning practices across wealth advice, insurance and banking – ranging from carelessness to outright fraud. Australian market regulators have been bruised too. Despite increasing compliance burdens and regulatory changes over the years industry practices remain poor, and they have been criticised for not pursuing tougher actions when firms have clearly breached their compliance obligations and duty of care to customers. Public confidence in the financial services industry has been shattered.

As far back as 2010, a whistleblower raised allegations of misconduct by financial advisers employed by CFPL, a subsidiary of CBA. The allegations included that employees were advising clients to invest in high risk but profit-generating products that were not appropriate for them, switching products without the relevant client’s permission and forging clients’ signatures on documents. As a result, when the GFC occurred, thousands of clients of CFPL [the financial planning subsidiary of CBA], many of whom were nearing retirement or had already retired, lost millions of dollars.

It later became apparent that the misconduct extended beyond the couple of advisers named and CBA implemented a second compensation program and ASIC accepted an enforceable undertaking that reviewed the advice given to clients by an additional 16 advisers. Three additional CFPL advisers and six advisers from Financial Wisdom [another CBA advice arm] were subsequently identified as also having provided inappropriate advice and CBA paid compensation to those clients. Australian media reported misconduct by financial planners at CFPL, a systematic cover up by management, and inadequate offers of compensation to customers. CBA commenced the Open Advice Review Program offering a total of $37.6 million in compensation to customers. ASIC estimated the total loss suffered by all investors who borrowed from various banks to invest through Storm to be about $832 million.

Similar commitments were made after the Comminsure scandal in early 2016 and again in 2017 in relation to the AUSTRAC investigation into money laundering through CBA ATMs. That this conduct occurred in all of the major entities suggests it cannot be explained as ‘a few bad apples’ in an attempt to distance the entity from responsibility. It ignores the root causes of conduct, which often lie with the systems, processes and culture cultivated by an entity. It should have been identified and stopped by the regulators. And it wasn’t just ASIC that didn’t do it’s job properly. NAB said that to provide details of misconduct that had occurred over the preceding five years it would have to look at, among other things;

• Compliance Statements it had made under the Code of Banking Practice [which recorded 1,914 breaches of the Code],
• 300 events reported as significant breaches to ASIC or APRA,
• 370 Financial Ombudsman determinations,
• 375 determinations by the Credit and Investments Ombudsman,
• 246 significant litigation matters and five different databases recording customer complaints.

Taken together, the course of events and the explanations proffered can lead only to the conclusion that neither CBA nor NAB could readily identify how, or to what extent, the entity as a whole was failing to comply with the law. And if that is right, neither the senior management nor the board of the entity could be given any single coherent picture of the nature or extent of failures of compliance; they could be given only a disjointed series of bits of information framed by reference to particular events. Information presented in that way points too easily towards explaining what has happened as ‘a small number of people choosing to behave unethically’ or as the product of ‘people, policies and processes that existed with a pocket of poor culture in that area at that time’.

Clients seldom complained about being charged for nothing. They did not complain because the fees they paid were charged invisibly. Their levels of financial literacy precluded them from understanding how they were being ripped off.

• Whether the conduct is said to have been moved by ‘greed’, ‘avarice’, or ‘the pursuit of profit’, it is conduct that ignored the most basic standards of honesty.
• The licensees did nothing to stop it and they took the proceeds.
• The conduct of licensees and advisers was inexcusable and no-one has since tried to excuse it.
• No-one has been subjected to any formal public process of investigation, finding and punishment for this conduct. Only at the last minute before the hearings began, did enforceable undertakings yield public, and very limited. formal acknowledgment from entities that ASIC had ‘concerns’ about their conduct.

New civil actions.

The big four have been under greater regulatory pressure since the Coleman Inquiry in late 2016 called for a tribunal to be established to help victims of bank misconduct. The $6.2 billion bank levy raised in the 2017 Federal Budget — a tax related to budget repair, rather than bank misconduct — cut earnings by around 3-to-4 per cent. But the bills are adding up.

• CBA’s $700 million AML/CTF fine
• NAB, ANZ and CBA have been forced by ASIC to pay $120 million over bank bill interest rate rigging
• Westpac has agreed to refund 200,000 customers over failing to pass on discounts
• Last month NAB flagged a $100 million provision to cover “regulatory compliance investigations”

ASIC has started fresh proceedings against NAB, which is just the first step in what the regulator said were, “broad-ranging and significant investigations currently underway into fee-for-no-service failures in the financial services industry”.  An estimate of $835 million of charges in the 2018 financial year has been announced. However, it is thought that the Royal Commission may lead to further action and another $500 million of charges has been factored in for 2020.  Banks should have little difficulty footing the bill. The $2.4 billion in compliance costs, fines and customer remediation represents only about 2.5 per cent of the expected more than $90 billion in cash profits they are expected to churn out in the next three years.

