As the misadventures of the can-do Commonwealth Bank remind us, even
though our bankers didn't bring the house down in the global financial
crisis as happened elsewhere, we still had too many victims of bad
investment advice losing their savings.
So, what's the answer? Tighter
regulation of banks and investment advisers, or a higher standard of
ethical behaviour by individuals working in banking and wealth
management? Try both.
I'm not so naive as to have much faith in
self-regulation, but that's not to deny that some people's behaviour is
more ethical than others', nor that more individuals behaving ethically
would make a difference.
When you stop believing our personal
behaviour matters, that we're all mere cogs in some uncontrollable
machine, it's time to slit your throat.
My guess is most people
like to think of themselves as reasonably ethical, which is not to say
most of us actually are at all times (not even me). Trouble is, most
people make their judgments about what is ethical and what's not from
the behaviour of those around then.
Moral compasses are hard to
find. But that's why I'd like to see a movement initiated by Dr Simon
Longstaff, of the St James Ethics Centre, the "banking and finance
oath", get more publicity and more signatories. The better known are the
oath and those who've signed up, the better judgments others can make
about how a particular action measures up.
The oath consists of
nine principles: trust is the foundation of my profession; I will serve
all interests in good faith; I will compete with honour; I will pursue
my ends with ethical restraint; I will create a sustainable future; I
will help create a more just society; I will speak out against
wrongdoing and support others who do the same; I will accept
responsibility for my actions; my word is my bond.
The names of
the many signatories to this oath are listed on its website, thebfo.org.
They include Glenn Stevens, Jillian Broadbent, Carolyn Hewson, Warren
Hogan, Andrew Mohl and Elizabeth Proust.
Why doesn't someone ask
the chief executives of the big four banks just what it is that makes
them feel unable to sign up? It couldn't be a threat to their
profitability, surely.
THESE days the world is positively awash
with forecasts of what will happen to the economy. Treasury publishes
its forecasts twice a year, the Reserve Bank publishes four times a year
and a couple of dozen economists in the financial markets make their
forecasts regularly and freely available.
But it wasn't always
like that. Before the financial markets were deregulated in the early
1980s few economists worked in them, the Reserve kept its opinions to
itself and Treasury's official forecasts in the budget papers were kept
terribly vague. Billy Snedden's last budget advised that "economic
growth is expected to quicken considerably in 1972-73".
When I
became an economic reporter in 1974, one of the few unofficial
forecasters was Melbourne University's Melbourne Institute, where the
regular pronouncements of Dr Duncan Ironmonger drew rapt attention from
the media.
And by then Philip Shrapnel's business selling his
forecasts had been going for 10 years, meaning the economic analysis and
forecasting firm BIS Shrapnel is celebrating its 50th anniversary this
year.
Shrapnel, who trained at the Reserve, spent a few years
working as a forecaster for pretty much the only notable management
consulting firm in those days, WDScott, before going out on his own. He
was a character, said to polish off a least half a bottle of scotch as
he stayed up studying the documents on budget night.
A lot of the
people who paid to attend his forecasting conferences - still held today
- would have been there to get his forecasts and plug them into their
company's annual budget. These days my guess is his company makes more
of its money from its research reports on particular industries and its
special focus on property and construction.
Whereas David Love's
rival subscription newsletter, Syntec, made its name from its uncanny
ability to read the mind of Treasury, Shrapnel was fiercely independent.
Not for him the risk-averse strategy of clustering with everyone else
around the official forecast.
His successors retain this approach
of doing their own analysis their own way and sticking to it. Like all
forecasters they've had their misses, but their independence of mind may
explain some notable calls: no downturn as a result of the Asian
financial crisis of 1997-98; a downturn in 2000-01 no one else was
expecting; and no recession following the global financial crisis.
