THE DISTILLERY: Hancock tardiness

A jotter reveals lax reporting standards from Gina Rinehart, while another highlights that just a fraction of bank deposits are guaranteed by the federal government.

Bank bashing might be a semi-professional sport, but the federal deposits guarantee enjoys contrasting popularity because it keeps our savings safe and helps deliver a financial system that’s more stable. Mortgage-holder or not, we can all appreciate this. But does anyone realise that the guarantee runs out after a mere $20 billion? That’s the revelation that The Australian’s Richard Gluyas offers this morning. While there are contingency plans, all this is found in the fine print. Also in this morning’s Distillery, The Sydney Morning Herald’s Ross Gittins puts the case for higher taxes, Gina Rinehart’s Hancock Prospecting proves to be a tardy financial reporter and there’s praise aplenty for outgoing Sensis boss Bruce Akhurst.

Firstly though, it’s The Australian’s Richard Gluyas who says far too few people in the financial industry, be they depositors or bankers, know that the federal government’s deposits guarantee that’s driven the savings of so many Australians, has a limit of $20 billion per bank failure.

"It might seem like a lot, but it pales when compared to about $200 billion in eligible deposits for each major bank. In the highly unlikely event of a major bank failure, any payments under the Financial Claims Scheme would be recovered through the liquidation of the bank. An industry levy would be applied if there's a shortfall from a realisation of assets. But the fact remains that the initial payout is effectively capped by legislation at $20 billion, albeit with provision for the government to go back to the parliament for more. There is no mention of any of this in Swan's press release."

The Sydney Morning Herald’s Ross Gittins puts a compelling case to increase taxes and thoroughly debunks all the typical talking points about Australia’s wasteful spending and compromised international competitiveness. He’s quoting a new essay from University of Canberra public finance lecturer Ian McAuley.

"Contrary to some perceptions, he writes, Australia already has a small public sector and a low level of public debt. ‘Successive governments have kept taxes and deficits down by keeping expenditures down. As a result Australia has one of the smallest public sectors of all developed countries.’ Over the seven years to 2008, taxes paid in Australia to all levels of government averaged 29 per cent of gross domestic product, compared with a developed country average of 35 per cent. Only Japan and the United States pay less than us – 27 per cent – and they run perpetual budget deficits. If you judge it by total government spending, our spending averages 34 per cent of GDP, compared with the developed country average of 40 per cent. (In our case, the gap between taxation and spending is covered by non-tax revenue.)”

The Age’s Michael West finds some rather lax reporting standards from the house of Australia’s richest person.

"Gina Rinehart’s billion-dollar resources company, Hancock Prospecting, has failed to file its annual accounts for the past two years, a failure which the corporate regulator was at a loss to explain last night. John Hancock, one of the three Rinehart children in dispute with Mrs Rinehart over the family trust which controls almost a quarter of Hancock Prospecting Pty Ltd, confirmed to BusinessDay yesterday that he had been unable to obtain financial statements either for the trust or the company. Under the disclosure requirements of the Corporations Act, a company is required to lodge annual accounts within four months of the end of the financial year.”

The Australian Financial Review’s Chanticleer columnist Tony Boyd says the departure of Sensis boss Bruce Akhurst, a talented executive, marks an end of an era at Telstra and perhaps a lesson for professionals operating in a company/sector that’s structurally changing.

"Akhurst’s departure is symbolic of a dramatic change in emphasis at the company under chief executive David Thodey, who is moving Telstra from a heavy reliance on engineers and lawyers to the world of digital delivery and high-level customer service. That is not to say that Akhurst is a dinosaur who does not understand the digital world. On the contrary, he has a great depth of knowledge about all the sectors which are important to the transformation of Telstra. But after 15 years at Telstra he was in the wrong place at the wrong time. As the head of a print business which was shifting to an online business model, Akhurst could not run fast enough to keep up with the pace of change.”

The Sydney Morning Herald’s Elizabeth Knight asks who would be likely to take the top job at Sensis given that such a title would amount to a hospital pass. In other company news, the SMH’s Malcolm Maiden suggests that one of the things David Gonski could do when he takes the helm at the Future Fund from outgoing chairman David Murray is a review of the fund’s strategy. The Australian’s John Durie says many observers misinterpret the purpose of the Future Fund as a nation building entity.

The Sydney Morning Herald’s Elizabeth Sexton gives a rundown on what happened inside the Rinehart family to bring this feud to the public eye, while Fairfax colleague Ian McIlwraith has a sympathetic word for PaperlinX chairman Harry Boon. The Australian’s Barry Fitzgerald touches base with Altona Mining, while Bryan Frith takes a look at the rights issue by Real Estate Capital Partners USA Property Trust and the complaints made about it to the Takeovers Panel. The Australian’s Tim Boreham examines Calzada, Thor Mining and Macquarie Group in his Criterion column.

And finally, the Herald Sun’s Terry McCrann registers his displeasure with Malcolm Turnbull’s recent article in Business Spectator, emphasising the benefits of sovereign wealth funds.


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