The Asylum: How a bunch of rogue traders at Nymex took over the world oil market

asylumThe little-known but important story of how a bunch of potato traders at the New York Mercantile Exchange (Nymex) came from nowhere to set the world oil price is told delightfully in the book The Asylum by talented American journalist Leah McGrath Goodman. That no one exactly understood how oil prices are set is demonstrated in Goodman’s book with the transcript of an extraordinary interview between right-wing Fox News pundit Bill O’Reilly and Nymex executive John D’Agostino in 2008.

At the time, the oil price was skyrocketing towards $150 a barrel and O’Reilly was anxious to blame Venezuelan left-wing president Hugo Chavez and OPEC’s “greedy sheiks” for the high prices. D’Agostino was having none of it. He told O’Reilly high demand and a low US dollar were more to blame. O’Reilly was flabbergasted as the conversation continued. “[OPEC] gave Cheney the middle digit… they can change whatever they want, right?” he says. D’Agostino replied, “No, OPEC only set the oil supply, the price of oil is actually set in New York”.

The rest of the conversation is worth reporting in detail:

O’R: Is there a guy who says $125 a barrel?

D’A: No. There’s a huge market that sets the price.  It’s filled with hedgers. It’s filled with speculators.

O’R: Somebody has to put the $125 on the barrel. Who does it?

D’A: They’re getting it from this market.

O’R: Who is “they”?

D’A: The oil producers…

O’R: The CEO of Shell or ExxonMobil says ‘We’re going to pay $125 a barrel”. Is that what they say? I thought it was the sheiks and Hugo Chavez.

D’A: No, No. They are all looking to the exchanges, the free markets, to set the price. The markets right now are saying the price of crude is about $120 a barrel. It’s going up and gasoline prices are directly related to crude oil prices.

O’R: But somebody has to make a decision.

D’A: It would be great if there was just one person doing that, because then we could go talk to him.

The exchange ended with an exasperated O’Reilly believing he was being hoodwinked. It was a sentiment shared by his Fox viewers who showered the station with angry emails unable to believe it was American capitalists setting the price of oil not greedy Arabs and leftist dictators. But what D’Agostino was saying was true. The price of oil really was being set by a bunch of anonymous traders off Wall St who thought nothing of bringing the global economy to its knees.

This is upsetting because they are not nice people. As Goodman said, traders are yellers. One trader told her they yell because they don’t have time to be polite. “It’s a world of super-assholes,” he said. “They’re all dicks, crude, manly men.” They work on the futures market which is a scarier version of the stock exchange. Energy traders bet on the price of oil in any of the months to follow, to a period of ten years. It is precise. Even if you correctly bet prices will go up in a certain year, if you get the month wrong you could lose millions. Traders not only bet on the future price but also on the difference from month to month in a practice called “spread trading”, which they hedged against the outright future bets.

The market was Darwinian where the strongest and loudest ruled. The trading floor was often violent and nice guys didn’t last. Traders were assisted by runners who wore goggles to protect themselves from the constant shower of trading cards raining down on them. Traders were fined $100 for every card that didn’t reach the pit in one minute of trade and expertly flicked cards which would arch perfectly before landing across the two-storey high room. Position in the trading ring was crucial because if you stood close to a major trader you would have access to all the information they got.

Nymex was always a down-at-heel exchange compared to the New York Stock Exchange. The guys that bet on the blue chip companies looked down on the shabby traders of minerals and commodities. If the NYSE traders took an academic and mathematical approach to the market, Nymex operated more from the gut. Overthinking was bad, trading was “freestyle” and the traders were street smart. Porn was common on the floor, as were drugs. There was reputed to be firearms too. The cops left them alone as they contributed large amounts to the Police Foundation. The traders’ word was their bond and behind their bland trading jackets, there were many multi-millionaires. There were 816 seats in the exchange and they sold for $1.6 million a pop or could be leased out at $10,000 a month.

It was only in the 1980s that Nymex hijacked the oil market. Before that it was trading home of the humble Maine potato. For half a century, around 70 traders operated out of a redbrick mansion in downtown New York betting on spuds, unaware their world was crumbling around them. A rival market was emerging in Idaho potatoes while Maine’s annual potato crop was falling. The market was also corrupt with stories of bags filled with potato-shaped stones and spoiled Maine potatoes arriving at markets in the Bronx. Worse still, a national consensus was developing that potatoes tasted better from Idaho than Maine.

Initially this led to volatile prices which the traders loved. The wilder the swings, the more opportunity for profit. When the supply ran out at the end of spring each year, prices would go crazy, with half the market betting prices would rise and the other half hoping they would fall. The trading pit would be full of farmers, politicians, bankers and spectators who would come to watch the show each May. Traders were obsessed with Maine gossip, Maine weather, Maine soil. Because future contracts were tied to actual quantities, traders had to get in, make money and get out quickly to avoid a pile of potatoes arriving on their doorstep. Traders skilfully exploited the expiration date right up to the last few seconds to end up “flat” in the market without any bets left on the table.

The whole idea of a futures market sounds absurd but has practical value. It made it possible for farmers to lock in future profits in advance at an agreed price. It gave them financial stability to plan their business years ahead with price risks transferred to the speculator who pockets the resulting profit or loss. This underlying utility still drives the futures markets in commodities like oil.

Incredibly, Maine potatoes were the third most traded commodity in America in 1976. But an enemy at the gates was about to spoil Nymex’s party. JR Simplot was an eccentric Idaho farmer, nicknamed the Potato King. When he died in 2008 aged 99, he was the oldest person on the Forbes 400 rich list worth $3.6 billion. Starting out as an onion farmer, he branched into potatoes winning the contract to supply US armed forces in the Second World War and then McDonald’s in the 1960s. Simplot was annoyed Nymex would not trade his Idaho potatoes. In the May 1976 rush he played against the Nymex traders selling millions of dollars of potatoes driving the price down. But unlike the traders he did not go “flat” at the close of trade.

Simplot was left with a contract to deliver massive amounts of Maine potatoes which to the consternation of the market, he did not have. However what he did have in plenty was Idaho potatoes which he offered in compensation.  Nymex refused to accept his Idaho potatoes and the market defaulted. Simplot was fined $50,000 but succeeded in busting the Maine market.

Nymex lost all legitimacy and most of its traders resigned. In 1977 they appointed a 27-year-old trader named Michel Marks to be its unpaid chairman. Marks was the son of a former Nymex trader and a child prodigy. Reeling from the loss of potato futures, the exchange scraped by, betting on odd trades like Australian beef cattle (when it was supposedly tainted by kangaroo meat, the price oscillated wildly, an outcome traders loves). Its rival exchange the Chicago Mercantile Exchange (Comex) overtook it and tried to buy out the cut-price seats at Nymex. The deal only went south when Comex pulled out thinking they had paid too much money for it.

