The guardians of the public accounts, particularly in the public service, have never manifested much intense interest in white collar crime of the type manifested by old colleagues or people with whom they have constant interchanges. Treasury bureaucrats, for example, had to be dragged kicking and screaming into the royal commission into the banks, insisting all along that nothing bad would be found, and that any systemic issues had already been resolved by its wise stewardship.
They persuaded successive ministers of the essential honesty and stability of the system, and the risk that any asking of rude questions might accidentally cause it to totter. They persuaded ministers and prime ministers of their conviction that chaps with backgrounds very similar to their own would not stoop to do anything that was dishonest. That was an opinion echoed back to the public by all the great and good of industry and high finance at the lobby dinners, donor functions and private meetings and over the confidential phone calls by which the wisdom of the chaps informs treasurers, prime ministers and reserve banks and prudential regulators of the mood and the temperature of the national economy. One invisible hand washing the other, assisted by a healthy interchange of post-retirement appointments, even for ministers.
Ministers and public officials resisted the pressure for any sort of open inquiry. Those demanding it most loudly were just the sorts of outsiders now expressing their opinions about the quality, quantity, efficiency and honesty of government in the Pauline Hanson One Nation push. Many were National Party backbenchers. Their populist calls became irresistible; their simplistic populism and beliefs in financial conspiracies had to be addressed. A retired high court judge, Ken Hayne, thought to be both harmless and sound was commissioned, and the government's spinners joined with the lobbying and public relations apparatuses of banks, insurance companies, and financial advisers to announce that there was nothing much to make a fuss about. From spite, the government hoped it could retrieve condemnation of industry superannuation funds, with boards containing union representatives, to the benefit of worthy financial advisers, whose investments were, usually, not within cooee of industry funds.
As the Hayne and PricewaterhouseCoopers (PWC) inquiries showed, our biggest crooks are as likely to be bankers, consultants or auditors. Greed and profit have overwhelmed any sense of a social licence.
No one was more surprised than the Treasury and the prudential regulators when it emerged that Australia's banking system was run by gangs to whom honesty, fair dealing and regard for the public interest were entirely foreign concepts. Banks were rorting customers, even, it turned out, dead ones. They were rorting the regulators, even by fraudulently manipulating public statistics. They were abusing honour systems by being without honour. They were so driven by profit and the bottom line that many cared little for what was right. They were shown to be greedy. Rapacious. Without a moral bottom, or the slightest concern for their apparent reputations as public spirited citizens.
It was obvious what the ultimate report was going to say. But it was a measure of the shamelessness of then-treasurer Josh Frydenburg that he thought he might be able to confect some public relations coup from the presentation. Hayne wouldn't play. He thought what he had found to be a disgrace on most of Australia's private institutions, and many of our public ones. He thought many of the top bankers, at board and executive levels, to be contemptible human beings. If some were slightly less to be condemned, not a single manager deserved praise. He denounced a toxic culture of greed and law-breaking which put profit ahead of community wellbeing.
The commission also had some reflections on an old argument about whether banks or businesses existed only to make profit, without regard for public benefit, or whether they had duties as public citizens, operating on a social licence with special privileges and powers, to the communities they served and the social, cultural and economic life of the community. It became clear that public expectations of corporate citizenship were not overly onerous, and, in ordinary circumstances, served the banks, their reputations, and their competitive positions well. The image of the remorseless community predator was not good for business. Banks were expected to "pay back". They were shown not to be doing so.
It was 2019, and an election was due. The treasurer and the prime minister vied with the opposition to be the suitable party assuming responsibility to implement Hayne's recommendations, totally accepted by each side.
At that stage any evidence of halfheartedness, whether on Treasury advice or otherwise, would have been politically damaging. Scott Morrison and Bill Shorten accepted and agreed with the recommendations, professing themselves shocked by the rottenness of the system. The lobbyists held back. Seven years on, not even one of the recommendations has become law.
