Jun 072015
 

Last week convicted fraudster and one time Australian national hero Alan Bond passed away. In many respects Bond’s rise, fall and comfortable dotage tells us much about Australia today.

Originally born in England, Bond was a ‘ten pound pom’ – like this writer and two of Australia’s last three Prime Ministers – whose family took advantage of subsidised immigration programs to leave the cold climate and dismal British economy for sunnier, more prosperous parts.

Building the Australian dream

In Australia Bond prospered. On leaving school he became a sign writer and set up a business where he quickly gained a reputation for sharp practices and cutting corners. However as with much of his generation real wealth was to be made in property speculation.

As Australian cities expanded through the 1960s, developers and speculators were at the forefront of the nation’s economic growth. Perth, Bond’s home town, doubled in size between 1961 and 71 and the once dodgy sign maker made his mark as a wheeler and dealer as he traded properties and build his fortune.

As the 1980s began a cashed up Bond was ready to take advantage of the economic orthodoxy of the time that to compete internationally, Australian businesses had to consolidate domestically to gain the scale required to be global players.

Bond added to his claims in 1983 when he wrested the America’s Cup out of the cold dead hands of Long Island’s Newport Yacht Club. Suddenly businessmen were the national heroes and Australians, particularly politicians, fell over themselves to bask in the glow of the nation’s entrepreneurial summer.

Dancing on the world stage

Around the time of the America’s Cup win the newly elected Hawke Labor government deregulated the Australian banking industry providing a ready supply of hungry financiers prepared to fund the global ambitions of Bond and his contemporaries.

The rest of the decade saw Bond leading a wave of Australian entrepreneurs using easy money to build international empires. Bond himself ended up building one of Australia’s brewery duopoly, holding prime Hong Kong property, buying the nation’s most popular TV station and owning a Chilean telephone company.

Naturally much of his money ended up in Switzerland and Lichtenstein, something that would work in his favour early in the 1990s.

The larrikin streak

Bond’s disregard for the law, investors and anyone unfortunate to get between his cronies and a bag of money – politely described as a ‘larrikin streak’ by many – continued as regulators and governments indulged his behaviour.

One good example of the free pass he received from Australian regulators in the 1980s were his insider dealings with his then mistress Diana Bliss, the latter of whom exquisitely timed a purchase of a small energy exploration company stocks in 1988 a week before Bond Corporation announced a take over offer.

Regulators at the time dismissed any claim of insider trading after being assured that neither Bond nor Bliss would ever countenance such behaviour, the Sydney Morning Herald later reported.

When the luck runs out

Eventually the 1980s Australian economic miracle and the entrepreneurs leading it proved to be chimeras based upon property valuations. When the 1990 downturn hit, the rampaging Aussie business heroes all quickly fell as their overindebted empires collapsed.

Bond’s personal fortune however survived thanks to his judiciously salting away assets controlled by loyal advisors. His 1994 bankruptcy hearing ended in farce when he successfully convinced the court he was suffering dementia and couldn’t remember anything of his business dealings.

He couldn’t stay too far ahead of the courts however and ultimately Bond served two prison terms totalling four years for dishonestly pillaging companies to keep his operation afloat.

At the same time Bond was being chased through the courts, Australia’s banks were licking the financial wounds incurred from their irresponsible exposure to the nation’s entrepreneurs. The lessons they learned define modern Australia.

Bearing the brunt

The country’s small business community eventually bore the brunt of the Australian banks’ losses as lenders’ balance sheets were rebuilt through high interest rates, massively increased fees and charges and tightened lending criteria. Many of those high fees and rates continue to cripple Australian business twenty-five years later.

Adding to the Aussie small business sector’s woes, the 1998 Basel I Accords were coming into force favoring property lending over business finance. Increasingly it became harder for any Australian businessperson to raise money from local banks while property speculators were welcome.

Over the next twenty years the result was stark. One chart from the Macrobusiness website illustrates the huge growth in Australian residential property lending and the stagnation of business finance since 1991. Only at one stage, in 2008, has business lending matched the levels of the late 1990s.

Egan_Soos_australian_debt_ratios

That shift to an economy based upon property prices, particularly speculation on residential accommodation, has served Australia well with the nation not experiencing a recession since the 1990s downturn.

The Australian economic miracle

Australia’s success allowed Reserve Bank governor Glenn Stevens to sneer in 2010 that Microsoft founder Bill Gates’ warnings about the Australian economy lack of diversity were misguided and foolish – the mining boom coupled with never ending property price growth guaranteed the nation’s prosperity.

In this respect, all Australians have become Alan Bond. Just as the bold riders of the 1980s boom based their future on property valuations so too have Australian households and the entire economy thirty years later.

Hopefully for Australians in general it will end better than it did for Alan Bond in 1996.

One though should not weep too much for Alan Bond, after being released in 2000 he quietly rebuilt his empire and in 2008 BRW magazine estimated his wealth at $265 million and named him among the 200 wealthiest people in Australia.

Time will tell if Australians share the deceased tycoon’s luck but in a way we’ve all become little Alan Bonds now in our dependence upon the valuations of our real estate holdings and the indulgence of those financing our lifestyles.

It may well be having a few bob hidden away in Switzerland might the best way for Australia’s indebted homeowners to protect their future.

More reading on Alan Bond

http://theconversation.com/alan-bonds-lesson-for-australia-we-get-the-fraudsters-we-deserve-42897

https://twitter.com/Mick_Peel/status/606703668658765827/photo/1

http://www.macrobusiness.com.au/2015/01/australian-private-debt-and-dont-skimp-on-the-pate/

https://news.google.com/newspapers?id=GjZWAAAAIBAJ&sjid=6-cDAAAAIBAJ&dq=diana%20bliss%20petro&pg=3849%2C5089408

http://www.abc.net.au/news/2015-06-05/ian-verrender-on-alan-bond/6525132

http://www.smh.com.au/business/comment-and-analysis/alan-bond-a-dealmaking-dynamo-gone-wrong-20150605-ghhc52.html

http://www.smh.com.au/business/obituary-alan-bond-19382015-20150605-ghgnia

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