In the short term it left Nymex in a huge hole but in the longer term it was Comex who suffered. Marks worked around the clock in 1978 to understand the business inside out. Some traders wanted to bring back a potato market but the Simplot scars were too deep. In any case the market regulator permanently banned potato trading. There was money to be made selling platinum and other metals but these markets were not volatile enough to be super profitable. Looking at what was dormant on the books, Marks hit on heating oil.

It was an far-seeing energy economist named Arnold Safer who convinced Marks that the free market would eventually set the price of oil. In the earliest days of oil the price was set by John D. Rockefeller and his “barrels”, before it was taken over by a consortium of the Texas railroad and the oil majors. Since the 1973 Oil Crisis, it was OPEC that was flexing its muscle. But Safer told Marks non-OPEC countries would eventually flood the market with excess oil destroying the Middle Eastern cartel. He also advised Marks to only trade things whose prices weren’t fixed by the government. The opportunity came with the deregulation of the heating oil market in the late 1970s. Mark dusted off an old contract to sell heating oil to the Dutch. In an ingenious move, he scratched out Rotterdam and changed it to New York harbour so they could concentrate on local trade.

The future market for heating oil opened on November 14, 1978. Volume was low on the opening day which was not a good sign. “Low volumes beget no volumes” was the conventional wisdom in the trading pits. Marks hassled the big traders, energy companies and banks to trade with him but no-one believed OPEC could be challenged. However because Nymex had no history with oil, the industry made the fatal miscalculation of ignoring them.

Heating oil merchants paid vastly inflated for their product while even OPEC struggled to turn a buck when its price for oil did not keep up with the changes to supply and demand. Private oil companies exploited the difference by hoarding oil contracts, locking in higher prices. They charged $10 more a barrel than the OPEC price but Marks decided to do exactly the opposite. His heating oil was 20c a gallon cheaper than Exxon. His customers were initially worried whether Nymex could guarantee continuous supply and they also worried Exxon might find out about the deal and punish them. But cheap oil is cheap oil and enough merchants did bid to give Marks the start he needed. Nymex traders didn’t care about the product or the price, what they needed were sufficient bids and offers to work the gaps.

Word slowly got out about the bargains at Nymex. Serious corporate customers arrived in the form of drillers, refiners and shippers of heating oil. Within months the number of bids went from hundreds a day to many thousands. For the first time ever, buyers and sellers of heating oil could tell exactly what the price was by looking at the Nymex trading board. It gradually attracted all of the heating oil contracts of the United States, turning the exchange into an invaluable source of information. People began to trust the exchange because it was a public market and because, unlike the oil companies, it did not rely on ever-increasing prices to make a profit.

Things really took off in 1980 when the Iraq-Iran war broke out. When the news broke, over 50 traders immediately flooded the ring clamouring for heating oil. Within days the Nymex price doubled and would have risen further but for government-imposed price limits. The low and high price were the same as everyone was buying and there were no sellers. There was a vast underground trade into the higher-priced unregulated market controlled by the oil companies, an illegal practice but one which flourished without supervision.

New US president Ronald Reagan gradually eased price controls and Marks debuted futures on leaded petrol (gasoline) in 1981. That market was so successful it continued for two years even after leaded petrol was banned in the US. In 1983 Reagan removed the last of the oil price controls and Nymex launched its crowning glory: a futures contract on sweet crude light oil, the bedrock of the industry. Marks opened a specific market to sell West Texas Intermediate light to the largest oil storage facility in the world at Cushing, Oklahoma.

The dots were starting to join. US Oil production was on the decline and Americans were cutting usage. OPEC jacked up its prices as did the oil companies. But the supply scare had caused non-OPEC companies to increase production flooding the market with oil, plummeting the price. Panicked Wall St traders rushed to Nymex to hedge their expensive contracts. Nymex became a huge liquidation warehouse selling off oil at bargain-basement prices. The traders made a killing on each transaction. Suddenly power was no longer in Houston, Amsterdam or the OPEC HQ at Vienna but at a grimy rat-infested building in lower New York, inhabited as Leah Goodman said by “misfits and pranksters and gun-toting gangsters who had absolutely no knowledge of the oil business”.

Over the years that followed, other players muscled in on the market but Nymex’s position was secure. Even the oil companies came cap in hand to the exchange and openly traded on the market. When Nymex moved to the World Trade Centre the market was so intense, it did not notice the smoke pouring into the room after the 1993 bombing and traders refused to evacuate. Nymex moved out of the WTC before 2001 which was prescient. But it was slower to see the oncoming of electronic trading and almost lost the market entirely to the more innovative Intercontinental Exchange (ICE). With Nymex’s power waning they agreed to a merger with its former enemy Comex in 2008 and finally the electronic boards replaced the whirring of paper in the pits.  A handful of traders still ply their wares in a small venue using the old open outcry system of the potato trading days. There are calls for it to be preserved. But Nymex is no museum. Although people like Bill O’Reilly never knew it, its traders still set the price of oil to this day.

The rising price of gas

One of the Santos GLNG  gas compressor plants under construction near Roma.
One of the Santos GLNG gas compressor plants under construction  in the Surat Basin near Roma.

More indications arrived this week the price of Australian domestic gas is likely to double or triple after 2014 – though not for the reasons people in the industry are spruiking. Research from the Australia Institute says the current wholesale price of $3 a gigajoule would likely go to $9 in three years. Increases of this magnitude will put pressure on manufacturing businesses, mostly in Victoria dependent on gas. But that is the likely outcome once the eastern seaboard gas market becomes connected with the world.

This is not the only recent research that predicts this. Geologists always knew about gas in the coal seams of Queensland and NSW but it was too expensive to drill for in comparison to natural gas trapped in conventional chambers. Higher prices in Asia, suddenly made that CSG more valuable. The three big companies and their backers are spending $60b to extract the gas, and to build pipelines and the LNG plants for export to Asia.

Those export plants are on Curtis Island off Gladstone where US-construction giant Bechtel is building three massive facilities for Santos GLNG, Origin APLNG and BG Group’s QCLNG  next to each other. Rolling out in 2014, the plants will have a combined capacity of 20 million tonnes of LNG a year. They will take methane gas from the coal seams of the Surat (west of Toowoomba) and Bowen (west of Mackay) Basins and supercool it below minus 160 °C so it condenses into liquefied natural gas compressed for shipping.

In Japan customers will pay $15 a gigajoule for LNG. When you take away the $6 a gigilitre cost of liquefaction and transportation, what’s left is the netback price. Australian producers could charge a netback price of $9 a gigajoule and still find a Japanese buyer. With Gladstone available, why would local producers continue sell to local customers at $3 a gigajoule?  The domestic price is bound to find equilibrium with the export netback price as domestic supply drops. Given the size of the world market, the equilibrium will be mostly in the direction of the current world price.

Gas availability is not the issue. The Government’s BREE (Bureau of Resources and Energy Economics) says adjustment would depend on “consumers sensitivity to changes in gas prices.” Origin recently agreed to supply Santos with 365 petajoules of gas from 2015. This will make it hard for domestic gas buyers on the east coast to secure supplies beyond 2014. Queensland will be worst hit. Santos and Origin did not reveal the price but said it was linked to the oil market. At $100 a barrel of oil, that already pushes the gas price up to $7 a gigajoule, twice as expensive as the domestic market.