Virtually all of the misconduct examined by the royal commission stems from the banks being conglomerates of multiple financial services businesses and so the law, as it stands, is inadequate. The Banking Act needs to be reversed to a simpler time when commercial banks were separated from investment banking, and unable to trade in securities and derivatives. If commercial banks were allowed only to take deposits and make loans [up to a prescribed limit], and kept separated from other financial services and speculation, the financial system would be much simpler, and therefore the regulatory regime could be made less complex.

The SMSF sector – the next ‘river of gold’.

Since the official introduction of SMSFs in 1999, they have grown from a niche product to a significant component of the superannuation sector. Today, about 600,000 SMSFs hold assets worth nearly $700 billion, which is 30% of funds held in superannuation. The decision to set up an SMSF is one of the most significant steps a consumer can take in relation to their retirement savings. At the very least, consumers need to understand the risks, time, resources and compliance obligations associated with an SMSF before deciding to move their superannuation savings out of a prudentially regulated environment. It is therefore essential that, before making the decision to set up an SMSF, consumers have access to good quality, personal advice that is not conflicted.

The major deficiency of a SMSF is lack of statutory compensation. When advising a retail client to transfer an existing superannuation account balance from a superannuation fund regulated by the Australian Prudential Regulation Authority (APRA) to an SMSF, the client should be made aware that SMSFs are not subject to the same government protections such as statutory compensation in the event of theft or fraud, and that the client will not be eligible for compensation under superannuation laws if the SMSF suffers loss as a result of theft or fraud in the underlying investment asset.

In recent years, there has also been a growing interest in using SMSFs as a vehicle for investing in property. Regulators need to reduce the use of self-managed superannuation funds to invest in property after a review uncovered high levels of detrimental advice being provided to DIY trustees. ASIC reviewed 250 randomly selected client files and found 90 per cent failed to comply with the “best interests” test and other legal obligations. In a report SMSFs: Improving the quality of advice , ASIC raised particular concerns about people being encouraged to set up an SMSF with the narrow purpose of investing in property.  The review revealed non-compliance ranging from poor record-keeping and process failures to failures likely to result in significant financial detriment In 10 per cent of files reviewed, the client was likely to be significantly worse off in retirement due to the advice. “Our concerns were based on the balance size of the SMSF, the age of members, and the level of gearing within the fund, or a combination of these factors,” the report said. In 19 per cent of cases, clients were at an increased risk of financial detriment due to a lack of diversification. The results were flagged by ASIC deputy chairman Peter Kell when he appeared before the banking royal commission suggesting the standard of advice relating to SMSFs had to improve. ASIC noted the findings of a recent Productivity Commission report, which found SMSFs with balances of under $1 million delivered, on average, lower returns than big funds.

“The strategy of gearing through an SMSF to invest in property, which is being actively promoted by ‘property one-stop shops’, is high risk,” and likely to result in financial detriment to SMSF members.”

These one-stop shops typically involve real estate agents, developers, mortgage brokers, accountants and financial advisers. ASIC has taken action against Park Trent Properties Group and Anne Street Partners, and warned of more surveillance and enforcement activity. “We are particularly concerned about the operation of one-stop shops because of conflicts of interest and, together with the Australian Tax Office, we will have an increased focus on property one-stop shops in the future,” the report said. “This will include building and sharing data and intelligence, and ASIC taking enforcement action when we see unscrupulous behavior.” The Future of Financial Advice regime sought to overcome conflicts by requiring financial planners to act in the best interests of their clients. Experts say there is nothing inherently wrong with property investment, but it should be part of a wider, well considered strategy involving multiple asset classes to spread risk.

The banking royal commission heard how AMP planners advised several clients to set up SMSFs to buy investment properties through Property Saint without telling the wealth manager or his clients they owned 60 per cent of the business. The Financial System Inquiry headed by David Murray recommended a ban on limited recourse borrowing but the Turnbull government declined to adopt the proposal. ASIC said it would be following up with regulatory action, especially where consumers had suffered but as yet, consumers remain exposed to the same corruption as has been exposed in the Royal Commission.

