Regulator - October 2009

Welcome

This has been the month that Australia could fairly be said to have moved from the bantamweight to the middleweight division of global economic players: The ascendancy of the G20 as the primary coordinating forum for global economic policy; the World Economic Forum ranking of Australia as the number two financial centre internationally; and the rally in international markets precipitated by Australia’s hike in official interest rates all combined to bolster Australia’s place in the global economic hierarchy. As CNN noted of the RBA-driven rally in the Dow and the FTSE, it was “a kangaroo bounce”.

Granted, our newfound status is in part due to Australia’s current financial strength, relative to the traditional heavyweight economies. However, the GFC may result in some re-ordering of global power that not only benefits developing nations such as Korea, China and Brazil but enhances Australia’s level of international influence over the medium to long term, including in the area of regulatory reform.

All the more reason then, for the local marketplace to take an active interest in the future shape of market reforms by maintaining a dialogue with the relevant Federal ministries and making submissions as appropriate. With US President, Barack Obama, signalling a tougher line on politically sensitive issues such as executive remuneration and our own Government wanting to prove its G20 credentials as a good global citizen, remuneration caps and other hardline regulatory reforms could well be on the table.

So it was timely to hear the views of some leading Australian chairmen at last week's Australian Financial Review Chanticleer luncheon, co-sponsored by Mallesons. As Qantas Chairman, Leigh Clifford, legitimately noted of the executive remuneration debate: “There has obviously been a community reaction, and understandably, but the onus needs to be put back on boards”. For his part, Dr John Schubert made the insightful observation that supervision of financial markets is just as important as the regulation of them.

Against this backdrop, the Productivity Commission’s recently released draft report on executive remuneration is analysed by Tim Bednall in our lead article this month.

Among some of our other contributions, Ian Edmonds-Wilson considers the implications of the Federal Government’s $8 billion helping hand for the RMBS market, John Edstein makes some predictions about the outcomes of the Cooper Review on superannuation, Stephen Jaggers analyses the conflicting world views of Treasury and ASIC on future regulation of financial products and Caroline Coops takes aim at the lack of clarity in the national unfair contracts regime.

I am also pleased to welcome Beijing based partner, David Olsson, to this edition of Regulator. As one of our senior people on the ground in China and with a broad range of contacts, David provides a very informed analysis of the outlook for China’s financial markets reform process. The good news is, the GFC hasn’t slowed the reform train in China; it’s full steam ahead.

Happy reading and enjoy the remainder of your week.

Stuart Fuller
Managing Partner (Practice)