ASIC: Coalition cuts gutted our capabilities

By Leith van Onselen

You’ve gotta love the Turnbull Government’s response to Labor’s call for a Royal Commission on the banks as noted by Houses and Holes this morning with Treasurer Scott Morrison scrambling to boost ASIC’s powers and resources in a bid to head-off a Royal Commission. And yet according to ASIC chief Greg Medcraft, it is precisely the Coalition’s cuts to ASIC in the 2014 Federal Budget that rendered the regulator impotent. From The Guardian:

The head of the Australian Securities and Investments Commission has admitted budget cuts enacted by the Coalition have compromised the corporate watchdog’s ability to engage in proactive investigations.

Asic suffered a cut of $120m over four years in the 2014 federal budget.

The chairman of the commission, Greg Medcraft, said the cuts had “absolutely” resulted in less surveillance.

“Seventy per cent of our resources are devoted to surveillance and enforcement and when you have cuts in the budget what happens is actually you reduce the level of proactive surveillance because proactive surveillance is discretionary,” he told ABC Radio. “What it means is that we see people less than we may have in a proactive setting”…

“That is a matter for government and it’s a matter of determining what level of resilience you want in the financial system,” he said. “If we look at the area where there have been problems – the area of responsible lending, financial advice, of life insurance – there’s three for a start where clearly we could do more surveillance.”

So the Coalition cut ASIC’s funding, thereby reducing its capabilities, and is now scrambling to bolster it back up to counter Labor’s call for a banking Royal Commission. Maybe, just maybe, it shouldn’t have cut the regulator’s resources in the first place?

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Comments

  1. Can anyone tell me what the LNP do besides destroying, cutting and gutting things ?

    NBN, CSIRO, Gonski, Health, Education, carbon abatement, NDIS, infrastructure, tax, surveillance – literally everything.

    They offer absolutely nothing, no plans, no policies, zero – all they do is cut and slash.

    Just a disgrace, an absolute disgrace of a political party.

    • “Can anyone tell me what the LNP do besides…”

      I would think it is silly to believe that a bat, a club and a bludgeon would make any different bruises in spite of their differences.

    • You are absolutely correct David. Labor under Hawke and Keating dragged them kicking and screaming into the new century. They are a backward looking bunch of swamp rats. What grates me is that people truly believe this notion that the LNP are great economic managers – it is a fallacy, and even some otherwise intelligent people i know believe it. I guess being intelligence is no substitute for just putting the microscope on what the LNP have done over the course of their political life – which is not much. Almost every significant piece of social or economic reform has come from Labor. The LNP exist as caretakers. They are there to step in when the electorate has recognised labor has descended into corruption and self indulgence.

      • JC,

        Intelligence has nothing to do with it, otherwise all physicists etc would be atheists. Psychology is the reason.

  2. That seems a bit spurious from Greg Medcraft, cuts 2 years ago stopped ASIC being proactive, what happened to the last 10 years?

      • Locus of ControlMEMBER

        I don’t blame ASIC as much as I blame deficiencies in the Corporations Act that they’re responsible for administering. When you have a spare 12 hours have a browse through it – the Corporations Act is woefully ill-equipped to address the shenanigans and rorts perpetrated by big business and big finance. Who is to blame for that? Well that would be our legislators, so…

      • Rent Seeking Missile

        You make a good point Locus.

        But bear in mind that the organisation in closest contact with the Companies Act, and therefore most able to see its deficiencies and make recommendations to remove or ameliorate them, is ASIC.

        I don’t see that happening.

        Again: the problem is ASIC itself.

      • Locus of ControlMEMBER

        I believe ASIC are well aware of shortcomings in the Corporations Act. They can recommend all the changes they like to the Corporations Act, but they can’t institute them. Only politicians can make changes to the law. Who funds the big 2 political parties? Big financiers and big business. As long as that’s the status quo the necessary changes wont be made to the Corporations Act. This leaves ASIC in the unenviable position of being the kid with a toy gun in a battlefield full of howtizers and machine guns. Of course they’re going to be useless – they can’t be anything else.

      • Rent Seeking Missile

        Is that belief of yours based on any first-hand experience with ASIC staff?

        I say with confidence, borne of experience: ASIC is the problem.

      • Have to agree with the Rent Seeking Missile on this one, ASIC is stocked with losers! Any person who has dealt with them regularly will understand this.

      • Agreed. ASIC have been asleep at the wheel for years. To conveniently now complain of budget cuts is just butt covering. Medcraft is only interested in his own reputation.

    • I’ve said it before and I’ll say it again: ASIC are bloody useless. They are a bunch of nobodies going nowhere.

    • @RSM above is right.

      The problem is they are set up to fail so the political class can deflect anger at corporate malfeasance (often undertaken by their close associates) to a bureaucratic entity without significant political cost. Few are ever fired from said entity so staff take the pain in exchange for a steady job.

