MONETARY/CAPITAL MARKETS
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INTRODUCTION
The People First Party’s monetary/capital markets policy is designed to reform Australia’s economy by putting productivity before speculation and sovereignty before foreign debt. It is the most comprehensive monetary plan of any political party in Australia, unlike the major parties who argue over non-substantive policy, such as how many boards the RBA should have.
The policy comprises of seven core components where reform is needed:
- Using Government Infrastructure Bonds to fund the Construction of Sovereign Assets
- Restore a Public Retail Bank and Insurance Office to Underpin Financial Services
- Reform Capital Raisings and Securities Trading on the ASX and Energy Markets
- Enforce Superannuation Funds holding Board Elections
- Tighten Capital Controls on Foreign Purchases and Lending
- Require Multinationals to Publicly Disclose Related Payments by Country
- Repatriate Australia’s Gold from the Bank of England
Monetary policy is the key to a nation’s sovereignty. Any country who uses foreign debt to fund its way of life is doomed to destroy itself. For too long, Australian governments have allowed foreign banks and multinationals to undermine Australian businesses through unfair laws in the name of attracting foreign capital. Similarly, lax rules on super funds and the ASX has allowed corporate cowboys to reap the benefit from capital investment rather than producers and shareholders. This has inflated asset prices in relation to incomes, making it difficult for small businesses to compete with the corporate sector. These policies will level the playing field for small Australia businesses and entrepreneurs, as well as ensuring our sovereign infrastructure remains in Australian hands.
The People First Party’s monetary/capital markets policy is the most comprehensive reform plan of any political party in Australia. We propose to:
- Introduce an Infrastructure Bank to be managed by the RBA in conjunction with Treasury. The Bank will issue bonds to either the federal or state government for seven infrastructure assets. These are dams, baseload power stations and transmission lines, road, rail, ports, airports, and telecommunications.
- Restore a public bank to ensure that bank branches stay open, so people can access essential banking services.
- Restore a Government Insurance Office to ensure that insurance is affordable.
- Reform capital raisings on the ASX by ensuring that new capital is issued on a pro-forma basis to existing shareholders rather than new shareholders who have no stake in the company.
- Treat stock lending as a sale subject to capital gains tax. Naked short selling will be banned.
- Superannuation funds will be required to hold elections for board members at Annual General Meetings.
- Fund managers will be unable to cast proxy votes at company AGMs, unless those proxies are directly from members who have indicated their voting intentions.
- Domestic banks’ supply of foreign debt they access to on lend for housing will be restricted. The exact amount will be determined in consultation with banks with a view to gradually replace foreign funding with domestic funding sources.
- Energy wholesalers will be required to sell energy in 24-hour blocks not 30-minute blocks. This will seek to reduce volatility in pricing and stabilise the supply of energy.
- Foreign ownership of residential and agricultural land, sovereign infrastructure, and water rights will be banned.
- Multinationals will be required to disclose related party payments by country and purpose in their financial reports, providing greater transparency about the flow of profits offshore. This will act in Australia’s interest by ensuring transfer pricing arrangements are not undermining the ability of Australian businesses to compete.
- Repatriate Australia’s gold from the Bank of England and store it in the RBA’s vaults in Martin Place, Sydney.
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1. Introduce an Infrastructure Bank
Infrastructure should be funded through domestic earnings not foreign debt
Introduce an Infrastructure Bank to be managed by the RBA in conjunction with Treasury. The Bank will issue bonds to either the federal or state government for seven infrastructure assets. These are dams, baseload power stations and transmission lines, road, rail, ports, airports, and telecommunications.
Monetary policy is not being used effectively in Australia. As a result, there is a chronic underinvestment in infrastructure. Infrastructure can drive productivity and provides essential services. Australia’s monetary policy solely relies on qualitative easing which is insufficient to deal with underlying economic structural issues. The RBA should also use quantitative easing in the form of infrastructure bonds to finance infrastructure that is vital to Australia’s economic and sovereign security. Unlike qualitative easing which predominantly impacts demand, the use of infrastructure bonds increases the supply of goods and services without having to use foreign debt.
2. Introduce a Retail Bank
Banking is an essential service
The last three decades have seen rapid decline in the number of bank branches, particularly in the regions. This has had a detrimental impact on many small towns as business and residents must travel large distances to access banking services.
While the internet has enabled some services to be conducted online, not all services can be performed online. Furthermore, some regions cannot access the internet. Many of my constituents, especially retirees, are uncomfortable using online banking due to scam concerns. The People First Party believes banking is an essential service and that a public bank be run by the government to ensure universal banking for all.
Banking services could be provided in existing post offices using the payment systems of the RBA.