Some legislation has gone against Hayne recommendations. The current government purports to have "reformed" the banking and financial advice system but change that makes a difference is hard to find. Bank bosses are restored to their rightful place at the top of the financial and political ecosystem and continue to have close and privileged access to the treasurer, the Treasury and the prime minister. We rarely know what they are saying.
The Hayne inquiry became a dead letter. Finance is trying to have us forgive PWC as having suffered enough.
I will return in a moment to some more current instances of the public morality and ethics of some of Australia's most important financial institutions, such as PWC and KPMG Australia, or the apparent operating principles of modern public service. But could I propose at this point that the Australian economy is as much plagued by institutional corruption, insider access, secretive and unaccountable systems and economic waste as Italians under the various Mafia enterprises of southern Italy, the system of arbitrary and thoroughly corrupt government by discretion under Donald Trump in the United States, or doing business by bribery of senior officials in Zimbabwe or Cambodia.
It's a cost of doing business in Australia. It almost certainly costs ordinary Australian taxpayers - the potential One Nation voters for example - about the same as the invisible taxes paid to organised crime in Italy, the United States or Zimbabwe, perhaps an extra 10 per cent on transactions.
Here, though, the beneficiaries are mostly held in high honour, often regarded as great Australians, festooned with postnominals and given high places at the top tables. But whether as members of the great and good, or honorary members of the Soprano family, our systems involve massive transfers of wealth from ordinary Australian to our richest Australians, and to transnationals.
Most of those getting this largesse are not doing anything illegal, or, strictly, doing things that ordinary Australians cannot do, if they had the money, the inside access to the system and the lack of shame about taking money from the common blanket of all Australians. A good deal of the money sploshing about would be being spent anyway - on roads, or trains, or public buildings, on ships, and guns and exclusive rights to conduct various forms of business.
But in Australia, citizens are not dealt with equally. There are insiders and there are outsiders. The insiders have their own special access to parliament - as often as not these days with passes enabling them to go into private areas of parliament with a special pass, "sponsored" by an elected representative. They get access to the minister's ear. Just as importantly, and a little more unaccountably, they get access to the minister's minder's ear. The party in power arranges special functions to which major donors are invited, where they can lobby ministers, even the prime minister. By convention, that exclusive access gets you a hearing, but not necessarily a "yes". But the system is not transparent, and no one can know, other than to observe how close some of the relationships are. In many cases, those brokering the meetings are old party colleagues of members of the government, prostituting their knowledge of how things work, and their access to decision-makers, to business interests generally hostile to the party of government.
Some of these lobbyists - and only a tiny proportion of them are registered - get special hearings from government because they present ministers with what are presented as inside opportunities, such as the right, in effect, to bid to have businesses located in this country. Many of the recipients of government money under Albanese's Future Made in Australia plan - bringing jobs, new industries and opportunities to Australia - arrive accompanied by lobbyists, often old political mates. If they can get a deal, the lobbyists are taking a percentage of the millions in question. They are not doing it from patriotism, love of their political party, or as a favour to old political mates. Their glossy submissions will be partly composed by former senior public servants who know exactly who will be reading the submissions and the sort of arguments that will persuade them. In many cases, there will be no tender processes, and, often, a business that has got a leg in with a relatively modest submission can build from it to get expensive extensions, and insider status.
Consider One Nation as among those left out.
Some of the mechanisms of this became a matter of public scandal as successive governments ran down the analytical and policy-oriented areas of departments, instead taking their advice from private sector consultants, for ideological reasons. Skilled consultants parlayed their access and their success in promoting solutions to become indispensable to ministers and agencies - virtually the only ones who knew what was going on.