The gas companies admit price rises are coming but try to turn the argument. They say domestic supply problem could be solved by more drilling and blames the campaign waged by the anti-coal seam gas protesters for driving up prices. It ignores the huge facilities at Gladstone changing the rules of the game. These facilities would not have been built if Queensland didn’t identify CSG as a power source. Huge new infrastructure will link us to the world market regardless of how much we produce.

There is only way to keep the price down – set a reserve price. That’s what they do in Perth for Western Australia’s offshore industry. WA is behind Queensland in the production of CSG but has huge conventional sources. These produce 60% of Australia’s gas (twice as much as the eastern seaboard). WA’s gas network is not linked to the east but is linked by LNG plants to the world market – with more to come. Yet WA has a gas reserve which insists a quota of 15% is kept for domestic use. It creates a guaranteed market that cushions it from the higher world gas price though it is more expensive than the eastern seaboard.

The eastern jury is out on the reserve issue. Analysis by law firm Minter Ellison shows different parliaments have different ideas. The Commonwealth is against but federal Liberal have not revealed their position. Also against are South Australia, Tasmania and the territories. The NSW Government has recommended one but not actioned on it yet. Queensland is different again. It has a loose reservation clause in law. They could require every tenement holder to set aside 15% for domestic use but no contract has this proviso. Energy Minister Mark McArdle calls it a last resort.

Though not explicitly endorsing it, the Australia Institute sees no reason a reservation price should not happen. It said a reserve would create two markets, one for domestic and one for international. Since producers extract sufficient gas to supply Australia at a low price, they could still earn healthy profits by selling additional gas at the world netback price. The gas reserve policy would not act as a disincentive to further investment in new gas production. With four states and one territory involved, getting an eastern seaboard reservation price would be more complicated than the one in WA, the Institute said.

The gas industry is against a reserve, saying the cheaper local price would prevent investment in new supply.  Industry peak body APPEA denounces “the folly of providing industry-specific assistance and using subsidies to resist structural economic shifts”. APPEA’s eastern region chief operating officer Rick Wilkinson (not Williams as The Australian and other media called him) said rising gas prices were something NSW may have to get used to unless the industry could “get on with developing NSW gas resources”.

The Grattan Institute agrees, calling a reserve domestic price protectionism that “inequitably shifts economic benefit from producers to some consumers”.  It quotes BREE which says a reserve would lower gas prices. However it would also increase lobbying costs, reduce investments and decrease supply as it lowers the incentive to drill.

Reserve price or not, the introduction of CSG has made gas more profitable. The companies want to drill for more, particularly in NSW where the gas lies in more populated regions. But rather than attack the NSW Government for imposing restrictions, industry advocates like Wilkinson prefer to influence public opinion by blaming the protesters. “For this (rising prices), they have local anti-CSG activists to thank,” Wilkinson told The Australian.

Blaming protesters is designed to turn public support against restrictions and increase pressure on the State Government to remove them. The Gladstone LNG plants will set the price not production flow and only reserve price intervention will change that.

Fifty-five pieces of legislation

THE thing politics has over policy is that it is a sport. When The Age called this out in its editorial asking for the head of Julia Gillard, it was condemned for focusing on palace politics instead of setting the agenda of policy. The Age knows personal drama is infinitely more interesting than the 55 or so pieces of legislation yet to pass in the final week of the 43rd parliament of Australia.

But here where I don’t have to pander to profit or personal drama, I can take the time to look at all 55 remaining bills, in alphabetical order.  They cover wide-ranging issues of environment, the world economy, employment, education, tax reform and agriculture.

This is what parliament is for: to change and enact law. Each of the 55 bills is important to someone or something; a truth the independent members of parliament (who raised most of them) know all too well. I’m hoping people feel more informed for reading them; I did for writing them down.

1. African development bank Bill 2013 

Enables Australia to become a member of the African Development Bank Group by authorising payments to subscribe to membership shares in the African Development Bank and meet membership and ongoing subscriptions to the African Development Fund.

According to Bernie Ripoll (Lab) the bank promotes sustainable economic growth to reduce poverty in Africa. The bank has 78 member countries, comprising 54 African and 24 non-African countries. In 2011, the Independent Review of Aid Effectiveness recommended Australia join the group as it would represent value for money, and be a high-level indication of Australia’s commitment to development in Africa.

2. Australian Jobs Bill 2013 

The far-reaching bill would require private and public projects of half a billion dollars or more to develop an Australian Industry Participation plan. The Australian Industry Participation Authority would administer and monitor compliance reporting back to parliament. In the first debate, Liberal backbencher Craig Kelly saw an obvious problem: The measure would see government officers embedded in business, “just like it used to be in the Soviet Union”.

The planning regime will cost $1 billion dollars to implement, so I wonder if it will be subject to an Australian Industry Participation plan if it passes.

3 Australian Ownership Bill 2013

This Katter bill wants to limit foreign investment in Australian agribusiness and agricultural land. It would require the Foreign Investment Review Board to take “the national interest” (a contested concept) into account in foreign investment and prevent non-Australians from owing half or more of an agribusiness or land more than four hectares.

4 Aviation Laws Amendment (Australian Ownership and Operation) Bill 2013

Another Katter bill to amend air acts to ensure Australian international and domestic air services are at least 51% Australian owned and operated, do at least 80% maintenance in Australia and use only Aussie crews.

5.  Broadcasting Services Amendment (Advertising for Sports Betting) Bill 2013 [No. 2]

A Greens bill to amend the 1992 broadcasting act to prohibit ads on odds, restrict betting ads to after 9pm, prohibit “non-ad ads” and freeze betting ads before sports broadcasts. Given the 1992 act is pre-Internet, this seems papering over enormous cracks.

6. Competition and Consumer Amendment (Australian Food Labelling) Bill 2012

This one from the Greens wants to amend the Competition and Consumer Act 2010 to specify country of origin on food with labelling based on the weight of the ingredients.

7.  Competition and Consumer Amendment (Strengthening Rules About Misuse of Market Power) Bill 2013 is an adjunct of 6 to strengthen the act to protect people in complicated supply chains eg where a $1 litre of milk to the customer is a net cost to the producer.

8. Customs Amendment (Prohibition of Certain Coal Exports) Bill 2013

Amends the Customs Act 1901 to prohibit the export of coal mined in the water catchment valleys and district of Wyong (NSW) and enable the minister to prohibit the export of coal mined “in other areas”. This is Craig Thomson’s attempt to shut down Wallarah Two underground mine despite no-one ruling it in at the moment. “People in electorates trust the laws, they don’t necessarily trust the politicians,” Thomson said. “And that’s why I tabled a bill today that looks to restrict the export licences of miners in the Wyong Shire in particular, but more broadly any other area that the minister by legislative means, deems to be appropriate.”