High quality governance is integral to a system where members rely on others to make
decisions on their behalf, especially in an environment of compulsory savings and muted
competition. Unlike shareholders in listed companies, super fund members have no voting rights and little if any influence over board appointments. In this context, the regulation of governance standards matters more than in other investments. Over the past 30 years the governance of super funds has improved greatly due to a tightening of legislative requirements, increasing powers given to regulators, and the introduction of prudential and reporting standards targeted at governance. Yet governance practices lag contemporary best practice. The evidence suggests that some boards are either not complying with all of their regulatory obligations, or are complying in a ‘tick and flick’ sense without striving to protect and promote members’ best interests.

Best practice governance would require that the trustee boards of all super funds have a good mix of knowledge, skills and experience, and are free from potential conflicts of interest. Feedback from the SUPERANNUATION: EFFICIENCY AND COMPETITIVENESS survey suggests not all funds employ satisfactory practices for appointing adequately skilled and qualified directors. One in five CEOs disagreed that their funds seek independent review of trustee capabilities to ensure they are optimal, and only three in five strongly agreed that their boards examine and improve their own effectiveness on a regular basis.

Further, some retail fund directors, although considered ‘independent’, are on a number of related-party boards, which raises questions about their independence and fuels perceptions of conflicts of interest. Indeed, one recent study estimated that 78 per cent of directors on retail fund trustee boards are affiliated with related parties. APRA identified board composition as an ongoing concern in its recent review of the governance of super funds. Evidence of unrealised economies of scale, persistent underperformance and an entrenched large number of small funds — about half of all APRA-regulated funds have less than $1 billion in assets — raises the question of why there have not been more fund mergers, given the likely benefits for members. Membership of an underperforming fund imposes large costs resulting in a full-time worker in the median bottom-quartile fund can expect to retire with a balance less than half the size than if they were in the median top-quartile fund.

Little is known about mergers that have been broached but not completed. Yet anecdotes
abound of mergers not proceeding for reasons disparate to members’ interests. At times there appears to be an absence of strategic conduct regulation. Some barriers to mergers are still evident, despite recent changes in regulatory guidance  with some directors reluctant to countenance mergers that would see them losing their jobs.  Further, good disclosure of fund practices and decisions is essential, especially where funds are outsourcing to related-party providers. APRA has voiced concerns that some funds may not be achieving value for money in their outsourcing arrangements.

Destroy the existing system and start again.

[Edited extract from Online Opinion by Nicholas Gruen. ]

Bank of England governor Mervyn King describes the special status of the public–private partnership that is banking, where commercial banks resell basic banking services they access exclusively from the government-provided central bank, that, as lender of last resort, effectively guarantees their liquidity. Oh, and if that isn’t enough, governments first guarantee them, as the Rudd government did over one panicked weekend in 2008, or, failing that, simply hand over money to keep the show on the road, a diabolically bad set-up as the worst “of all the alternatives.” We’ve duct-taped it back together after the GFC: a little more capital adequacy here, tighter prudential standards there. Global debt is now $164 trillion, or 225 per cent of global gross domestic product, 12 per cent higher than its last peak in 2009. The banking system as it stands, both nationally and internationally, remains structurally unstable, just as it was before the crisis, amplifies the economic cycle, just as it did before the crisis, and will blow up again, drawing taxpayers back into its maw.

Let’s start with the scandal of the royal commission itself. A Productivity Commission inquiry costs three or four million dollars – a figure that might double or quintuple if we include the costs of outside participants in the inquiry. The PC actually has discovery powers not unlike a royal commission’s, though it’s never used them and it wouldn’t be the appropriate specialist body for searching out and pursuing wrongdoing. But it provides an indicative benchmark on the costs of a good look around. So too does the recent inquiry into the public service, which at around $10 million seems excessive …… but is similar. ….. the royal commission is budgeted to cost government $57.5 million. Each of the major banks is spending around that on their favoured big law firm. Then there’s external PR, lobbying, day-to-day “issues management,” crisis and/or strategic issues management, and so on. Add to this substantial in-house expenditure on all these items. Smaller firms would be spending less, but there are many more of them – in banking, funds management and financial advice. So half a billion dollars seems like a safe underestimate of the total cost of this exercise. Much of it goes on massively inflated salaries to top lawyers – think ten to fifteen thousand dollars a day. But more goes on sheer inefficiency. The legal system has virtually no regard for directing lawyers’ efforts to where they’re most valuable. So the commission sends out trawling requests for all records of all misconduct. This has at least uncovered lots of bad things, though many had already been reported to authorities and then kept quiet.

