THE Rudd Government and regulator, the Australian Securities and Investments Commission were ill equipped to handle with global financial crisis, according to economist and former Liberal Party leader Dr John Hewson.
Dr Hewson was part of a panel discussion at the annual Australian Direct Property Investment Association, where he candidly said the Federal Government and ASIC did not have the experience or dynamism to adequately deal with the current financial crisis.
He believes that many of the policies and practices were ineffective in the face of complex financial transactions.
Dr Hewson said much of the regulation was useless and demonstrated a lack of understanding of financial transactions.
“For example, many of the regulations around capital adequacy could be easily circumvented with instruments such as credit default swaps. Even though they recognised that this was happening, they did not recognise the significance of it.
“You simply don’t have the people within the organisation to ask the right questions or get the right information,” he added.
ADPIA president Linden Toll said members have reported that ASIC is looking to increase regulation on fund managers, but many felt that what had been developed at this point was unable to adequately deal with the issues they now faced.
Toll also said many members were concerned about banks withdrawing funding from the commercial property sector.
“There is no doubt that many feel that government intervention is required to balance the hole left when the government guarantee on bank deposits was introduced.
“Serious consideration needed to be given by the Government to the issue of how the Government Guarantee would affect tax payers in the future,” he added.
“What we have seen is vast numbers of those nearing retirement move their assets into cash. Unfortunately, for many, this was done when markets were down around 50%.
“With these funds now sitting in cash – earning around 2% – these Australians will never have a chance to rebuild their investment to the level they once were. This may well become a very serious issue for all Australians as large numbers of retirees turn to government provided pension rather than living off their superannuation as they had planned,” Toll continued.
Dr Hewson also said he was ‘staggered’ that the Rudd government did not impose requirements on banks to increase lending when it developed the guarantee on bank deposits.
Instead many in the property industry are reporting banks tightening lending whilst at the same time, foreign lenders withdraw from Australia.
Australian Property Journal