      Staffing an effective financial regulatory agency would require skill sets honed by a very few, already highly paid, private sector and likely pre-compromised persons. Financial crime is not amenable to being beaten with a heavy police baton and requires specialised skill sets and inside knowledge to figure out exactly what is going on. It is often intimately linked to organised crime or complex illegal activity. An effective entity would need to somehow capture these skill sets and set up incentives for them to work in the public interest. This would need to be augmented by an effective and iron clad protective whistle-blowing regime and a mechanism to facilitate entities dobbing in competitors who are gaining competitive advantage by breaking the rules or working at the very edge of legality rather than forcing them to join in on the activity for fear of losing market share as is currently the case in a race to the bottom of bad corporate behavior. Can’t see any of that happening.

      An alternative might be to link regulators with intelligence agencies and basically give them the right to go fishing (and learning) via intrusive means. For the reasons outlined in the first sentence this is unlikely to get up and is likely a step in a dangerous direction in my opinion anyway – even though it would work.

  3. When has ASIC ever done anything anyway – under Liberal or Labour?

    Don’t want to be unkind UE, but this seems like partisan propaganda????

    Seriously – where is the evidence?

    • Ronin8317MEMBER

      That is being unfair!! ASIC did a lot of things.

      * They tried to nail Jodie Rich for the One Tel collapse. They failed.
      * They tried to persecute Eddie Grove for running a scam with ABC Learning. They failed.
      * They tried to persecute Fortescue for ‘misleading’ the market over a Chinese deal. They failed.

      The list of court failures goes on..

      They had a win against Centro and James Hardie, but both are hollow victories. In Jame Hardie’s case, they have to pay like 30K each? (reduced to 25K later on, and all paid by insurance anyway).

  4. moderate mouse

    Why wasn’t he banging on about it when it happened? The guy is a joke. He’s just trying to avoid an RC so that it doesn’t uncover how captured ASIC are. If it means more money to fritter away in pretend investigations, all the better. Fox…blah blah…hen house…blah blah…. This country is a joke.

    • Spot on. He’s had years to complain about cunding futs but didn’t. So what’s the agenda now? Arse covering, supporting the Great Princes of the LNP etc etc…

    • adelaide_economist

      Not defending the failure to speak out but we do need to appreciate the sense of fear that the Abbott Government brought with them in the early days. They settled scores all over the place with anyone they perceived had ever spoken against them – look of course at the dumping of Martin Parkinson against even Joe Hockey’s wishes as an example of how out of control they were.

      People who were perceived as being helpful even in the Howard days were elevated. There was obviously a very long grievance history for anyone who wasn’t perceived as fully on their side, and it had few limits.

      The Commission of Audit had more or less listed virtually every government function as ‘contestable’ or not needed. Yes, heads of agencies and authorities should still have spoken out but they would just have been replaced by an even more compliant yes man or woman.

      It’s just the perversity of introducing popular ideas like ‘performance measures’ for agency heads etc when of course it only ever gets used to flush people who are not towing the political line enough. Compare and contrast the treatment of say Blair Comley (and his record of effectiveness) and say, whatshisname who runs FIRB. It’s a joke.

      • You might have a point, but Medcraft had been doing nothing for 21/2 years before Abbott stepped onto the dais & has stayed true to that form throughout.

    • Looks more like waiting for an opportune moment to extract some payback if you ask me. Makes the LNP look like asshats when they say no royal commission because ASIC and ASIC comes out and admits they are ineffective due to the actions of said asshats.

  5. Maybe labour should also announce a Royal Commission into non residents being allowed to buy around 10% of existing property over the last few years with no prosecutions, this would guarantee their election.

  6. ASIC by definition may only police the rich so how can someone be surprised when a leading party of the rich cuts police that can only harm the rich?
    the other party of the rich at least pretends that that care about someone else.

    It’s so typical for neoliberals to decrease funding for agencies like ASIC and ATO (designed to protect poor from the rich) and increase funding to police forces designed to protect rich from the poor

  7. So, if we were wondering where has ASIC been all this time and why don’t they seem to do anything. We now have a glimpse as to the excuse they would have used when the SHTF. “Oh, we would like to have done more surveillance but our funding was cut, so you see there’s really nothing we could have done, our hands were tied”.

  8. Maybe it’s time we also figured out a way to protected, honour and somehow reward whistleblowers more? I mean pissing off powerful corporations and governments, even if they’re doing the wrong thing, can’t be an easy thing to do. We need to have their backs.

    • adelaide_economist

      Agree RobW. Whisteblower legislation (particularly in practice) is hopelessly bad at protecting those who whistleblow even though they often serve as amazing protectors of the public interest. It’s a rare whisteblower who doesn’t end up permanently unemployed and often unofficially blacklisted from working again in their industry.

    • Not that I would normally recommend this, but look at the US model. Whistleblowers there get a cut of the fine. Up to 30%. Solves some problems.

  9. As for Turnbull….what do you expect from a banker?….come to think of it, so was Medcraft…we’re screwed!

  10. Turnbull
    Turdball

    My eyes and brain make that substitution every time I see the word, can’t help it.