UPDATED 23 October
So the latest saga has come and almost gone. The Coalition, which began with a much-vaunted promise of bipartisanship, has now reverted to form. It has accused the Government of bungling the most important financial move it has made, the Bank Deposit Guarantee; Malcolm Turnbull and Julie Bishop have accused Kevin Rudd and Wayne Swan of misleading the House, if not outright lying; and Turnbull has impugned Ken Henry, Secretary of the Treasury, seemingly all on the basis of an article in the 21 October issue of The Australian that asserted that the Reserve Bank Governor had disagreed with the Bank Deposit Guarantee arrangements.
In Senate Estimates today, Henry was subject to grilling by heavy-hitting Liberal senators Abetz, Coonan and Brandis, who seemed unwilling to accept his assurance that the Reserve Bank had no reservations about the Guarantee, and had not advocated a cap, despite their and the media’s insistence that it had. Their questioning was inquisitorial and unrelenting. Henry’s cool demolition of the Coalition’s attack was both comprehensive and deflating
Undeterred, the Coalition, like a dog with a bone, which they thought was appetisingly smelly, in Question Time today persisted with its attack which was designed not to improve the legislation in question, but to harass and embarrass Rudd, his ministers and the Government. Some questions might be considered legitimate, seeking to ascertain the unintended effects of the measure, but they were asked with an indignation that bespeaks their seething anger at their bone being taken away, just when they thought they were in for a feast.
Now that their accusations have been shown to be without foundation, has there been any semblance of an apology? No. Indeed it seems to have heightened the anger and the aggression with which questions have been asked.
What about the papers. Today, 22 October, The Australian continued yesterday’s theme that the RBA warned against the savings guarantee and that it was distorting the market, with “The Government has back flipped on its free unlimited bank deposit guarantee after it emerged Reserve Bank governor Glenn Stevens gave advice to impose a fee for large sums to avoid distortions to the financial markets.” Dennis Shanahan begins his piece “The Rudd Government has made its first big mistake under pressure”, delighting in pointing to the folly of the Government’s actions. Of course if Dennis says it’s a big mistake, it MUST be BIG. He reassures the Government though with “For the Government, the situation is embarrassing but not irretrievable, and a hard lesson in the need to ensure haste doesn't impair proper decision-making.” We hope Dennis they really learn that hard lesson, so you don’t have to reprimand them again.
So truth is of little concern, it’s perception that counts. The Opposition and the media rely on this truism. [more]
The facts are that the Government acted quickly, it would say ‘decisively’, on Sunday 12 October when banks and stock markets were closed, to guarantee bank deposits in institutions overseen by APRA, so that when they opened the next day there would not be a flight of deposits to overseas banks that were guaranteed. That was an essential move. The Government, Treasury, RBA and the regulators knew that some adjustment would be needed as the consequences, some unexpected, flowed from the decision. They are now managing that adjustment as they listen to the many players in this complicated market. They will not satisfy all the special pleaders. The market will adjust to the new reality, and institutions whose financial products that are not overseen by APRA will make modifications to their products that will make them competitive again, and for large deposits institutions will pay a premium to have the guarantee applied to them. The world will go on, and in the process, according to the Government, all but 0.5% of deposits will be covered by the guarantee.
The Coalition has not offered a firm alternative; its original proposal to limit the guarantee to $100,000 would, according to the Government, leave 40% of deposits unguaranteed. It has been satisfied with trying to score political points, although Bishop’s attempts to do so under the persistent questioning of Tony Jones on Lateline last night made her performance among the most pathetic we have seen from her. Not once did she answer Jones’ repeated questions: “Where is your evidence?” and “What is your source?”
Today Turnbull was subdued, as well he should have been, Bishop was as feisty but ineffectual as ever, and repeated points of order from the Opposition showed how little progress they were making. Overall many exhibited unbridled anger.
This has been a sorry episode. If Coalition members believe that the average punter is remotely interested in their machinations, or if they are that it will shift the persistently unfavourable polls in their direction, they will be disappointed.
So much for hand-on-heart bipartisanship.
UPDATED 23 October
On the last night's 7.30 Report, Malcolm Turnbull outperformed Julie Bishop and is now the clear winner in the most-pathetic-interview stakes. He has made obfuscation an art form, and whenever challenged by the interviewer, using as loud a voice as possible, employs what has become his standard rejoinder: “But X (in this case Kerry O’Brien), you don’t understand ...” Naturally Turnbull’s understanding would be superior to that of a mere interviewer. He used the same tactic on Chris Ulhmann on the ABC's AM this morning. There were quite a few things Chris didn’t understand. One thing both he and Kerry O’Brien don’t understand is what the Coalition’s policy on the deposit guarantee actually is; another is how bipartisan support has evaporated so quickly, and why.
This morning The Australian is scrambling to counter Ken Henry’s adamant statement in Senate Estimates yesterday “The story on the front page of yesterday's Australian newspaper was wrong! That is, w-r-o-n-g exclamation mark.” Dennis Shanahan, not noted for his comedic skill, has countered with “Sorry Dr Henry, but our story was right, r-i-g-h-t.”. If you want to read the lamest of defences it’s here. Its lead story Revealed: secret RBA advice was more meaty and balanced, and the editorial Deposit cap to help stability, while lending its support to the paper’s story, took a more level-headed view of the Government’s actions, with statements such as “As Wayne Swan said yesterday, the most important point about the federal Government's decision to guarantee bank deposits was that the move helped restore confidence in an industry battered by the global financial crisis.” and “Given the magnitude of the Rudd Government's response to the international crisis, adjustments to its initial decisions are nothing to be embarrassed about. Overall, the Government has managed the crisis well.” concluding “In this instance, no one has lost an eye and there has been time to correct the original decision, which The Australian supports. But by refusing to own its mistakes, a relatively inexperienced government is squandering the opportunity to learn.” But on the way it does take a swipe at Ken Henry, I suppose because the paper took a hit from him.
But aside from the skirmishing about who said what to whom and when, this episode demonstrates the corrosive effect of media intrusion into these matters, where the key issue is CONFIDENCE. Has The Australian contemplated what effect its articles have had on market confidence, has it reflected on how the Coalition has used its writings to score political points and change its position from bipartisanship to aggressive opposition? How much has the confidence of the market been affected over the last few days by the Opposition’s utterances about Government ‘bungling’, and its assertion of ‘policy on the run’? On the face of it, it looks as if scoring political points has taken priority over responsible language that would have the effect of imbuing confidence in a market overwhelmed by fear.
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