The professions are just one genteel instance of Adam Smith’s famous line, “People of the same trade seldom meet… even for merriment and diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices.”

If it were to be taken seriously, there’d be so much more to successful reform than simple deregulation of barriers to entry. At both macro and micro levels, professions typically exert a huge influence on the demand for their services. The lawyers representing each side in a case effectively dominate legal procedure and will gold plate each stage of the process to an extraordinary degree. And highlighting the financial aspects of reforming the professions is only the first step. Making them truly responsive to our needs is a bigger prize. Imagine a market in which you might be able to find medicos, lawyers, investment advisers and managers in the way you can assess which restaurant suits you on TripAdvisor. Throw in consumer advocates, found in the same way, who help you navigate the maze of professional services to best meet your needs.

Around the Western world “information policy” is mostly stuck in early prototype. Thus, governments issue crude edicts with little care for their effectiveness. In financial planning, for instance, mandated product disclosure statements for investments cost the economy billions annually, but go virtually unread. Meanwhile, as the scandals about financial “advice” surge from time to time, new regulation is developed. But it always resembles a PR makeover rather than serious policy action. Some corrupt limbs are jettisoned so the rotten body – the corrupt business model – can live on. Both investment “advisers” and mortgage brokers are now subject to extensive and costly regulation, including the usual mandatory disclosure of commission payments. But it’s all built around the existing model and its fundamental deception – that they’re “advisers.” Regulation now requires practitioners to provide formal written “statement of advice” to their clients – generally adapted from master scripts spewed forth from software marketed to the industry as “sales technology.” Salespeople still play their well-rehearsed role as their clients’ fiduciaries [though most still lack any tertiary qualification] but now as government-approved professionals.

National Financial Literacy Strategy.

If an ordinary consumer wants to find out more about financial planning the government sponsored website “Money Smart” has a list of hundreds of companies that have attempted ‘scams’. Remarkably, none of the banks currently under investigation by the Royal Commission appear on the list. Evidence suggests that financial literacy has not improved since the global financial crisis, and may have gotten worse. A survey of adult financial literacy in Australia found that in 2014 the number of people who could
actually recognise an investment was “too good to be true” – for example a financial asset promising to pay a return much higher than the going return on similar assets and for no greater risk – had actually declined, to 50% from 53% just three years earlier. The survey also found that those who recognised that good investments [something with relatively low risk] may fluctuate in value fell to 67% from 74%. The Productivity Commission found that 14% of the adult population had relatively low literacy skills. This is defined as being able to, at best, locate basic information from simple texts but being unable to evaluate truth claims or arguments. The report also found 22% of the population had low numeracy skills, meaning that they can count, add and subtract and do other basic arithmetic. But they cannot understand statistical ideas, mathematical formula or analyse data. In other words, a significant proportion of the Australian adult population are not equipped to understand the effect of an interest rate increase on their loan repayments, or understand a loan document that includes an interest rate increase after an initial period. Fixing the problem of financial illiteracy cannot wait until people are in the throes of negotiating home loans and credit cards. And it should definitely take place before Australians resort to pay day loans.

The whole approach to financial literacy, soon to be renamed ‘financial capability’ [for fear that some may be offended by the term ‘illiterate’], is a very sad joke. I attempted to obtain some help in Darwin and the only organisation that responded was the Brotherhood of St Lawrence and they directed me to a scheme run by the ANZ.

The goals are not well defined: they are not SMART, they all fit within the parameters set by the Australian Bankers Association and are generally useless. Fighting for curriculum space for financial literacy is a political exercise which governments must play hard. For example, by attaching serious funding to the achievement of financial literacy indicators at the school level, and training and certification for teachers.

The strategy must be removed from the auspices of ASIC  and offered by tender to an organisation skilled in the delivery of complex education products to illiterate and low income groups.

The Banking Act must expressly forbid vertical integration, creating the conflicts of interest between providing efficient financial services and exploiting customers to maximise profits for shareholders. The banks cannot be trusted to “manage” these conflicts of interest, and relying on more rigorous law enforcement is unrealistic.

