The Guardian 7 December, 2005

Standing by his tax "sham" man

Anna Pha

Adelaide businessman and Liberal Party donor Robert Gerard finally submitted his resignation from the Board of the Reserve Bank of Australia (RBA) last Friday even as Prime Minister John Howard was still standing by "his man". Gerard’s fall came following accusations of tax evasion through a "sham" tax haven insurance scheme and a long battle with the Australian Taxation Office which was ongoing even as he took his seat on the RBA Board.

The RBA is Australia’s central bank, its Board has statutory responsibility for monetary (including interest rates, reserves) and banking policy in Australia.

The writing was on the wall for Gerard on November 29, when Australia’s leading business newspaper, The Australian Financial Review devoted most of its front page and four full inside pages to the businessman. "RBA member in $150 million tax ‘sham’", ran the front page headline. Below it read: "Gerard used offshore tax haven"; "Costello appointee gave Libs $1.1m".

The Financial Review did not let up over the next three days, with more front-page leads and yet more whole pages inside each issue. Then on Saturday, in yet another front page lead, came the news that Gerard had resigned, but Howard still "stands by his man" who is a member of the Prime Minister’s Community Partnership.

Under the RBA’s code of conduct board members are required to maintain the highest possible standards of ethical conduct. Apart from Howard and Costello, no one else seemed to be arguing in defence of Gerard remaining on the Board. Costello almost sounded as though Gerard’s tax affairs were pretty much common practice amongst business people. And that may well be correct.

"If ordinary law-abiding taxpayers are rightfully outraged by the use of offshore tax havens to avoid paying Australian tax, why did the Treasurer appoint a serial user of tax havens to the Reserve Bank Board?", asked Labor’s Wayne Swan.

The donations of $1.1 million to the Liberal Party since 1998 (and nothing for Labor) could not have done him any harm in Howard’s or Costello’s eyes.

But there is another question that needs to be asked: Why did the Financial Review give so much space to the issue?

Perhaps the comments by David Bassanese in the December 2 issue of the Financial Review offer some insight to this question: "Most Australians may now know that Robert Gerard of Gerard Corp sits at the table that decides the direction of interest rates. But do they know that joining him at the table is the chairman of the country’s largest property group, Frank Lowy, Telstra chairman Donald McGauchie and former WMC chairman Hugh Morgan?

"Why are they there? As most economists know, the RBA governor — along with his staff — really decides where interest rates are headed. The board merely rubber stamps their decision.

"Given this, why let some of Australia’s biggest and politically best-connected business interests get privy information on these decisions? We could ditch the Treasury secretary also, whose political master is still the Treasurer.

"As in New Zealand, let the RBA governor decide himself. If Ian McFarlane [RBA Governor] really wants someone’s advice, he can pick up the telephone."

The RBA Board has nine members — the Governor who is chairman, the Deputy Governor, Secretary of the Treasury and six external members appointed by the Treasurer for renewable terms of five years.

The six comprise one academic and five from the business sector.

Professor Warrick McKibbin — currently waging a campaign against the Kyoto Protocol (see Financial Review 30-11-05), a non-resident senior fellow at the Brookings Institute in the USA and a professional fellow at the Lowy Institute for International Policy.

Frank Lowy — chairman: Westfield Holdings, Lowy Institute for International Policy

Jillian Broadbent — director: Coca-Cola Amatil, Woodside Petroleum, SBS, Westfield America Management Ltd, Westfield Trust (Westfield Trust is the largest listed property trust in Australia).

Donald McGauchie of union-bashing, waterfront fame — chairman Telstra Corp, director: James Hardie & Nufarm, former president National Farmers Federation

Hugh Morgan — joint chair Common­wealth Business Council, former CEO of WMC, director Alcoa, president Business Council of Australia

Roger Corbett — (replacing Gerard) CEO Woolworths, director Fairfax Holdings, chair of Australian Made Campaign, director: Business SA & Australia Chamber of Commerce and Industry — the latter two being employer bodies

If these five business representatives do play more of a role than suggested by David Bassanese, then they could control the direction of monetary and banking policy in Australia.

They are after all political appointees of the Howard Government and with some of them associated with far right organisations including the HR Nicholls Society, Centre for Independent Studies, Enterprise Australia, and the Institute for Public Affairs.

The Prime Minister’s Community Partnership

Robert Gerard is a member of the Prime Minister’s Community Partnership which includes big business and church/charity representatives.

The Community Partnership aims to "promote philanthropy and encourage business to operate in a manner that meets or exceeds the ethical, legal, commercial and public expectations that society has of business"!

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