Macquarie, Cossie, media blunders, RACV-IAG insurance tie-up


July 28, 2008

Here are Stephen Mayne's four stories from the Crikey edition on Tuesday, 11 October, 2005.

1. The Who's Who of Macquarie influence pedalling



By Stephen Mayne, owner of 12 Macquarie Bank shares

Bob Carr's decision to join Macquarie Bank so soon after retiring as NSW Premier is a disgrace. Just look at the $1 billion plus Macquarie and its investors have made from the Eastern Distributor toll road between the city and Sydney Airport which the incompetent Carr Government presided over. The Millionaire Factory may as well have said, "Thanks for the billion Bob, now here's an undisclosed amount of money for you, to help us try and suck in the next bloke."

However, the Liberal Party can't exactly call for the more ethical American approach of a two year cooling off period because retiring Howard Government Ministers have been even worse than Bob Carr in recent years. In terms of the eight most inappropriate appointments over the years, try these for size:

Michael Wooldridge: gave an additional $5 million to the Royal Australian College of GPs for a new Canberra headquarters one week before quitting as Health Minister in November 2001 and then signed up as a consultant a few weeks later, eventually receiving a $382,500 payout.

Peter Reith: signed up as a consultant to Australia's biggest defence contractor, Tennix, within two days of resigning as Defence Minister.

Bob Carr: after handing over billions in value to Macquarie Bank as NSW Premier, signs up as a consultant two months after retiring.

Larry Anthony: Former Children and Youth Affairs Minister who joined the ABC Learning board five months after losing his seat.

Richard Alston: took a consultancy from Austereo over digital radio regulation six months after retiring as Communications Minister in February 2004.

Graham Richardson: Thought it was fine to be Federal Minister for Communications and then a fixer for Kerry Packer, the biggest beneficiary of Australia's television licensing system over the years.

Alan Stockdale: Macquarie and its investors made hundreds of millions from the Kennett revolution and then the former Victorian Treasurer thought it was fine to join the Millionaire's Factory two weeks before the all important Frankston East supplementary election in October 1999.

Terry Mackenroth: Played the tough guy Queensland Treasurer handing our great slabs of hinterland for development, then retired and six weeks later joined the board of Brisbane-based developer Devine Ltd.

Macquarie Bank only features twice in this list, but there is no doubt about the scale of their influence pedalling strategies which extends to hiring the siblings of Prime Ministers, top bureaucrats, former unionists and politicians themselves. How's this for an impressive line-up?

Anne Keating: independent director of Macquarie Leisure
Paul Keating: Joint venture partner in China flogging home loans
Stan Howard: former chairman of Macquarie-packaged Hills Motorway Group
Max Moore-Wilton: PM's former departmental secretary is CEO of Sydney Airport
Alan Stockdale: former Victorian Treasurer was head of external relations for Macquarie Infrastructure Group
Warwick Smith: former Howard Minister is head of external relations for the entire bank
Ross Cameron: the former Federal MP is a consultant
Paul McClintock: John Howard's former Cabinet Secretary sits on a Macquarie's infrastructure management board
Michael Easson: former NSW Labor Council Secretary on MIG board

If we've missed anyone, email smayne.com.au.au. Macquarie's Labor credentials have even extended to sponsoring the Mick Young charity day at Randwick in Sydney each year.

Arguably only Dick Pratt has had more political figures on the payroll over the years, although the likes of Kerry Packer, Rupert Murdoch and Frank Lowy have also been politically active as they work the regulatory system to maximise their wealth and power.

Given that so much of Australian business relies on a corporatist approach of exploiting government licences and weak regulators, as opposed to genuinely competing on the global stage, you can't blame the suits for trying to maximise their position. The problem lies with the money-hungry politicians who are members of a political duopoly that seemingly adopts an anything goes approach.

At one level, we really should applaud Mark Latham for eschewing this grubby system and telling us what really happens.

CRIKEY: We rang Carr's office for comment but he's overseas and unavailable.



4. Cossie's Treasury: Australia's most inaccurate forecasters



By Stephen Mayne

Did anyone else see the irony in Peter Costello using the Federal Treasury to try and dump all over Malcolm Turnbull's tax reform forecasts? The Australian splashed with the story this morning and Sam Maiden was obviously given a decent backgrounder about the Treasurer's "withering savaging" of Australia's richest MP in a briefing to Liberal MPs.

However, surely any story about Costello and his Treasury attacking someone else's budget forecasts needs to provide the context of their own woeful budget forecasting record. This is a table we first ran on September 26 showing how wildly wrong the original and updated budget forecasts have been over the past ten years:

Cossie's lame forecasting record – the evidence

Year

 Budget

 Mid-year update

 Next Budget

 Outcome

1996-97

 -$5.65bn

 not done

 -$6.89bn

 -$5.28bn

1997-98

 -$3.85bn

 -$2.75bn

 -$1.1bn

 $1.17bn

1998-99

 $2.69bn

 $3.27bn

 $2.88bn

 $4.34bn

1999-00

 $5.21bn

 $2.69bn

 $7.79bn

 $13.06bn

2000-01

 $2.84bn

 $4.33bn

 $2.25bn

 $5.97bn

2001-02

 $1.52bn

 $0.5bn

 -$1.19bn

 -$1.06bn

2002-03

 $2.09bn

 $2.14bn

 $3.92bn

 $7.48bn

2003-04

 $3.66bn

 $4.64bn

 $4.59bn

 $8.04bn

2004-05

 $2.39bn

 $6.21bn

 $9.23bn

 $13.62bn

2005-06

 $8.92bn

 to come

 to come

 to come


When you miss the outcome by an average of $7 billion over the three years, you've got a thick hide to start bagging others. Then you have the obvious ruse of magnifying Turnbull's so-called blunders by counting them over four years, rather than one. This is stock and trade for any politician trying to reach as big a number as possible.