In view of the gross breaches of the law the Commonwealth Bank should have it’s banking license revoked and every Board member fined severely and disqualified. The conduct of the bank in ‘overlooking’ 53,000 breaches [that in effect assisted drug dealers and terrorists] and not reported to AUSTRAC simply adds to the record of dereliction of fidicuary duty bordering on malfeasance. In light of the security implications, the fines [of a paltry $700 million] are manifestly inadequate and should be appealed. If APRA and ASIC do not punish the CBA then the whole system will know it’s acceptable to simply cut a cheque from petty cash and continue their illegal activities.

Using the excuse of financial stability APRA has allowed the banks to engage in some illegal practices, that maximise their profits at the expense of their customers. Ultimately this has become a threat to financial stability, because in maintaining a near monopoly [by buying up the smaller and regional banks] on mortgage lending, the banks have contributed to a massive housing bubble and encouraged a massive increase in debt which is a threat to the financial system. APRA and ASIC must be more vigilant and take action rather than simply seeking undertakings from those corporations that have broken the law.

 

#thanksforlettingmeserve

Corporate spin doctors have jumped on the Government band wagon to offer special rewards to veteran diggers, exploiting the opportunity to appear ‘more’ Australian, e.g. AGL.

As one of Australia’s oldest companies, Anzac Day is an important part of AGL’s history. On [insert appropriate date here] we will acknowledge all Australians who have served and died in all wars, conflicts and peacekeeping operations.

It’s interesting that in the last 5-10 years, when all the ANZACs have vanished from
the scene, the mythmakers have moved in to try and turn ANZAC day into something else, from a memorial and wake to some sort of celebration of nation where politicians, products, services  and personalities dominate. The few ANZACs I heard speak, usually dwelt on futility, horror and the emotional bonds of mateship. Not much about Australian identity, or defence of FREEDOM, there. Gallipoli, even as it occurred, was becoming part of an ideological battle. It was first turned from horror into myth and then the struggle began over the uses of the myth.

The frenzy will reach a peak on Sunday when all the countries involved in WW1 remember the fallen. However, some veterans aren’t happy.

The …… bigger problem is of putting defence personnel on an impossibly tall pedestal while ignoring those who provide service to the community more continually, and are exposed to more trauma on a much more regular basis than the average Australian Defence Force member. What about police and emergency services who have to attend car crashes, or fish bodies out of rivers? Or paramedics who attend countless overdoses, suicide attempts and related traumatic events? Or staff in emergency departments in hospitals who have to make life-saving decisions every day? Add in aged care and disability workers, or special-needs teachers who have to plug away anonymously every day, and the idea of a community thanking military or ex-military people for their service leaves some very uneasy.

Retired ADF members have a Department of Veteran’s Affairs to look after them [sometimes not very well] and, if necessary,  their family because of their service, a national public holiday that remembers their service, along with Armistice Day where they can wear a poppy to commemorate the war dead. There are advocacy groups such as the RSL, Legacy and others to lobby governments for service-related causes, the military gets a separate allocation of medals and awards in the Australia Day and Queen’s Birthday honours’ lists, and the Invictus Games has been created to further raise awareness of the cost of military service. 

All of these are worthwhile groups and activities. But they point to the fact that regardless of what people may think or the media might portray, the military and ex-military communities are pretty well catered for on the whole. So rather than sanctifying military service, the media and politicians should devote more of their energies to recognising those who work on behalf of the greater good in often traumatic, and always difficult circumstances at home. 

Veterans should consider being somewhat counter-cultural. Rather than accepting acknowledgment from random strangers with no idea of what they did, perhaps highlight what a unique honour it was to do things in pursuit of the national interest, building on the work of generations of service personnel who went before. In a world where humility is in increasingly short supply, a better hashtag for veterans groups might actually be #thanksforlettingmeserve.

As the Centenary of the First World War Armistice approaches, DVA is preparing a program of commemoration to mark 100 years since the end of the First World War. It will be the last significant event of the Centenary of Anzac 2014 –18. They will pay tribute to the 416,809 Australians who served in the First World War. They will honour the 62,000 men who were killed and the 156,000 who were wounded, gassed or taken prisoner. They will also honour the more than 1.5 million service men and women who have defended our country in all conflicts, wars and peacekeeping operations over the past century, and the more than 102,000 who sacrificed their lives for our country.

Yes, all well and good, but will anyone tell the WHOLE story?

A conflict of interest.

[Largely copied from Territory Times Facebook page.]