In many cases, of course, many of those involved in giving advice were the very same public servant experts who had been displaced, now providing much the same service but at twice the price. And, sometimes, as we have learned, not exactly the disinterested, independent and budget-conscious advice as before, but advice calculated to maximise the payment and the engagement of the consultancy firm. In some cases, and in procurement areas as much as in policy advising, agencies had little way of knowing whether they were getting value for money. In many cases, moreover, a contract to advise about the purchase of some system, or strategic direction, would lead to follow-up contracts to implement the recommendation and to put the system in place.
In many cases, particularly in Defence, not least over the AUKUS submarine contracts, departmental and service people would be getting second careers, implementing, for the profit of defence contractors, decisions which they had helped evaluate. The department, and many other agencies in similar positions, are doing very little to manage conflicts of interest, to monitor outright corruption, or to discourage the sets of mutual expectations created.
Labor, under Albanese, promised to cut back on the use of outside consultants, and to restore the intellectual heft of departments and agencies. They were helped in this aim by a corruption scandal involving PWC, which became involved in advising on measures against transnational tax evasion, then, before it was implemented, using its inside knowledge to approach transnationals with advice about how to evade the new system. It cost PWC. It was excluded from government contracts, if, on Finance advice, for an amazingly short time. Consultants were sacked. There appears to be a slight chance that the AFP will prosecute some of the worst offenders, but, as an AFP priority, it seems to stand behind delivery of nuclear submarines and completion of Afghanistan war crimes prosecutions. No action has been taken for civil penalties, although, overseas, similar types of misconduct have led to penalties imposed on partnerships of more than $1.5 billion. The Department of Finance thinks its old friends have already suffered enough, and that a combination of a spank on the fingers and ticking-off on an hour of ethics training once a month will prevent any recurrences. Emboldened, PWC still refuses to hand over (even to the AFP) some of the documents recording its guilty knowledge.
KPMG is another of the big four accountancy practices, one which, like PWC, has been involved in providing advice to customers in business and government (including at state and local government levels), and audit functions for very big companies needing an independent tick-off of their financial statements. They are not directly in trouble with the Commonwealth, at least, yet. But it turns out that some of the consultants, seeking to make pitches for business to some big companies, took a peek at the confidential auditing documents of similar companies. Thus, Optus accounts were looked at ahead of making an approach to Telstra, for example. A whistleblower (now a professor of philosophy at Wollongong) thought this was improper and probably illegal, but KPMG rejected this and obtained legal advice that suited it.
But the whistleblower persisted, and his information was broadcast from the Senate, leading to legal advice from another quarter (very critical) and a cascading sequence of resignations from the top. Many of the clients, including some NSW state government agencies, have been far from amused at the breaches of confidence by a business putting, like the banks and PWC, profit before legality and honesty. Minister for Finance Katy Gallagher, who has yet to adopt Finance advice on PWC's return (completely rehabilitated) from the naughty corner, has asked whether the big four ought to be out of the government advising system.
The potential for corruption or waste is accentuated by the way that many of the senior departments, including Prime Minister's, Treasury, Home Affairs and Defence, have severely (and illegally) truncated FOI rights, so that wrongdoing is not necessarily exposed.
The Prime Minister himself sets the standard in a closed, secretive, non-transparent and unaccountable system, just as he does with concealment of his dealings with lobbyists. Four years into power, his government is now reproducing all the worst features of the Morrison government. At the time he attacked those features and promised Labor would be different.
Not every form of insider access, contracts bypassing open tender processes, or consultancies with double agendas are necessarily improper or corrupt. But they are far from best practice and are more likely to add to costs and delays, rather than to save time and money. Moreover, they increase the potential for corrupt clipping of contracts by public servants and lobbyists engaged in the contracts. With some senior public servants considering that the privacy of public servants - even those found to have committed serious ethical breaches - is a more important value than respect for the public interest and the public right to know, the potential for serious corruption is much increased.
The National Anti-Corruption Commission is incapable, under present management and operating principles, of discovering or dealing with systemic corruption. Once a government becomes determined, as this one is, to hide things, the public can be sure that there is plenty to hide.
