Bungling Kevin Rudd creates a financial crisis where there was none before

There were no problems with Australia's banks. They were and are still making profits. Sub-prime loans have not been a significant problem in Australia. So drama-queen Kevin Rudd had to puff up his own importance by "guaranteeing" bank deposits (which were already protected by long-standing "lender of last resort" facilities anyway). But he didn't guarantee other deposit-takers such as cash management trusts. Cash management trusts are widely used in Australia by those who have significant funds as they are the only way to get some interest on your money. Bank interest is negligible. So Rudd created the impression that only the banks were safe and caused a huge run on all the "left-out" institutions -- which now have had to suspend withdrawals -- with dire consequences for many, as seen below

SELF-FUNDED retiree Greg Russell is the human face of the Rudd government's mishandling of its response to the global financial meltdown: he now has $5 in his bank account. Because he put his money into a cash management account, Mr Russell's assets are frozen, along with those of his wife Debbie and the savings accounts of his two children. And, because he is in the process of selling his business, he still owes the tax man a big bill for his quarterly Business Activity Statement (BAS).



When the East Coast Mortgage Company on NSW's North Coast froze Mr Russell's assets on Tuesday, along with a raft of other secondary lenders, the results were shocking. He's had to take out a $50,000 loan to cover his BAS commitments and to maintain his, and his family's, living costs. East Coast Mortgage is just one of a series of institutions which have had to freeze customer deposits because the federal Government's guarantee of savers' deposits only applies to major banks. This has seen a flood of money pour out of smaller institutions, like East Coast Mortgage, which didn't get government backing.

East Coast isn't alone. Big non-bank players, such as AXA (formerly National Mutual), are among 13 major groups which have been forced to freeze withdrawals by depositors.

Treasurer Wayne Swan told people like Mr Russell, 59, that they should go to Government welfare agency Centrelink for income support if they found themselves in trouble. Mr Russell says the Treasurer doesn't know what he's talking about. "It's a complete joke,'' Mr Russell said. ``Imagine how the staff at Centrelink are going to cope with my circumstances.

"Wayne Swan is clutching at straws. There's pride involved here, as well. "Self-funded retirees don't want to be lining up at Centrelink. He's run out of ideas. They don't know what's going on. "I sold my business and have always supported local, well-run mortgage funds. "I have invested a large portion of the proceeds from the sale of my business into these organisations. I'm speaking, not only on behalf of myself, but for a large number of investors throughout Australia.

"The Government made a `rush of blood' decision to guarantee banks, credit unions and building societies and exclude mortgage funds. We now find there are $14 billion of frozen funds and how are investors going to survive throughout the next three, six and 12 months?'' As a result of the Government decision, Mr Russell has been left with $5 in his personal account and $165 in his business account at the NAB.

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A small personal note from a quiet Sunday morning

I gather that for most employed people the financial crisis has had negligible effects. I am however one of the investor class. As a retired man, I live almost entirely on the proceeds of my stockmarket investments. And about half of those investments are in Australian bank stocks. So I am in big trouble, right?

Not at all. One reason why I invested heavily in banks was that Australian banks had big meltdowns at the time of the Hawke/Keating deregulation. Most of the State banks went broke and even Westpac tottered a bit. And that all happened because of incautious lending to Alan Bond and his ilk. So I figured that they had learned their lesson and were not likely to risk any recurrence of that. And I was right. The Australian banks are in good shape. Their share prices are way down but as long as the dividends keep coming, why should I worry about that? The new high is always higher than the old high so the share prices will bounce back in due course.

And September/October is dividend time so I have had a good cash inflow recently. I like to keep a fair bit of cash on hand to fund the various gifts and donations that I give out from time to time. My own needs are minimal. I mostly give direct to the intended beneficiary. Giving to charitable organizations usually just supports a herd of parasites. Most of what you give to Big Charity pays for "administration". The only exceptions I make are that I do give to the Salvation Army and to Legacy. The fact that I have some army background is probably sufficient explanation for the latter and it explains a lot of the former too. Many old diggers will tell you how good the Sallies have been in wartime. And I do have a soft spot for real Christians.

Even so, I recently found that I did have about $10,000 that I had no obvious use for so I BOUGHT SOME MORE SHARES. Why everybody is not doing so rather escapes me. Prices are very rarely as low as they are at the moment. It is a great time to buy cheap.

And my remaining cash is mostly in banks. Though I do have a few thousand in a cash management trust.

All of which, in my view, shows one benefit of managing your own money rather than giving it to someone else to manage. I can ride out the share price downturn because I don't need to sell anything. But superannuation funds and the like are always having to sell in order to fulfill their obligations to people who have reached retiring age. So they are selling at a huge loss, which drags down the funds available to everybody on their books. Not smart!