9 Dairy Industry (Drinking Milk) Bill 2013

Katter’s call to register dairy regional representative bodies and Fair Work Australia to determine a modern award for dairy farmers with farmers and processors to establish enterprise agreements and collective negotiations.

10 Early Years Quality Fund Special Account Bill 2013

Peter Garrett’s bill to establish the Early Years Quality Fund Special Account providing $300m over two years to long day care services to pay employee wages, costs and expenses and is an early pay off for Gonski to make kindy-teaching a better paying job.

11 Environment Protection and Biodiversity Conservation Amendment (Making Marine Parks Accountable) Bill 2012 [No. 2]

Townsville LNP’s George Christiansen’s “Making Marine Parks Accountable” bill amends the Environment Protection and Biodiversity Conservation Act 1999 to allow Government to set an area of sea, or land and sea as a Commonwealth reserve with the help of an independent scientific reference panel and a stakeholder advisory group. Christiansen wants to protect fishing constituents’ access to marine parks.

12 Environment Protection and Biodiversity Conservation Amendment (Moratorium on Aquifer Drilling Connected with Coal Seam Gas Extraction) Bill 2013

Amends the Environment Protection and Biodiversity Conservation Act 1999 to place a two year moratorium on aquifer drilling connected with coal seam gas extraction; and impose penalties for contravention. Katter wants to ban CSG mining for 24 months.

13 Fair Indexation of Military Superannuation Entitlements Bill 2012

Katter bill to index military retirement benefits the same way as Australian age and service pensions, based on a higher-end consumer price index.

14 Fair Work (Job Security and Fairer Bargaining) Amendment Bill 2012

This Greens bill amends the Fair Work Act 2009 to expand enterprise agreements, settle disputes, and make provisions on industrial action. The object is to consider items of job security, full employment and work/life balance when the full bench makes a workplace determination.

15 Fair Work Amendment (Arbitration) Bill 2013

Katter bill to remove the restriction of Fair Work Australia dealing with disputes by arbitration, mediation or conciliation, or by making a recommendation or expressing an opinion.

16 Foreign Acquisitions and Takeovers Amendment (Cubbie Station) Bill 2012

Katter bill to stop the foreign takeover of Cubbie cotton station near Dirranbandi, Qld.

17 Grape and Wine Legislation Amendment (Australian Grape and Wine Authority) Bill 2013

Ag Minister Joe Ludwig’s bill to create a new Grape and Wine Authority by merging the Grape and Wine Research and Development Corporation and the Wine Australia Corporation. The merger would align strategy and achieve efficiency gains.

18 Homelessness (Consequential Amendments) Bill 2013

Social inclusion minister Mark Butler’s bill introduced with the Homelessness Bill 2013, to repeal the Supported Accommodation Assistance Act 1994 and makes an amendment to the Commonwealth Electoral Act 1918. The bill ensures homeless people can still vote in elections.

19 Homelessness Bill 2013

Butler’s main bill which provides for the recognition of homeless people and those at risk of homelessness. There is a recognition of homelessness and an aspiration everyone should have a home. The aim is to remove barriers in social inclusion and improve service delivery.

20 Imported Food Warning Labels Bill 2013

This Katter bill imposes penalties on those who don’t label imported food properly.

21 Income Tax Rates Amendment (Unlawful Payments from Regulated Superannuation Funds) Bill 2012

Bill Shorten’s bill – Combined with the Superannuation Legislation Amendment, the bill amends the Income Tax Rates Act 1986 to impose a 45 per cent tax on superannuation benefits illegally released early. See also 50.

22 Infrastructure (Priority Funding) Amendment Bill 2013

Greens bill to amend the Infrastructure Australia Act 2008 to prioritise Commonwealth rail funding over roads, with the exception of road projects designed to fix an urgent road safety issue or which construction has already begun.

23 Intellectual Property Laws Amendment Bill 2013

Greg Combet’s bill to tighten IP laws on crown use, implement a TRIPS protocol to supply developing countries with generic versions of patented medicines, protect plant breeder IP and bring in joint patent regime for Australia and New Zealand. Despite its international importance, this huge bill got little attention in local media. International Business Times said the law would enable Australian companies to respond to future health crises in less developed nations.

24 International Organisations (Privileges and Immunities) Amendment Bill 2013

Bob Carr’s bill to amend the International Organisations (Privileges and Immunities) Act 1963 to give privileges and immunities to the International Committee for the Red Cross and the International Criminal Court. The first part is required because Australia has signed an MOU with the Red Cross making it a legal entity while the second provides support for victims in ICC trials and removed a roadblock to Australia’s accession to the ICC Agreement on Privileges and Immunities.

25 Live Animal Export Restriction and Prohibition Bill 2013

Andrew Wilkie’s bill calls for the end to live animal export by 2017 and in the interim ensure “satisfactory treatment” before slaughter.

26 Malabar Headland Protection Bill 2012

Minister for State Gary Gray’s bill provides for the protection of Malabar Headland following divestment to NSW. Malabar Headland is in south-east Sydney and was declared a 70-hectare national park in 2010. It was transferred to NSW in 2012 after remediation. The bill ensures Commonwealth oversight of the site.

27 Marine Engineers Qualifications Bill 2013

Wilkie’s bill to amend marine regulations to ensure Australian standards are followed despite the rundown of Australia’s merchant fleet.

28 Marriage Equality Amendment Bill 2012

Greens bill to allow gay marriage. Likely to fail due to Liberal block of conscience vote.

29 Migration Amendment (Reinstatement of Temporary Protection Visas) Bill 2013

The Coalition’s Scott Morrison’s bill to restore two new temporary protection visa classes lasting three years. One is the offshore entry TPV for refugees entering at an “excised offshore place” (eg Christmas Island) but who meet Australian protection obligations, the other a “secondary movement” offshore visa which is the same except the person is a non-citizen who transited in a country other than Australia where the person could have sought protection.

30 Migration Amendment (Temporary Sponsored Visas) Bill 2013

Immigration Minister Brendan O’Connor’s variation on the TPV bill and one of the few bills gathering media attention due to the furore over 457 visas which are a subclass of TPVs. It require sponsors in the TPV program to do Australian labour marketing testing with Fair Work inspectors oversight before employing someone on these visas.

31 Military Court of Australia (Transitional Provisions and Consequential Amendments) Bill 2012

and 32 Military Court of Australia Bill 2012

Nicola Roxon’s bill to establish the Military Court of Australia as part of the Federal Court to overcome the High Court challenge to the 2007 Military Court to deal with widespread military abuse. Lane v Morrison came out of a recruitment drive here in Roma in 2005. After a round of golf and drinks, Lane supposedly ”tea-bagged” an army sergeant but denied the charge before the military court. Lane successfully argued the court was unconstitutional.

33 Minerals Resource Rent Tax Amendment (Protecting Revenue) Bill 2013

Greens amendment to the ill-fated Minerals Resource Rent Tax Act 2012 to disregard increases in state royalties after 1 July 2011 when calculating royalty credits for the tax. Adam Bandt’s objective is to protect tax revenue from being eroded by increased State Government royalties.

