The Raff thinks that many of Henry’s readers will not have heard of the august government body ARPC, otherwise known as Australian Reinsurance Pool Corporation. Toot-toot-toot, here comes the money train, all aboard. So what is the ARPC? The function of this business is to provide insurance for businesses affected by an act of terrorism. Every business that has a business insurance policy is lumped with an ARPC premium added to the company’s insurance premium. The ARPC says it’s not compulsory but that’s only if a business chooses not to have insurance.
The ARPC premium can be calculated in a number of ways with three tiers of additional premium. The added premium for Tier C (mainly rural businesses) is 2.6% and Tier B (mainly suburban) is 5.3%. Tier 1 is the cash cow. Some months ago the Raff was alerted by a friend that the premium for Tier 1 had risen from 12% to 16%. What’s betting the next rise is to 20%. Federal state and local governments are making grabs for cash.
The Raff thought he better look at the ARPC’s annual report for 2015/2016 to discover what bickies are involved. Let’s start with the balance sheet: On the asset side of the ledger total assets was $604.6 million that includes investments of $524 million invested in term deposits. With respect to the latter, ARPC could have doubled its income from directly investing in bank shares for dividends as opposed to term deposits with ANZ, BOQ, CBA, WBC and other financial institutions.
On the liability side of the ledger, shareholder equity or net assets of $503.7 million includes $479.6 million held as a reserve against claims. The latter figure is a cash reserve because the cash flow statement shows nearly a billion dollars withdrawn from term deposits and then reinvested back into term deposits. May be, and just perhaps, $500 million in reserves might be better spent on hospitals.
So where do the goodies come from for the Commonwealth Government? Well, the total capacity of the scheme is shown as some $13 billion dollars, of which $10 billion is guaranteed by the Federal Government. And guess what, the Government is paid handsomely for the guarantee. The Raff has not delved into the ARPC accounts in forensic detail but it’s noteworthy that the P & L account shows finance charges of $55.02 million. Furthermore the cash flow statement shows outgoings of Retrocession Payments of $65.2 million and $63.7 million for creditors and employees. No doubt the directors and board members are paid handsomely.
The 2015/2016 ARPC Annual Report states that by the end of FY18, the Federal Government will have received fees and dividends of $845 million – come in spinner. The following chart shows what the ARPC will use to justify further hikes in premium and a there is a table showing some aspects of ARPC financials (note the Commonwealth Guarantee Fee).
Source: ARPC 2015/2016 Annual Report
Source: ARPC 2015/2016 Annual Report
And some call Australia the lucky country! If it is, what have Australians done to deserve the current dross of leaders? Well it probably is a lucky country unless a person is a direct shareholder of a major bank, a person contributing to a superannuation fund, a business relying on electric power supply without disruption, a household facing massive hikes in power prices to mention but a few. Crikey that just about encompasses everybody.
The Raff is going to leave the bank situation until last. The next grab for cash is the NSW Fire Service Levy (FSL). The Raff has always had a building and contents insurance with NRMA. In the past building insurance included around $200 for the FSL. The insurance companies no longer add FSL to the building insurance premium but now the local council collect a FSL along with rates. And guess what? The $200 has risen to just over $300 – the Raff does not object to this because his house is located right next to a reserve contiguous with a National Park. However, a large part of the FSL is based on the unimproved value of the property being accessed and not mainly on risk. For instance Prime Minister Turnbull will pay a FSL of over $500 with never a fear of bush fire. Now here is the rub. Many property owners do not have their house insured and therefore did not contribute to FSL – now they have to because it’s charged by council as part of their rates, although separate billing will apply. Some rural land owners will apparently pay less. One can but imagine that there is a windfall in all of this but how much remains a question. Residents can only hope that every cent is reinvested in fire control and firefighting equipment.
It is happy days for FSL and Council. This is because residents around where the Raff lives received new property valuations from the Valuer General’s Department - the value of their properties hiked between 20% and 40% - if this trend continues it will not be many years until Sydney Northshore households will pay many thousands a year in rates and FSL.
Just a tad more focus on NSW Government - there is a proposal to abolish stamp duty on buying a house in the belief that the prices of homes and apartments would fall if stamp duty were abolished, which is of course cobblers. What would be the replacement? Some genius has recommended a one-off Land Tax of over $5,000 per block. The Raff is sure that the poor households would be excited by this idea. The way the grab for cash is going a Land Tax is probably inevitable and we will all become a lot poorer. One thing for sure – if there is a land tax there will be no getting rid of it. Land tax might be a replacement for lotteries sold off and of course there is always the possible reintroduction of a death tax. The bastards will go for every crumb.
The Raff’s local shopping centre is St Ives set amid the leafy Northshore. Some years ago parking was not a problem – but now it is and at 11 am the Raff has often found no parking spaces available within the shopping centre precinct. This state of affairs is primarily due to the plethora of blocks of units constructed and under construction, and soon to be constructed as owners of houses bale from being sandwiched between or overlooked by high rise. What’s the local council going to do? Well it has to its credit added spaces to a car park outside the shopping centre precinct but the local rag cited plans to install parking metres in nearby streets. Yes, you can guarantee that Council will ensure its suck of the sav.
Our Federal Treasurer seems to know little about finance and that profit goes hand-in-hand with return on equity (ROE) and return on assets (ROA). It is true that Australia’s leading banks are frightfully robust, but that’s the way the public would like them except for political members of the dark-side. ROE and ROA for the Big-4 banks is near double US banks and a tad ahead of UK banks. Why just banks? Why not add a levy to every business with ROEs and ROAs equal to or greater than for banks? There is no fairness, just a money grab.
The decision to go the banks is a disgraceful one and any act to control bank salaries, bonuses or any other aspect of bank operations is likened to communist control. But then if our PM leaned further left he would probably topple over like the Raff did a couple of weeks ago when he took the short route down from a small grandstand – no bones broken just a tad loss of pride.
The Raff and the Table-of-Knowledge (TOK) lost many tens of thousands this week when the main banks got savaged with Morrison’s grand plan. The Raff would like Turnbull and Morrison to know that the Liberal supporters at the TOK will never ever again vote for the Liberal Party (LP). The LP is seen as defunct, a dinosaur; this is a sentiment held by many friends outside the TOK. The Raff has already paid his $25 to join another party – f---- y—Liberal Party.
Nick Raffan