EDITORIAL FRIDAY 24.10.08.
I think it’s safe to say that the Global Financial Crisis has been in the headlines for so long now that rather than a crisis it is starting to look like the normal state of affairs. It’s been more than a year since the share market started wobbling, and the sequence of crash, rally, crash again, has been repeated so often now that it’s hardly news. Warnings of economic doom are now so commonplace that they have become more like a weather report than a news flash. Unfortunately, for the thousands of Australians whose savings have just been frozen in a host of investment funds, the crisis is still a crisis.
It is clear now that the Government made a mistake by not including a cap on the bank deposit guarantee, but despite the recriminations it would have been an even bigger mistake not to have the guarantee at all. Nevertheless, it is vitally important that stability is also restored now to the investment houses which provide annuities for self funded retirees, as well as the foreign banks who provide finance to business. Wayne Swan’s advice to retirees to visit Centrelink is really not very helpful, and if that’s the best the Government can do then they deserve the criticism currently being heaped upon them by the opposition.
At the same time, the Government cannot afford another mistake, and rushing to provide another blanket guarantee would be exactly that. Instead, a way needs to be found to guarantee the holdings of Mum and Dad investors, the annuities of retirees, and at the same time the viability of the financial institutions which deliver those services. This might involve introducing a cap after all, grandfathering existing investments, imposing a premium for any guarantee above a certain level, or a combination of these measures.
Those are matters for the Government to resolve, and quickly, rather than wasting time engaging in a debate with the opposition over what is already old news. Given the importance of private superannuation and other investments in Australia’s retirement incomes policy, it is vital that these vehicles are given some stability. The Global Financial Crisis might be old news now, but it continues to unfold with new challenges confronting the Government daily.
The only thing that is certain, is that the uncertainty will continue for a while yet.