34 National Electricity Bill 2012

Rob Oakeshott’s bill to make the national electricity law a Commonwealth law rather than state law. Oakeshott said the states’ electricity networks have seen the biggest increases in electricity prices and have the biggest say in how the pricing rules are set. “There’s a clear conflict of interest in states owning monopolies and regulating monopolies at the same time,” he said.

35 National Health Reform Amendment (Definitions) Bill 2013

Amend definitions in the 2011 National Health Reform Act to allow the new National Health Performance Authority report on the performance of hospitals and primary health care organisations.

36 Native Title Amendment Bill 2012

Nicola Roxon’s bill to amend the Native Title Act 1993 to disregard historical extinguishment of native title and broaden the scope for voluntary indigenous land use agreements. 

37 Paid Parental Leave and Other Legislation Amendment (Consolidation) Bill 2011

Families Minister Jenny Macklin’s bill to clarify provisions related to ‘keeping in touch’ days. This means that they can come to work for up to 10 days during their parental leave, without it affecting their unpaid parental leave entitlements.

38 Pay As You Go Withholding Non-compliance Tax Bill 2011

Wayne Swan’s bill imposes a pay as you go (PAYG) withholding non-compliance tax on directors and some associates where their company has a PAYG withholding liability for an income year and the director or associate is entitled to a credit for amounts withheld by the company during the income year. These amendments reduce the scope for companies to engage in fraudulent phoenix activity or escape liabilities and payments of employee entitlements.

39 Primary Industries (Customs) Charges Amendment (Australian Grape and Wine Authority) Bill 2013

Joe Ludwig’s bill amends three acts to form the new Australian Grape and Wine Authority (see 17).

40 Primary Industries (Customs) Charges Amendment Bill 2013

Ludwig’s bill removes product specific maximum rates for R&D charges and marketing charges as changing them is difficult, slow and expensive. See also 42 and 48.

41 Primary Industries (Excise) Levies Amendment (Australian Grape and Wine Authority) Bill 2013

Another Ludwig bill changing three acts to form the new Australian Grape and Wine Authority (see 17 and 39).

42 Primary Industries (Excise) Levies Amendment Bill 2013

Another Ludwig bill to implement the government’s rural R&D policy, to remove product specific maximum levy rates for R&D levies and marketing levies. See 40 and 48.

43 Public Interest Disclosure (Whistleblower Protection) (Consequential Amendments) Bill 2012

Wilkie bill and companion to number 44 with consequential amendments to four acts.

44 Public Interest Disclosure (Whistleblower Protection) Bill 2012

Wilkie’s bill provides a comprehensive definition of public interest disclosure and provides protections to public officials to make such disclosures. 

45 Reducing Supermarket Dominance Bill 2013

Katter bill to reduce market share to 20% by enforced divestiture over six years and establish a Commissioner for Food Retailing.

46 Renewable Fuel Bill 2013

Katter bill to regulate renewable fuel and mandate 5% ethanol by 2017 and 10% by 2020.

47 Reserve Bank Amendment (Australian Reconstruction and Development Board) Bill 2013

Katter bill to establish an Australian Reconstruction and Development Board to fix financial arrangements of stressed agriculture businesses and associated industries.

48 Rural Research and Development Legislation Amendment Bill 2013

Ludwig’s third R&D bill affecting 8 acts. See 40 and 42.

49 Student Identifiers Bill 2013

Tertiary Education Minister Chris Bowen’s bill to introduce a national student id from 2014. Needed because there is no single repository of records for vocational education and training.

50 Superannuation Legislation Amendment (Reducing Illegal Early Release and Other Measures) Bill 2012

With 21, Bill Shorten’s complex bill to ensure civil and criminal penalties for promoters illegal early release of superannuation benefits, part of his “stronger super” reforms.

51 Tax Laws Amendment (Disclosure of MRRT Information) Bill 2013

Joe Hockey’s bill to provide an exception to the prohibition imposed on taxation officers about the disclosure of information regarding the tax affairs of a taxpayer. Hockey wants to remove doubt tax officers can provide information about the MRRT when the Minister wants to make it publicly available. The intention is to reveal how much the mining tax has raised, without breaching tax privacy laws.

52 Tax Laws Amendment (Special Conditions for Not-for-profit Concessions) Bill 2012

Treasurer Swan’s bill to amend taxation legislation to restate the ‘in Australia’ special conditions for income tax exempt entities. The bill is raised after the High Court found charities are considered to be pursuing their objectives principally ‘in Australia’ if they merely operate to pass funds within Australia to another charity that conducts its activities overseas.

53 Telecommunications Legislation Amendment (Consumer Protection) Bill 2013

Communications Minister Stephen Conroy’s bill amends the Do Not Call Register Act to clarify who is responsible for telemarketing calls and faxes where third parties are involved, vary industry codes and tighten the ombudsman standards.

54 Veterans’ Entitlements Amendment (Claims for Travel Expenses) Bill 2010

Julia Gillard’s own bill to amend the Veterans’ Entitlements Act 1986 to extend the time period for lodging a claim for non-treatment related travel expenses from three to 12 months and enable further extensions of time in exceptional circumstances.

55 Voice for Animals (Independent Office of Animal Welfare) Bill 2013

Greens bill to establish the Office of Animal Welfare as an independent statutory authority originally planned by Labor. Bandt said the Office would be a centre of excellence for animal welfare science and law, and work to harmonise and improve animal welfare laws across the country. He also said it would give animals a voice in parliament, independent of the Agriculture Department and Ministry, to reduce animal cruelty.

Shitstorm: The Rudd Government’s response to the Global Financial Crisis

The Germans, in their infinite wisdom, chose the word “shitstorm” as their Anglicism of the Year in 2012. The jury defined shitstorm as a public outcry in which arguments mix with threats and insults to reach a critical mass, forcing a reaction. Shitstorm, they said, filled a gap in German vocabulary “through changes in the culture of public debate.” The influential urban dictionary has a more pithy explanation, calling it a “gigantic cluster fuck”.  The 2010 book Shitstorm: Inside Labor’s Darkest Days by Lenore Taylor and David Uren is about the gigantic cluster fuck that was the Global Financial Crisis. Taylor is one of the country’s most respected political journalists while Uren has written on economic issues for 35 years so they team up well to discuss how the GFC shitstorm impacted Australian politics and the economy.

The book takes its name from a quote then-Prime Minister Kevin Rudd in a television interview. On March 8, 2009, Rudd spoke to a live studio audience on the Seven Network’s Sunday Night program about the government’s response to the GFC. Responding to opposition claims about the debt Labor created to fund its stimulus, Rudd said it was a choice between letting the market fix it up or intervening with temporary borrowings. “People have to understand that,” Rudd said, “because there is going to be the usual political shitstorm – sorry, political storm over that.” The swearword was likely a choreographed error from Rudd who left little to chance.

shitstormDeliberate or not, the choice of words was typical Rudd. The cover of the book Shitstorm shows the four members of the kitchen cabinet: Rudd, Linday Tanner, Wayne Swan and Julia Gillard. Rudd has his back to the camera. He is not interested in us, he is conducting his orchestra. But his players are not in tune. Finance Minister Tanner is looking off right, Treasurer Swan is looking left and only Rudd’s deputy Gillard is looking vaguely in his direction, but with her own agenda. The gang of four of the Strategic Priorities and Budget Committee (SPBC) made most political decisions many of which are still debated. But Australia avoided a recession, when the economies of the world crashed like ninepins around them.