Integrity: it is said integrity is doing the right thing even when no one is watching. It’s a question of morality. The most obvious test of of integrity in the Territory media is when there is an election. Territory journalists just don’t get the concept of conflict of interest or perceived conflict of interest. Their profession and Territory politics has an incestuous culture and it is very difficult for the community to differentiate the difference between journalism and politics because the lines are so blurred. The Territory has a very small population which means we interact with people from all walks of life. This is one of the great things about the Territory. Due to this unique aspect of Territory life its imperative people in professions, where a high level of integrity and honestly should be mandatory, have a high level of situational awareness with whom they associate. For example: Imagine how difficult it is for a Police Officer in the Territory to attend a BBQ if they are forbidden to associate with certain types of people.

Territory journalists don’t have this culture, in fact their culture is to revel in the blurring of the lines. They use the blurred lines for their own personal gain. They use the blurred lines to dumb down Territorians. A conflict of interest perceived or otherwise should be declared by a Territory journalist when reporting, particularly during elections. For example: Garry Shipway the NT News journalist worked with Mick Palmer when Garry was an employee of the CLP and Katie Wolfe from Mix 104.9 worked with Kon Vatskalis when Katie was an employee of the Labor party. Neither Garry or Katie declare this perceived conflict of interest when reporting or commenting on the two Darwin Mayoral candidates.

Christopher Walsh, who was sacked after working for the NT News since 2014, is suing Nationwide News, a News Corp Australia subsidiary that publishes the Darwin-based paper, and its editor, Matt Williams, for unfair dismissal. According to court documents, Walsh claims Williams and the general manager of the NT News, Greg Thomson, came to an arrangement with the head of the chief minister’s department, Jodie Ryan, under which Ryan would blind-copy them into all media queries from Walsh to the Northern Territory government and public service. This was “because Ms Ryan did not like the exposure from articles written by [Walsh] in which she was held accountable to the public”, the reporter alleges in the claim. The arrangement was allegedly agreed during a discussion about government advertising in the NT News and was attended by News Corp Australia’s chief operating officer. Walsh complained to the paper’s head of news that Williams’s action was unlawful, an infringement of freedom of the press, undermined democracy, threatened Walsh’s integrity and undermined him as a political reporter. Walsh has accused News of firing him for complaining about the deal. He is suing for loss and damages, and is seeking reinstatement in his former role with back pay and penalties. A spokeswoman for News Corp Australia said the company and the NT News “strongly refute the claims made by Mr Walsh who was dismissed for misconduct in October 2017”. Walsh has published two books as a political reporter, including ‘Crocs in the Cabinet’ about the Adam Giles-led NT government.

Walsh may have got the boot for the article he wrote about the Speaker in July 2017. However, this is the good old Northern Territory where for those who have been here for a long time accept corruption is a way of life, and those who have been here for a short time don’t care.

The Territory has massive social and financial issues that need to be investigated and reported. The Territory has a dysfunctional government and Darwin City has a dysfunctional council. Yet the NT News chooses to ignore such stories. If the NT News was fair dinkum they would be calling for a clean out of Darwin Council. The Mayor and the Alderman have had 5 years to get things on track but the council has gone backwards. And nothing has changed with the ‘election’ [that term is used advisedly] of the new mayor and aldermen.

The NT News and the old guard of the CLP and ALP can’t break free of the old cycle of squandering millions upon millions of tax payers and rate payer’s money on useless advertising in the NT News. The editorial staff and reporters are compromised by their addiction to this money and will only support those who promise to maintain or increase the supply of your money to the NT News. Case in point: The Gunner Labor Government is spending more taxpayers money in the NT News than the CLP ever did in the last term. Also, ratepayers may notice that the ‘new’ Darwin City Council  has increased their advertising in the NT News.

The small gene pool of journalists in the Territory has a culture of complacency, laziness and unprofessionalism. Within their culture they also believe they are in control and are the king/queen makers. So any new journalist who arrives in the Territory, jumps into the shallow gene pool and is quickly coated in the same slime. It is baffling and frustrating that we don’t have one journalist in the Territory who has the guts to report on real issues truthfully. For example, if a journalist wanted to win an award they actually deserve they don’t have to go far to lift the lid on corruption in the Territory.  Most of them choose not to.

As an observation the gene pool in the Territory for journalists, politicians and the legal fraternity are approximately the same size and depth [small and shallow] yet they control every aspect of our lives. They also socialise together in the same pack. Always tackling the big issues, guess that’s what happens with a very shallow gene pool.