Peter Whish-Wilson (Tasmania, Australian Greens) Share this | Hansard source

I will take the interjection, Senator Duniam: our state of Tasmania. They bought the land, which was often used for agricultural purposes prior to tree farms—good high-grade agricultural land. The communities that used to service those farms were gone, because these trees take 20 or 30 years to grow. At the end of that, not only did investors lose their money, but the schemes all collapsed like a house of cards, as did Gunns Ltd, the timber company. What happened? What about the plan for Australia to be self-sufficient in forestry products? At the end of it, all these trees were sold for a few cents in the dollar in terms of their asset backings to foreign investors. So Australians pumped $4 billion into managed investment schemes; it all went to the wall—all the trees were sitting there unpruned and a fire risk. Farmers wanted to get rid of them but they could not get access to the land because of legal issues.

It was a total catastrophe. No-one has ever been brought to account. This was Australia's mini GFC moment. Senators Duniam, Bilyk and Brown may be thinking that, had we had a pulp mill in Tasmania, it might have bought the trees. There may be some truth to that. Had one of the world's biggest pulp mills been built in the Tamar Valley—which, I unashamedly will say, I campaigned against 14 years—it probably would have bought these trees. I have to say that these investors bought the trees for next to nothing and they still do not know what they are going to do with them. That suggests that they do not have a market. It would have been an absolute catastrophe if another couple of billion dollars of investors money had been poured into a dirty, stinking, rotten pulp mill in a tourist valley in beautiful Tasmania.

The whole thing was a house of cards from the start. Anyone with half a brain would have seen it coming. But nevertheless the investors—because of what we call, in technical terms, asymmetrical information—did not know the risks. Many of the financial planners did. Certainly the companies that were spruiking these tree farms knew the risks. What did they do? When they knew that this was a giant Ponzi scheme, the only way they could keep going was to keep new investors' money coming in so they could pay the bills. Even though they knew it was a giant Ponzi scheme, they kept dancing until the music stopped. Guess who else kept dancing until the music stopped? The banks did. Lo and behold, the big banks were loaning the money to the tree farm scheme companies to on-loan to the mum-and-dad investors who were being told that these things were as safe as houses.

But the banks were very clever. ANZ, for example, loaned the money to Timbercorp—a colossal catastrophe—but they refused to put tree farms in their own financial planning wealth management arms. We asked them, and they said they were too high a risk. But they were happy to loan this money to these investors at 15 per cent. Those of us who understand finance would be wondering why we were paying 15 per cent, because that spells risk by any means. Nevertheless, a lot of these good people, these good Australians, were not sophisticated investors. They trusted their accountants and they trusted their financial planners when they were told that these would be good for their retirement: 'They are almost annuities. They're trees. They'll pay out in the future, and you get a tax deduction now.'

No-one has been brought to account for this scheme. This report makes a number of recommendations that will help prevent this from ever happening again. However, the Greens believed, after this report, that a royal commission was needed into misconduct in the financial services sector. A royal commission could just look at this catastrophe alone, without looking at the banks, without looking at any other of the many scandals that we have seen in the financial services sector in this country in recent years. It could just look at managed investment schemes.

At the end of the day, the most important thing is that the Senate's report is here for people to read and that we act on it and make sure this never happens again. One thing I did learn in my years in finance and in teaching finance is that financial catastrophes, Senator Williams—through you, Chair—always tend to happen just outside the boundaries of people's active living memories. They always tend to happen just outside people's memories. They will happen again. There is no doubt about it. We have to put legislation in place and make changes to make sure that managed investment schemes—complex, risky products—are not bundled up by people who have their snouts in the trough trying to make a quick buck by ripping off investors. I have no doubt that it will happen again if we do not act on it. I applaud this report to senators in the chamber and ask that they read it.

The Greens will continue to crusade for an inquiry into financial services misconduct, an inquiry which will look at who is responsible for this and hopefully get some justice for the many victims who still are losing their homes and who still are tens of thousands, if not hundreds of thousands, of dollars out of pocket. We need laws reviewed and looked at to make sure this does not happen again.

Debate adjourned.