A recent piece in The Conversation by Graham Wells highlighted the problems of economic forecasting over even a three or four-year horizon, never mind the 40 years of the MoneySmart calculator. Such precision is less economic forecasting than looking at tea leaves or chicken entrails. Professor Wells gives some good advice “when it comes to economic forecasting, it’s wise to admit to uncertainty”.
But ASIC admits no uncertainty. In its statement of ‘strategic priorities’ number one is to have “confident and informed investors and financial consumers” and within that the top objective is “education – investor responsibility for investment decisions remains core to our system, understanding risk and reward and diversification is paramount”. The superannuation calculator provides absolutely no indication of the risks inherent in the 40-year journey to retirement.
ASIC’s remit is huge. It is the corporate regulator, looking into matters of corporate governance for millions of companies, large and small, throughout Australia. It has a licensing role for credit intermediaries. It is an investigating and prosecuting body for corporate malfeasance. And, furthermore, it has just picked up the gig of regulating market operators, such as the ASX.
The question must be asked, has ASIC become too big to do its job thoroughly? Note this is not ASIC’s problem, but is the fault of the politicians who set the system up in the first place.
ASIC has a lot on its plate; it is hardly surprising that sometimes things fall through the cracks. Other jurisdictions have recognised the increasing complexity of the financial landscape and the problems faced by an ageing baby boomer generation unused to this new landscape and have taken strong action. They have realised the need for more focus in this area.
The huge Australian superannuation pot (some $1.5 trillion of which almost one-third is in self-managed super funds) and the Australian obsession with property as an investment vehicle is, as history has amply demonstrated, a honey pot for unscrupulous shysters.
And unless one believes that somehow Australian financial institutions are more moral than others, AND Australian regulators are much better than those in the rest of the world, AND that the Australian consumer possesses superior financial knowledge and skills than consumers elsewhere, there is a case for considering what other jurisdictions have done and beef up consumer protection.
The best time to fight a financial crisis is before it happens, not after.
Pat McConnell is an honorary fellow, Macquarie University Applied Finance Centre at Macquarie University. This article first appeared on The Conversation.
