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Banking on the common good

  • 15 August 2018


If the good functioning of the economy and of the government depends on trust, last week's events undermined both.

We have yet further evidence at the royal commission that banks are not to be trusted with our money, still less with our superannuation. We have seen government ministers and David Murray, former CEO of the Commonwealth Bank of Australia, who previously opposed the appointment of the royal commission, now oppose proposals to broaden the board membership of banks and to include in their guidelines reference to a social license.

Trust in the government was also tested by evidence of its partisan administration. Its decision to award without tender a large contract to a small agency to care for the Great Barrier Reef has looked increasingly dubious. At the royal commission, industry superannuation funds that the government had tried to hogtie came out smelling of roses, while the retail funds run by banks, the government's favourites, were shown to be malodorous.

In other news a Federal Court judge criticised the court action brought by the Coalition-appointed Australian Building and Construction Commission as 'a completely unnecessary waste of public money'. The government-appointed Federal Public Service Commissioner was also criticised by an enquiry for failing to uphold APS values in providing material to the partisan Institute of Public Affairs.

Cynics will no doubt ask when anyone ever trusted governments or banks, and so whether these revelations matter. We may be tempted to agree. On deeper reflection, however, trust is central for the functioning of the state and of the economy.

For all its apparent solidity, money is no more than an assurance that we shall be able to exchange it for a certain amount of goods or services. It is only as good as the trust we place in the implicit contract behind it and in its guarantee. The same is true in more abstract financial dealings, where the entrails of past deals are cut up, baked together and sold. Their worth depends on our trust in the assurance that the ingredients are edible. We trust governments to ensure that our trust can be maintained.

Trust in relationships lies at the heart of the language of finance and government. We speak of trusts, trustees, fiduciary duty (one based on trust), mutual provident societies, cooperatives, securities, shares and exchange. The language of government is also relational: it embraces national interest, representation, commonwealth, election, members, responsibility (answering to others), charge and