A string of recent news headlines in the last couple of weeks rings alarm bells, about the way the Australian Government is now utilising the free market to implement its political and economic agenda.
On 24 August 2009, the Government announced it would strip market supervision powers from the Australian Securities Exchange (ASX) and transfer the powers to a Government agency, the Australian Securities and Investment Commission (ASIC).
This follows a sequence of Big Brother policies ("The Government needs to watch you") policies. FuelWatch, FoodWacth, and "ATM Watch" (stimulus packages) and of course pushes to censor the Internet (ala China). This also follows Prime Minister Rudd's 7,000 word essay where he blamed the neo-liberals and the free market for the global financial crisis. Lets revisit one snipet:
“Neo-liberalism and the free-market fundamentalism it has produced has been revealed as little more than personal greed dressed up as an economic philosophy. And, ironically, it now falls to social democracy to prevent liberal capitalism from cannibalising itself.”September 2009 - and how "ironic" it is to see the free market bailing out the Australian Government.
On 17 Sept 2009, it was reported that the Reserve Bank of Australia (RBA) paid a record dividend to the Federal Government of $5.23 billion for the 2008/09 financial year, up from $1.4 billion in the previous year, largely from currency trading - due a severe decline in the Australian Dollar and the subsequent rebound as Chart 1 illustrates. An extra $4 bn or so to help fill in the budget black hole..
Chart 1: History of the Australian Dollar since float.
Source: ABC News - 15 September 2009Result #1 - Free market helps Government reduce its record debt.
Has the Government been involved in insider trading?
As I've mentioned, the Australian Government announced it will take market supervision powers and give it to the bureaucracy to watch the misbehaving free market. Minister Bowen said this course of action was required due to concerns of conflict of interest.
However, a couple of weeks later...
On 22 August 2009 it was reported that the Future Fund offloaded a 1/3 stake in Telstra.
On 15 September 2009, the Australian Government announced Telstra should voluntarily split into two arms if it wishes to participate in its $43 billion national broadband network.
The first question that comes to mind. Did the Future Fund conduct insider trading? Did the Australian Government give the FF a heads up? The Australian Government does have a conflict of interest to see the Future Fund increase its net worth... The more money in the Future Fund, the greater the ability the Government has to meet its future liabilities (to pay superannuation liabilities of the Public Service).
Clearly the FF and the Government knew it had to offload as many Telstra shares before it dropped this bombshell.
Result #2 - The Australian Government distrusts the free market buy stripping the ASX of its supervision powers - yet it now appears (highly plausible)
Where is the accountability? Few media outlets have been asking the obvious questions...
But wait...
Earlier this year, the Australian Government announced it wanted to establish a $4 billion commercial property fund with the Big 4 Banks. However, this didn't pass through parliament. Solution? Use the Future Fund!
On 2 September 2009, it was revealed that the FF board approved moves to aggressively bid on shopping centres in Australia and Britain to the tune of $800 million. This follows a number of listed property trusts (or REITs) which almost collapsed in the market free fall last year, including Centro Properties. This is one way the Government can try to keep the property bubble going.
All this should come as no surprise though. After all, the Future Fund board is dominated by a group of prominent bankers (Commonwealth Bank, Suncorp, Rothschild Australia, JP Morgan). Sure these executives have vast experience in the capital markets and this is why they are on the board, but this group are also friends of the banking executives whom tried to buddy up with the Rudd Government to create a $4 billion commercial property fund - they too have a conflict of interest to ensure the property bubble keeps inflating.
So it looks very plausible that Free-market fundamentalism is bailing out the Rudd Government's "social democracy". If you can't get parliament to pass your economic and political agenda, just utilise the free market to do it for you. Kick in one motion, take with the
More soon,
Scott
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