3. Introduce a Government Insurance Office
Insurance costs are leaving Australians without protection
The privatisation of Government Insurance Offices by state governments have left many Australians unable to afford insurance because of reduced competition. Insurance costs have consistently increased by more than 10 per cent per annum.
Rather than fund a $10 billion reinsurance pool, that in the main will go into the pockets of foreign owned reinsurance companies, People First believes that $10 billion should be used to fund a national Government Insurance Office to provide cheaper insurance for Australians.
4. Reform Capital Raising and Security Trading on the ASX
Accelerated capital raising rules are being exploited
Capital raisings on the ASX, particularly for smaller listed companies are being undermined by the 15 per cent accelerated capital raising rules. This rule allows company boards to issue up to 15 per cent of new shares to non-shareholders every year, greatly diluting existing shareholders equity interests. The issue of new capital should be offered to existing shareholders on a pro-rated basis.
5. Short Selling to be Banned
Stock lending is stock selling
Shorting shares is speculation and not in the interests of shareholders. It is only available to large shareholders, and they can use their holdings to move the share price. This information alone should be considered insider information, and as such it creates an uneven playing field between large and small investors.
6. Superannuation Funds must Elect their Boards
Fund members must be given a say
Not only were Australians never given a choice as to whether they wanted 12 per cent of their wages taken from them, they have never been allowed to vote on who controls their capital once it has been taken from their wages. This process is undemocratic and lacks transparency. Industry and retail superannuation funds have nearly $3 trillion in funds under management and this expected to more than double by 2050.
It is therefore imperative that the managers of such huge sums of money are held accountable for their performance. It is worth noting that by controlling such large sums of capital, the managers of superannuation funds exert a large degree of influence on industry and the economy. In a country that upholds democratic principles of accountability, it is only to be expected that managers of capital be held to account.
7. Agents should not vote at AGMs without Shareholder Consent
Fund managers will not be given the authority to vote without gauging the intention of members
The owners of capital must not be separated from the decisions on how their capital is allocated. Yet this is exactly what superannuation does. Not only are board members not elected, once appointed they can cast votes as to who to appoint onto the boards of the companies they hold shares in. They can also vote on other resolutions put forward by companies including executive renumeration. They do not need to seek the approval of fund members for any of the decisions they make at company AGMs. This is not capitalism, it is communism, and the process of decision making in capital markets needs to be more democratic.
8. Banks need to Limit the amount for Foreign Debt they can use
House prices have been artificially inflated thanks to generous lending by the banks
In 1985, the four majors had approximately $8 billion in foreign debt. By 2008, it was closer to $800 billion. Most of this money was lent against housing contributing to house prices at least doubling relative to incomes. As a result, Australians are taking longer to repay their mortgages and have less disposable income. Furthermore, generous tax concessions to the foreign bondholders are resulting in tax base erosion and the leakage of wealth offshore.
Australian banks need to tighten their lending criteria to help supress the unsustainable rise in house prices. Overinflating house prices is taking much needed capital away from other sectors of the economy which is ultimately hollowing out Australia’s skill base and productive capacity. It is leading to a lower standard of living amongst working class Australians.
9. Energy Wholesale Market to be Reformed
Energy prices are being gamed by short term speculators
Short term pricing in the wholesale energy market is enabling speculators to gouge energy consumers. It is driving energy prices higher, causing pain to both consumers and businesses who rely on cheap energy for production.
10. Foreign Ownership of Residential & Agricultural Land, Sovereign Infrastructure, and Water Rights will be Banned
Key assets such as land and infrastructure must remain Australian owned
The sale of Australia’s infrastructure has weakened both Australia’s sovereignty and economic prosperity. Both Australian and foreign rent seekers are gouging rents from Australia’s infrastructure, making it harder for business to remain profitable and competitive. Foreign ownership also erodes Australia’s tax base.
11. Multinationals to provide Greater Transparency of Related Party Payments
Profit gouging must end
The amount and source of profits being transferred offshore needs to be disclosed to enable a better understanding of just how much profit leaves Australia’s shores every year.
Currently there is very little transparency about the flow of offshore profits. Related party payments are not disclosed publicly which facilitates the flow of capital offshore without proper transparency.
12. Australia’s Gold Bullion to be Repatriated
Australia’s gold needs to be secured in Australia
The RBA has never been able to explain why it is necessary to store Australia’s gold with the Bank of England. There are serious concerns about the security of Australia’s gold given audit reports into Australia’s gold holdings are not fully disclosed. These concerns have been further exacerbated by the RBA releasing documents stating that the Bank of England has detected the presence of fake gold bars and duplicate serial numbers amongst their gold holdings. There are also genuine concerns about the leasing of Australia’s gold holdings, which acts against the interests of Australia’s gold producers who contribute tens of billions in exports and employ thousands of people.
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MAIDEN SPEECH
10 September 2019
THE ISSUES
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