Rudd was right about the shitstorm, but could not see he would be a casualty. His sensational sacking happened after the book was released. Taylor and Uren never saw it coming either. No one did outside a small circle of Labor apparatchiks. The panic-stricken parliamentary putsch in June 2010 that cost Rudd his job as first-term Prime Minister left the Australian polity reeling, locked the nation into costly backflips, and severely damaged the trust between Labor and their own supporters that remains today.

The Julia Gillard government scraped over the line in the October 2010 election thanks to her negotiating skills. But she had to promise no carbon tax reversing a 2007 election promise. The distant drum of the US sub-prime mortgage crisis had little effect in 2007. In Australia the worry was interest rates which had risen 10 times due to mining growth.

Rudd and Howard knew the crash was coming but kept it out of the election campaign. Rudd couldn’t risk talking about a crisis as it would highlight Labor “inexperience” while it was inconvenient to Howard’s “don’t risk good times” message. When Labor won there was little time to celebrate. The first effect in Australia was the cost of borrowing. The big banks’s short term loans were suddenly exposed as money fled the banking system. No Australian bank had to close its doors but there were times when the queue was down the street (prompting banks to consider how to keep large queues inside).

As the cost of money rose, the Australian banks took the near unprecedented step of rising interest rates without a Reserve Bank signal. The first bank tipped off Swan in advance but the next one didn’t. The treasurer advised people to switch banks but he could see there was a problem brewing. While on summer holidays at Cotton Tree beach on the Sunshine Coast, he took a call from US Treasury Secretary Hank Paulson that terrified him. Paulson said the US “might be able to see a way” through the crisis if house prices didn’t collapse. Swan knew it was a big if.

It was the first item of business when Rudd returned to work after Christmas. Labor promised a budget surplus of $18 billion (around 1.5% GDP). China continued to eat up Aussie minerals, but elsewhere the news kept getting worse. When Rudd went to Washington in March, he met the IMF’s Dominique Strauss-Kahn who told him the sub-prime lending mess would cost the world a trillion dollars (a figure later upgraded to $3 trillion). Governments would ultimately bear much of that cost.

By May 2008 budget, Swan was under pressure to abandon $47 billion of promised tax cuts. The Government held firm but had to hold back on cuts they hoped would keep the books in the black. Swan couldn’t yet admit the growing crisis for fear of impacting consumer confidence. Matters spiralled out of control in September 2008 when the US’s fourth largest investment bank, Lehmann Brothers went bankrupt with $613 billion owing on uncertain assets. Trillions in securities across the world guaranteed or counter-signed by Lehmans were now at risk. The US’s largest insurer AIG’s shared dipped 70% with $550 billion tied up in sub-prime mortgages. Largest US mortgage-lender Washington Mutual saw their shares nosedive and mutual funds dumped securities to meet a run on redemptions. The bond market died as no one would lend for anything longer than one day.

Australia had $800 billion of debt, of which $500 billion was short-term subject to constant finance. As America’s financial wobble threatened to tsunami across the Pacific, Swan’s message was simple: “We are not immune but better placed than most to weather the coming storm”. But an IMF meeting in Washington in October 2008 would tell him the storm was worsening: it was enough for a clean bank to have links with a toxic bank to be in trouble. China’s boom would not save Australia.

Swan knew financial stimulus was needed. Rudd quickly warmed to the idea too. Over Christmas Rudd had been reading the economic ideas of EG Theodore whose bitter regret was a lack of Australian government action which prolonged the 1930s Great Depression. Rudd was not about to let it happen again. Panicky people salted $5.5 billion out of Australian banks in ten weeks since Lehman went bust, and second tier banks Suncorp and Bankwest were at risk of collapse. Rudd guaranteed all term wholesale bank funding and retail deposits. Smaller mortgagees like Challenger Howard were not protected and in two years the four big banks increased their home-lending share from 60 to 85% .

While the SPBC was arguing over the size of a stimulus, it was startled by the news the Reserve bank had dropped interest rates by 1%. This was twice as much as Treasury recommended. Rudd had learned the lesson from Treasury relief package model which was to ‘go early, go hard, go households’. The SPBC would also double Treasury’s recommendation with a $10 billion package –  $8.7m in cash handouts and $1.5m on the First Home Owner Grant. There was also $6.2m to build a green car. Rudd’s message was they were ‘deploying the surplus’ to secure the economy. Shocked Opposition leader Malcolm Turnbull gave immediate bi-partisan support. Labor’s own cabinet was in the dark about the proposal and unhappy about it. Rudd blamed the need for speed and ‘extreme market sensitivities’ but his downfall can be charted to this decision.

The IMF predicted the world economy would stagnate in 2009. The stimulus kept Australian tills ringing through Christmas but business confidence was low. The Government pushed hard to strengthen Howard’s G20 as a forum to make global recommendations. They were supported by the US which saw the G8 as too happy to install euro-centric banking controls, anathema to the Bush administration. In November 2008, the IMF told the G20 they needed to fund a stimulus worth 2% of GDP.  This was huge, yet they were underplaying the situation. The IMF’s chief economist Olivier Blanchard knew any higher recommendation would ‘scare people to death’. Countries took notice. Even mighty China announced a $600b Keynesian spending package on infrastructure projects.

The Rudd Government was in difficult political territory. Spending would ease unemployment but it would kill their surplus promise. Rudd and Swan refused to say the word deficit for months until they finally admitted it was temporary. The linguistic games showed frustrated ministers that Rudd’s office had centralised decision-making to an unacceptable level.

Rudd plotted a large-scale construction program to keep up employment. Schools were chosen because they didn’t need much lead time or lengthy council planning approvals. The $16.2b Building the Education Revolution program was supplemented by a $6.6b social housing program and $2.7b on a solar installation package. Labor also needed a quick ‘sugar hit’ and gave another cash handout to taxpayers worth $8b designed to keep money circulating. The total package was 2.4% of GDP in the first year, beyond the IMF measure but reduced to 1.8% in 2010-2011. By the second package in February 2009, Treasury was predicting Australia would avoid a recession. It was a magnificent achievement but there were serious flaws. The solar rebate was so high, it led to huge demand and shonky work practices with fatal results.

There was another  major casualty of the downturn – the ETS, known in Ruddspeak as the Carbon Pollution Reduction Scheme. The CPRS was due in 2010 but the Government delayed it a year to include extra compensation called a ‘global recession buffer’. Rudd decided to get his new “browner” plan through the Senate with the help of the Liberals rather than with the Greens who wanted tougher environmental action. Opposition leader Malcolm Turnbull was supportive but undone by deep divisions in his own party. The eventual compromise was torpedoed by Liberal hardliners led by Nick Minchin and a spill led to the surprise election of Tony Abbott as opposition leader in December 2009.