It seems that glass jaw Costello doth protest too much. First he tried the giggling on national television to demean Turnbull and now he's attempting to manipulate outcomes through official bureaucratic channels. Everyone knows that Australia's punitive personal income tax scales need major reform and Turnbull should not be slapped down like this by a paranoid Treasurer.

The failure of Costello's Victorian division to nurture any high-powered senior Federal Ministers to replace the likes of Michael Wooldridge, Peter Reith, Richard Alston and Rod Kemp speaks volumes about his fear of potential rivals, something that his treatment of Turnbull highlights.



19. Stephen Mayne's four favourite media blunders



By Stephen Mayne, media pedant

Media Watch might have moved on from the Stuart Littlemore days of pointing out petty little errors, but from time to time Crikey has taken on that role. And as our error-count has fallen dramatically since Crikey turned professional in March, we're not too hypocritical in pointing the finger. Here are four recent favourites:

  • ABC radio's flagship PM program twice described Kerry Stokes as Seven's "majority shareholder" during the big C7 court case. He's not, 43% is not a majority of anything. He's the largest, controlling and dominant shareholder, but not the majority.
  • Victorian Liberal David Davis produced a nice obituary for former Legislative Council President Bruce Chamberlain in The Age on Saturday, but surely he knew his former boss is Jeff Kennett, not "Geoff Kennett."
  • Sky Business Report last night told us that independent expert "Graeme Samuel" had done a report on the Mayne Group break-up. Er, try Grant Samuel, in which the ACCC chairman used to have a stake.
  • John Durie today told us in The AFR's Chanticleer column today that Rupert Murdoch "owns just 28 per cent of the $66 billion company." Not quite. He owns 28% of the votes, but only about 11% of the actual shares in the company. You can't forget Rupert's Sir Joh-like gerrymander which sees almost 70% of the issued stock without a vote.
That said, I've published more errors than all of the journalists responsible for the above combined.


24. Explaining the RACV-IAG insurance tie-up



By Stephen Mayne, candidate for the RACV board

Has anyone else wondered how the general insurance joint venture between publicly listed Insurance Australia Group and the mutually owned RACV works?

One prominent Melbourne businessman told Crikey yesterday that the RACV had sold the business too cheaply five years ago and could have made far more going it alone and launching some of their own products in NSW and around Australia.

However, a former credible RACV insider takes the alternative view, arguing that RACV has done well to extract excellent value from its 30% stake in the joint venture, Insurance Manufacturers Australia. It is telling that former RACV executive Rick Jackson is being slated as the heir apparent to IAG CEO Michael Hawker, who is well placed to run a Big Four bank one day.

We asked IAG to explain how the JV worked and this is what spindoctor Emma Foster came back with:

IMA is a 'manufacturer' of short tail personal lines (STPL) insurance products (car, home etc). The products are primarily sold through RACV, under the RACV brand, in Victoria, and Insurance Australia Limited, under the NRMA Insurance brand, in NSW and ACT. The manufacturing function means that IMA develops products, formulates pricing and manages claims. The risk for the STPL products is carried within IMA.

IMA is a licenced insurer, separate to IAG or IAL, and has a Board which complies with APRA's requirements as to independence and qualification. The Board of IMA has a total of seven directors: two RACV nominated directors, two IAG nominated directors and three independent directors (one nominated by RACV and two by IAG).

As IMA is a controlled entity, it is consolidated by IAG and not carried as an investment that is subject to regular revaluation in the books of the company. IMA's 2004-05 accounts, which have been lodged with ASIC, report Gross Written Premium (GWP) of $2 billion. IAG's 2004-05 accounts report GWP of $6.6 billion. Therefore approximately 30% of IAG's general insurance business was attributable to IMA.

RACV sold its struggling financial services business to HBOS for $27 million earlier this year and booked a loss of almost $4 million, but the IMA stake has clearly been far more successful, producing dividend income of almost $100 million in 2004-05.

The RACV board elections close at 5pm on Thursday so those wishing to vote need to really get their skates on. Incumbent John Rawlins is clearly very worried that he is about to be knocked off by Mrs Crikey, Paula Piccinini, because he has now written to every Victorian car club asking for their vote. Will it be enough? We'll know by early Friday afternoon.

Crikey will be upstairs at Young & Jackson in Melbourne from 4.55pm until 5.25pm this afternoon if anyone wishes to drop by and collect a ballot paper to provide some last minute support for our tilt. It would be handy to bring your membership number.

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