So my recommendation is just buy blue-chip stocks in your own name as a way of saving for retirement.






Idle Queensland Health building costs $1.5m as hospitals suffer

And the guy principally responsible for that seems unrepentant

QUEENSLAND Health has wasted almost $1.5 million of taxpayers' money while renting a Brisbane building that has stood empty for almost a year. The inner-city offices, earmarked to house IT staff trained to "optimise efficiency", will remain vacant until at least early 2009. As the state's cash-strapped hospitals cry out for staff and equipment, the wasted rent money could have paid for:

More than 1400 hospital bed nights;

The annual salaries of 20 nurses;

More than 1600 chemotherapy procedures;

672 eye operations, or

3118 renal dialysis procedures.

After The Sunday Mail revealed the chronic waste to Health Minister Stephen Robertson, he last night ordered a full investigation. A shocked Mr Robertson said he would make sure all Queensland Health buildings were audited to ensure even more vital funds were not being squandered.

Queensland Health began a seven-year lease on the 3200sq m Spring Hill property, tucked away in the dead end of Gloucester St, from December 1 last year. It was previously rented to Telstra. The annual rent on the building is $1,472,000. Property owner Draconi Pty Ltd will receive more than $10.3 million in rent for the term of the lease.

The health department has blamed the delay in occupying the building on problems with a contractor hired to refurbish the offices, needing an upgrade to accommodate improved technology. The deal was terminated in April after the contractor allegedly did not meet State Government requirements. The department said it was considering "options of recourse" to recoup funds and had employed a second contractor. It declined to reveal how much had been paid to the first contractor, saying specific financial information would not be available until tomorrow. A department spokesman said Queensland Health was unaware of any other leased buildings in a similar situation.

Queensland Health chief information officer, Dr Richard Ashby, said the building would house 250 Information Directorate staff "to optimise efficiency and drive key Queensland Health ICT projects, including e-health". "The cost of the premises is $460 per square metre, which has been deemed fair and reasonable under State Government guidelines," Dr Ashby said in a statement. "The building was a shell when the lease commenced, and accordingly the fit-out has been a major undertaking." As well as the contractor problem, there had been "power, access and other technical issues", he said.

Deputy LNP leader and Opposition health spokesman Mark McArdle said that in these tough economic times, it did not make sense to pay high rent for a building just so the Bligh Government could display its logo. "This empty building is a colossal waste of money that should be going toward making sick people well and reducing elective surgery waiting lists," he said. "This is another example of the Government's poor planning and bad management. "Queenslanders would be horrified to learn that this much money was going down the drain, while sick people are languishing on trolleys in overcrowded emergency department corridors waiting for a hospital bed."

Mr McArdle said the $1,472,000 per year rent could help pay for additional improvements to the Caboolture Hospital Emergency Department (estimated to cost $700,000) or deliver special-care-nursery cots at Ipswich and Toowoomba Hospitals ($470,000).

Mr Robertson said his department was "trying to get to the bottom of what is going on", but he could guarantee that the money spent on the building had not been diverted from other health service areas. He said he was angry about the handling of the matter. "I have asked for an urgent briefing and a more detailed investigation."

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More climate correctness

First "global warming" became "climate change". Now we have ....

Government experts say the word "drought" is making farmers feel bad and want people to use the word "dryness" instead. Farmers also needed to accept that drier weather was here to stay, said a report by the Government's hand-picked Drought Policy Review Expert Social Panel.

"Words like drought ... have negative connotations for farm families," the report said. "There needs to be a new national approach to living with dryness, as we prefer to call it, rather than dealing with drought."

The report criticised the Government's $1 billion annual drought program, under which drought-stricken farmers are paid Exceptional Circumstances (EC) funding. "For all the assistance provided, farm families, rural businesses and communities currently living with dryness in rural Australia do not feel or perceive they are measurably better off," the report said. Farming families in drought-declared areas can get an EC payment of up to $21,000 a year. The report quoted some farmers as saying EC payments rewarded unproductive and irresponsible farmers and were of no help to good operators.

Panel chairman Peter Kenny said dryness was tough for farmers. "We wonder why people have got so much pressure on them out there and they are blowing their brains out and there is a lot of them doing that," he said. "It is clear that drought is having an impact on the wellbeing of farming families and rural communities."

Agriculture Minister Tony Burke said the report showed rural families were not communicating with each other about their hardships. The Government had not got the policy right on tackling drought, he said. "Significant funds have gone to try and help rural communities, but you can't have these sorts of social outcomes and say that we've got it right," he said.

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