Abbott reneged on the CPRS, leaving Labor stranded. Rudd was so sure the Liberals would support it, he spent no time selling it to the public. It would be impossible to run a double dissolution election on a complicated scheme that Abbott was calling a “great new tax on everything”. The failure of the Copenhagen climate change talks in December was the nail in the coffin and Rudd delayed the ‘great moral imperative of our time’ to 2013.

As Taylor and Uren’s book approached deadline,  Labor’s three-year-long polling honeymoon was over and the Liberals were neck-and-neck. The media hammered them over stimulus plan failures. Rudd axed the installation scheme and Peter Garrett became the scapegoat ministerial scalp. The audit office found colossal waste in BER including substandard work and inflexible design. The budget surplus was a mirage and the Government had troubling selling its economic message for different reasons than before. During the height of the crisis, minister could not be frank for fear of damaging confidence, now they couldn’t sell the recovery because it would draw attention to the spending issues.

To Rudd and Swan’s credit, they saw the GFC coming earlier than most. They acted quicker than most and deeper and with the help of the Reserve Bank and China, Australia emerged almost unscathed. Abbott ridiculed 25 months of ‘Whitlamesque spending’ but Rudd saved the country from years of austerity with his infrastructure stimulus. What neither he nor anyone saw was that Australia would recover so quickly. His successor Julia Gillard suffered in the 2010 poll but held on with a debt burden that would cripple Australia’s ability to implement real change in the difficult decades to come. As Taylor and Uren concluded, the political shitstorm would be ‘wilder and more damaging that Kevin Rudd ever imagined’.

A new news beast: Newsweek goes digital

In an interview that could easily have passed for Fox talking to Murdoch, the Newsweek Daily Beast Company sat down with its editor-and-chief and founder Tina Brown to discuss the end of print at the venerable magazine Newsweek.  Newsweek fell into the hands of Brown and Beast two years ago but have been unable to resist sliding circulation and rising costs. The last print edition will be December 31.

Brown was on “Newsbeast” this week with the company’s new CEO Baba Shetty dissecting the reasons why Newsweek was shedding staff and its print publication.  Brown spoke of the need for protection, of journalists and content. Senior columnist John Avlon was all suited up as he lollypopped his bosses with the opening question phrased as a statement: “So we are taking the bull by the horns, going all digital…”

“We are,” replied Brown.  “We must embrace the future.”  Brown said Newsweek was 80 years old and it was time to start looking at the next 80 years.

Brown, like many editors before her, conceded defeat for print. The industry has reached a tipping point and it was no longer a case if but when. And “when” said Brown, might as well be “now”.

“We decided to take away the when and…embrace it, be ready for it.”

Avlon turned the discussion to Shetty with management speak. “Being proactive not reactive is always a good idea…” “Yes,” replied Shetty, who unlike Avlon, was dressed down with a jumper and shirt.

The new CEO, a “brand guru”, said Newsweek was a great brand and a powerful media icon but was encumbered by “the form factor” and its economics. To take away issues of physical printing distribution and circulation, Shetty said, by porting the core product to digital would be “incredibly liberating”.

“Consumers were moving to digital and advertisers would want to be there to grab these audiences. Tablet devices, web usage for news, and social news meant it made perfect sense for Newsweek to now go completely native on digital.” he said.
Brown gave an economic rationale to back it up. She said it cost Newsweek $42m a year to print, manufacture and distribute before you’ve even paid one writer or one intern.

“That’s an enormous albatross,” Brown said.

“We thought it was more important to protect the journalists, the contents, the photographers, the ideas.”

Brown said she wanted a digital Newsweek to focus on the marketplace of ideas. But how then, would it be different to the Daily Beast, also entirely online, asked Avlon.

Shetty stepped in to say they were “incredibly complementary”.

In four years, the Beast had gone from a start-up to a site with 15 million visitors a month, up a 70 percent since 2011, a huge spike in readership and engagement.

Many were “lean forward, participatory, multiple visits a day,” Shetty said. “The Daily Beast is indispensable many people’s information diet.”

A healthy portion of this traffic was generated each week by Newsweek’s strong original journalism. Newsweek, said Shetty, “a step removed”,  offering more considered, thoughtful, long-form journalism.

Brown said the Daily Beast and Newsweek spoke to “the same reader in different moods”.  The Daily Beast offered news that was “hot and happening” while Newsweek appealed to the ipad reader on the train home. But, she said, they offered the same sensibility: reflection, context and “a thorough look at what was happening in the world”.
Avlon steered the conversation to the new brand: Newsweek Global.  CEO Shetty called it a terrific new perspective and described who the product would appeal to: “The mobile, highly informed, highly engaged, person very aware of what is happening over the globe.”

He said removing legacy print, meant Newsweek could re-interpret what it could be in pure digital form. Brown said the Daily Beast now appealed to a similar global reader who lived in India, London or Brazil.

Brown said one of the focuses was on “really powerful live events” including ones they had organised like Women in the World. which has an associated foundation which last week launched a campaign for education of girls in Pakistan with Angelina Jolie, hot on the heels of the shooting of 14-year-old education campaigner Malala Yousafzai.
All aspects of the company, said Brown were “now playing together” but print was the anomaly. Getting rid of it went with “enormous regret” as some “incredible brilliant talent” would be leaving the company but it was “the right decision for the company.” Avlon concluded that in terms of content that was “good news for journalists” and an exciting new opportunity” before nodding to the camera to end the interview.
The Daily Beast article that went with the video, gave some statistics to back up the “tipping point” : There are now 70m tablet users in the US, up from 13m in two years. A further explosion of use is likely, especially as two in five Americans get their news online, a number that is also growing.

“Exiting print is an extremely difficult moment for all of us who love the romance of print and the unique weekly camaraderie of those hectic hours before the close on Friday night,” the article concluded. “But as we head for the 80th anniversary of Newsweek next year we must sustain the journalism that gives the magazine its purpose—and embrace the all-digital future.”

Clive Palmer: last sentry

Clive Palmer holds a fascination for Australian politicians and the media alike.  Prime Minister Julia Gillard invoked his name in her revenge attack on Campbell Newman’s Queensland LNP Government. Gillard made a long speech to the Queensland ALP conference yesterday but it was the reference to Clive Palmer (curiously left out of the official transcript) that gave the Brisbane Times its lead. “Even Clive Palmer is having doubts,” Gillard said. “You know the ship is going down pretty fast when the bloke who wants to resurrect the Titanic is seen leaving it.”

