Document purge leaves us all in the dark

While the ALP lurches, as good as rudderless, through its latest leadership emergency, the purging of public documents under the federal government proceeds apace.

Indeed it appears to be ramping up. Now records are vanishing from the public database at the Prime Minister’s Office.

Look no further than the links page on the website of the government bank guarantee scheme. Lo and behold the first link for the ‘Prime Minister’s media release of 12 October, 2008’ doesn’t work: 404 – File or directory not found. The resource you are looking for might have been removed, had its name changed, or is tempor-arily unavailable.

The Australian Securities & Investments Commission has taken dozens, if not hundreds, of documents off its public database: special exemption orders for liquidators among other things.

Then there are the historical details of billions in government guaranteed loans for the big banks. Gone. Disappeared from the Reserve Bank and Treasury websites as if the scheme never happened.

And now it’s the PM’s office.

Why? The most plausible explanation, as with these other government agencies, is that the government agencies simply get rid of information they don’t like, information which doesn’t suit their interpretation of history.

In this case, its taxpayer assistance for big banks.

Yet, in this case, thanks to a trusty source, we can report the contents of the hidden document and posit a reasonable explanation for why the government might have “’disappeared” it in the style of a 1980s Argentine junta.

The original announcement was posted here and included this vital assurance:

“Review of parameters [p 3] … The deposit and wholesale guarantees contain features and variables that may require refinement or adjustment in light of market developments. These include the setting of the appropriate fee level and structure, the threshold for the deposit guarantee and the overall coverage of the scheme. The deposit and wholesale guarantee scheme will be reviewed on an ongoing basis and revised if necessary.”

There it is, an announcement relating to the scheme to prop the banks up during the financial crisis with, among other things, the wholesale funding guarantee. It “will be reviewed on an ongoing basis,” it says.

Why is this important, apart from the obvious public interest in not having public records vanish because it suits a political agenda?

It is important because a decent policy outcome – as intended by the contents of this hidden press release – might have a benign effect on interest rates, even bringing more competition to the mortgage market as second-tier banks achieved lower-cost funding.

As is evident from the links which continue to work, Treasurer Wayne Swan often refers to the Council of Financial Regulators (RBA, APRA, ASIC, Treasury) as having given particular advice, including in February 2010 when he was closing the scheme to new applications (and allowing guaranteed liabilities to be run off over a number of years).

This Council of Financial Regulators, however, has not subsequently been asked for advice about the appropriateness of the fee structure despite Australia’s experience being at the extreme end of international experience and Senate committee recommendations, including a unanimous one in May 2011 for all participating institutions to be charged 70 basis points.

Here are some questions for government:

Is what the ratings agencies were saying about our banks back in 2008 still a good basis for setting a tiered wholesale-funding guarantee fee structure?

Why do the Australian guarantee fee differentials remain the extreme end of international experience, disadvantaging the smaller competitors?

• Why is the largest Australian differential double what the market was asking at the height of the global financial storm?
• Why hasn’t the Council of Financial Regulators been asked for advice about the continuing appropriateness of the 2008 fee schedule, particularly in light of the assurance in 2008 and the unanimous recommendation of the Senate banking competition inquiry last May?
• Wouldn’t reductions of 10-20 basis points that smaller participating institutions could offer if freed from some or all of the current guarantee fee discrimination potentially inject a dose of competition into housing and business lending markets?
• When is the government response to the Senate banking competition inquiry recommendations going to be finalised?

The Senate Economics Committee on banking competition took up the matter of the wholesale funding guarantee fee schedule unanimously at Recommendation 20:

• The Committee recommends that, to increase the competitiveness of smaller lenders, the Government immediately standardise the fee for all borrowers under the wholesale funding guarantee to a uniform rate of 70 basis points.

Although there is no official analysis of what this might mean to borrowers, on page 235 the Senate Committee report has the following gem from the Bank of Queensland boss David Liddy. He quantifies the impact:

• If the government guarantee on wholesale funding were flattened to the fee that the major banks pay for all remaining payments, BOQ would be able to immediately reduce our variable mortgage rate by 20 basis points.

Nothing can justify the extent of the differential between what the big four banks pay annually for the wholesale funding guarantee (0.7 per cent) and what the rest are slugged (1 per cent or 1.5 per cent).

And nothing can justify the purging of public documents from public databases by government agencies. This is the thin edge of the wedge.

And here’s another question, this time for the Office of the Australian Information Commissioner (OAIC): when can Australian citizens be assured that information and policy they have paid for – the same information and policy which is critical to the public interest in a functioning democracy – will remain on the public record, at least in an archive which can be easily accessed?