Rudd's policy as safe as money in the bank

KEVIN Rudd and his team of economic ministers have done nothing but compound the economic problems facing Australians since the global fiscal crisis began.

Make no mistake, not one of their imprudent acts has done anything but worsen the situation for the Australian economy. Though Treasury Secretary Ken Henry claims to have been in discussions with Rudd and others in the Government's economic enclave since the beginning of the year and formulating options to deal with the situation, evidence for this claim is lacking. Clearly not one of the Rudd Government's actions to date has been based on an intelligent assessment of the approaches taken by other governments overseas. None even show that the Rudd Government is aware of the experiences of other nations facing the same crisis. Instead, Rudd, Treasurer Wayne Swan, his deputy Chris Bowen and the head of Treasury have behaved irresponsibly, creating a unique crisis that now affects some 250,000 to 300,000 mortgage investors. The tragedy is that this was all predictable. Blind Freddy could have foreseen the consequences of providing the world's most open guarantee for banks. There is written evidence that Reserve Bank governor Glenn Stephens warned the Government of the likelihood of a flight of capital from unguaranteed funds to those covered by the ill-considered blanket guaranteed institutions before it was issued. Rudd and his team have acted like children in the cockpit of a 747. Faced with a number of big levers, they know that each does something but they don't know precisely what. In a matter of days, the Australian dollar rose in value to nearly match the value of the American dollar which, based on the enormous primary resources that exist within Australia, is probably fairly accurate. But, following the erratic, unintelligent approach taken by the Rudd Government, the Aussie dollar had dropped yesterday to about US60c yesterday. Of course, that's not the only problem the Rudd Government has created. Its ham-fisted handling of the open-ended bank guarantee ensured those who had placed their money in mortgage funds would be unable to access their own money. No one else can take credit for this development. And, as Opposition Leader Malcolm Turnbull has pointed out, there was absolutely no need to provide an open-ended guarantee for bank funds. It was not as if queues were forming in Martin Place, or outside any banks, as occurred when some institutions began to look shaky a month ago in the UK. There was no panic in Australia until Rudd introduced it with his Big Bang Big Bank announcement, which captured the attention of the public and gave them cause to consider how safe their money was in unguaranteed institutions. Grabbing at yet another lever, Rudd announced on Tuesday that mortgage funds which complied with the nation's banking regulations would be protected by the same guarantees as the banks. But this, one hesitates to call it a solution, is so impractical as to be farcical. To comply with the banking regulations, the mortgage funds would have to raise, as an industry, billions of dollars of capital to turn themselves into banks. In the current lending market, the likelihood of billions being made available for this or almost any other purpose is absolutely laughable. That's not the least of the hurdles that rendered this scheme inoperable on conception. For the mortgage funds to turn themselves into banks would require a totally different level of compliance, including the appointment of boards of directors instead of teams of fund managers, among other major changes. In short, the end of mortgage funds as they now exist. Was there any consultation with the industry before the plan was announced? No, according to insiders. If the head of Treasury was party to this proposal, he needs to take his head out of the hairy-nosed wombat's hole where he might prefer it to be and explain why there is a need to transform the finance sector and where did such a proposal come from, let alone give a hint as to where the necessary money would possibly come from. There might be no magic bullet for the global crisis but there is a fairly simple solution to the current Rudd-created crisis _ and that is to lower the guarantee limit to somewhere around the $100,000 figure Turnbull initially suggested. This might mean the consumption of a little humble pie but it would be better for the nation than the lashings of Coogee Bay Surprise that Rudd & Co are currently serving.