Gillard is referring to LNP life member Palmer dishing out on LNP leader Campbell Newman. Palmer has been on the attack since last week’s Queensland budget where the new government raised coal royalties. The near billionaire Palmer is directly affected through his China First coal project in the Galilee Basin which was cancelled in May though he cloaked his criticism in wider concerns. According to News Ltd, Palmer said “strikes, protest marches and royalty hikes were not good for the image of the state and would drive away investment.”
It is amusing to see Labor use Palmer as a tool of their propaganda after painting him so often as the bogey man. Wayne Swan was in Palmer’s sights for much of that past 12 months, but the businessman has added the State Government to his grumbles. He is fighting both levels of government over his proposal to pump wastewater from his Yabulu nickel plant into the Great Barrier Reef protection zone.
The Queensland Government decision to award Gina Rinehart and an Indian consortium a rail corridor to the Galilee also rankles. Palmer and his Chinese partners have put their joint venture on hold due to the falling price of coal. Most of Palmer’s wealth is in iron ore not coal. His company Minerology painstakingly secured 160 billion tonnes of iron ore deposits south of Dampier in the Pilbara Ranges in Western Australia over 15 years.

Forbes estimates Palmer’s worth at $795m making him the 29th richest person in Australia. Palmer said his father George, a successful silent movie star of the 1920s and a radio pioneer, had the greatest influence on him. “Dad worked with the then Prime Minister Billy Lyons when he was in power, advising him on media stuff. He was probably the first of the spin doctors,” Palmer told the Gold Coast News. “He also set up train and buslines for transportation. He broke that monopoly that the state railways had. He was quite an amazing guy.”

On leaving uni, George’s son got a job in real estate in the Gold Coast. He quickly became their top marketing consultant, before setting up his own company, GSS Property Sales. With the Coast in a construction boom, Palmer thrived and was worth $40m before the age of 30. In 1986 he set up companies to buy iron ore deposits and trade oil. He became a close confident of Joh Bjelke Petersen and an admirer of the way the Premier turned Queensland into a coal exporter. Palmer was considered the architect of Joh’s final election victory in 1986.

Palmer met Soviet leader Mikhail Gorbachev and set up joint ventures with Russian companies. Palmer also greased the wheel with Chinese interests and had to be patient to make the deals work over many years. The lesson was to treat everyone with respect. Palmer said Chinese collective decision-making process often allowed middle management more power than the managing director. Palmer’s skill was his sense of timing. As Griffith Uni’s Jason West said, thermal coal prices spiked to unprecedented levels allowing Palmer, Hancock and Forrest to experience profit margins beyond expectations. “Instead of earning margins of $2 to $10 a tonne as they had for decades, coal miners were now earning margins of $50 to $100 a tonne which in turn increased asset values to levels rivalling well-established and brand name top 50 firms,” West said.

West said Palmer had one income-earning asset and a whole bunch of tenements offering only promises of future wealth. They include the massive $8 billion Sino Iron Project at Cape Preston, 100 km south west of Karratha, WA expected to deliver before the end of the year. Owned by Hong Kong-based CITIC Pacific, it is on Palmer’s tenements and will be the largest magnetite iron ore mining and processing operation in Australia. The Sydney Morning Herald estimates Palmer will rake in half a billion a year in royalties on Sino Iron.

Much of his poor public profile is due to his buffoonish tendency to become a walking headline. Palmer is not shy about self-promotion and calling himself Professor Palmer, courtesy of an honorarium from Bond University. Bizarrely, he has been officially listed as a “national living treasure” though the National Trust of Australia offers no reason for this accolade other than the incorrect statement “Palmer is a self–made billionaire”.

There remains the unfinished business of political ambition. In a Lateline interview last week, he attacked Campbell Newman for his lack of experience in business. “I’m the most successful Queenslander in the commercial world that’s ever lived, yet I’m not supposed to have any say and any knowledge about that,” Palmer said.  But while he has flirted with Katter, he still wants change from inside his party. “I love the LNP and I’ve been a supporter of it for 43 years,” he said. “I remain the last sentry at the gate to protect democracy in this country.” The question remains whether the sentry is there to guard the gate or attack the castle.

Birth, marriage and debt: Bankrupcty in Australia

If you are a man, in your early forties and single, then chances are you are more likely to be bankrupt. That’s the finding of the Profile of Debtors 2011, a new report released by Insolvency and Trustee Service Australia. This Government agency knows this because anyone who becomes bankrupt must lodge a statement of affairs with ITSA.

The Bankruptcy Act 1966 allows for trustees to distribute property fairly among creditors and prosecute dishonest debtors. Bankruptcy lasts three years but can be extended. Since 2003 several patterns among bankrupts have been noticeable: they are mostly male (55:45), they are getting older, and they have less children than before. The primary causes are unemployment and economic conditions affecting their industry (particularly since 2009).

The majority of bankrupts earn $30,000 or less and the size of their unsecured debt is increasing. Despite low incomes, almost half have unsecured debt more than $50,000 and over a quarter have unsecured debt of more than $100,000. Over 23,000 Australians went bankrupt in 2011 and ISA constructed a profile of the average bankrupt last year. He was male aged between 35 and 54 years and single without dependents. It was his first time bankrupt. He earned less than $30,000 in the 12 months prior to bankruptcy (well below the $48,000 national average) and owed more than $20,000 mostly to banks. He had no assets like property that could repay creditors.  Tasmania and Queensland had the highest percentage of bankrupts and NT had the lowest. Three percent of bankrupts identified as Indigenous (who comprised  2.5% of the population). 

Nearly half of the liabilities is unidentified by the research with the “other” category responsible for 47% of all debt. Of the identified debt, credit cards were highest, with 21 percent of unsecured debt followed by personal loans and house mortgage both on 12 percent. Credit cards also accounted for 18% of personal insolvency agreement debtors’ debt and 58% of debt agreement debtors’ unsecured debt.

According to ASIC, Australians owe $36 billion on credit cards, an average of $4,700 per card holder. MoneySmart’s Delia Rickard said paying off credit card debt should be a top priority for millions of Australians. “If you have $4,700 credit card debt and only make the minimum repayments, it will take 49 years to pay it off and cost you around $14,600 in interest,” Rickard said. “But if you are able to pay off $250 each month, you’d pay off your debt in two years and save $13,700 in interest.”

Despite interest rates at historical lows, banks still charge astronomical rates for credit cards. Paul Clitheroe said the average card rate is around 17 per cent but many charge 20 per cent or more. “Monthly interest charges continue to eat away at household budgets making it hard to get ahead with card debt,” he said. “If you’re serious about clearing card debt, one solution is to use a personal loan to pay off the balance.” Clitheroe said this would increase monthly repayments but the debt would  be paid off in three to five years depending on the loan term.

There are new rules since July 1 which will allow people be better informed against the scams credit card companies use to fleece their customers. The company must now refrain from offering limit increases on cards, unless agreed, provide monthly statements that show how long it will take to repay the entire balance if you only make minimum repayments and provide clearer details on interest-free periods. All new credit cards must include facts sheets to make it easier to compare offers, the capacity for consumers to nominate the credit limit, a ban on over-limit fees, notifications if you exceed your credit limit and repayments to the most costly aspect of your credit card debt first (such as cash advances) to reduce debt faster.