A selection of CPA Australia's media mentions

Harvard Business School

The Financial Times online publication (FT.Com) has reported on CPA Australia's partnership with Harvard Business School. FT.com said the deal was the first of its kind between Harvard Business School Publishing and a professional association in Australia. The arrangement allows CPA Australia's members to complete business and leadership programs online.

Good practice

The launch of CPA Australia's Good Practice Guide in Asia attracted interest from mainstream media in several countries including in The Star Newspaper and Financial Daily in Malaysia. The guide contains Asia-specific information and includes information about procedures from the region's top organisations, regulatory bodies and members.

Corporate governance

An opinion article by CEO Geoff Rankin on corporate governance was published in The Australian Financial Review. The article highlighted the fact that despite the often well-established relationship between organisational culture and successful risk management, there were still examples of corporate failure due to poor ethical and governance standards.

Small business survey

CPA Australia's latest Small Business Survey continues to attract strong interest from mainstream media including The Weekend Australian, the Herald Sun, the Daily Telegraph, Australian Associated Press and the online publication Smart Company. CPA Australia business policy adviser Gavan Ord said owners of businesses needed to be more aware of conditions in today's trickier economic environment.

Global reporting initiative

CPA Australia's public profile on non-financial reporting and the Global Reporting Initiative has been reported by The Australian Financial Review and BRW. The reports said CPA Australia was calling on accountants to aid companies to bring their non-financial reporting up to scratch.

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In August a group of prominent and influential senior finance professionals gathered in Melbourne at the annual Robert Half roundtable to discuss a range of issues relevant to the profession.

Among those in attendance with Robert Half's Nigel Barcham were CPA Australia CEO Geoff Rankin FCPA; Deborah Sullivan CPA of Dental Health Services Victoria; Steve Kelly ASA from SMS Management & Technology; and Ray Gunston FCPA of the Tatts Group.

Prominent in the discussion was what climate change means for the finance profession. 'It's really an economic issue that flows across all business,' Rankin said. 'So it's just not the large carbon emitters that are going to be impacted by this ... it's going to have a flow-on downstream effect.'

Copies of the 2008 white paper will be available from the Robert Half website.

Colour me cautious

Leading finance commentator Alan Kohler examines why a steady investment hand and cool head will matter for some time to come

The world is becoming mired in stagflation and confusion, but I am crystal clear. Things still look grim and the bottom is in front of us, but I don't think you should stay out of the market.

The reason? All forecasts and 'calls' are useless, including mine. Sensible investing is about buying well and steadily, not paying fees, and holding for the long-term. And the best time to buy is during a downturn like this.

Picking a precise inflexion point, top or bottom, is impossible, so the only worthwhile strategy is to keep investing a bit at a time. This is the time when this strategy really matters. The risks feel greater, but the truth is that they are less than they were a year or even two years ago, when share prices were higher.

Fees also matter more, because 2 per cent is now a quarter of your likely five-year total return, where it was only a tenth of the return over the past five years.

During those past five years, I was watching corporate earnings carefully and reporting that share prices never got out of line with their normal, historical relationship to profits. But we were blindsided by the fact that the global economy and therefore earnings were being temporarily boosted by a credit bubble that has burst.

Prices have fallen as a result and in many cases look cheap. The trouble is that earnings have further to fall, and in some cases new equity will have to be raised (especially by the banks).

But let's not pretend the environment for investing is not difficult. It is.

The US, Europe and Japan are already in recession, which will be officially acknowledged in the coming months. Australia is on the brink of recession; so too is New Zealand.

It's the second phase of the credit crunch. The credit tap was turned off last year, and now the arteries of capitalism are progressively drying up and business activity and consumer spending are following suit.

ABN-Amro's Kieran Davies has pointed out that for only the sixth time in 50 years, money supply in Australia is now shrinking as people lock up their cash in term deposits (that's M1, which is currency plus current deposits). On four of those five previous occasions, the economy went into recession and on the fifth, in the 1950s, growth slowed to less than 1 per cent.

Consumer confidence, business confidence and lending are all at recessionary levels, and household wealth has declined the most since the last recession.

The good news is that the Reserve Bank of Australia is now focusing more on growth, or the lack of it, than inflation. It will reduce the cash rate quickly over the next 12 months to 6 per cent and probably less, but because wholesale funding markets remain tight, this won't be fully passed on by banks.

The sharemarket is not priced for recession. If the Reserve Bank cuts fast enough and if the banks squeeze margins and pass the cuts on and if there is absolutely no slowdown in China after the Olympics, we might avoid a recession. But those are big ifs.

Elsewhere, Western economies are becoming stuck in the quicksand of stagflation. Despite the appearance of a synchronised global slowdown, and probably recession, central banks are not cutting rates.

In fact many are likely to lift rates. Morgan Stanley's London economists say they expect 16 central banks to lift rates by the end of this year, and only two will cut: Australia and New Zealand.

The problem is that in most countries monetary policy is already loose. The weighted global cash rate is currently 4.5 per cent while global inflation is running at 5.3 per cent. That means the real cash rate is minus 0.8 per cent, the lowest in a decade.

In most of those countries core inflation is still rising. So, the central banks have already cut rates as much as they dare and are now facing the silent armies of recession with no corks in their popguns.

I don't think the US sharemarket has fully recognised that the US is moving into recession, either: it is not yet in the prices. The rally in the US in the past month has been a sort of fools' paradise that will come to screeching halt as evidence grows of rising unemployment, falling demand and more distress among banks.

If I'm right, the US stockmarket is about to suffer another leg downwards in the bear market as banks and investment banks enter a new phase of write-downs. Australian industrials and financials will follow. Commodity prices could rally again as the US dollar falls, so that resources stocks would strengthen.

So, what to do? Look for good long-term investments based on ideas that fit with the changing world around you and, above all, use dollar cost averaging (where you invest the same amount every month).

Infrastructure, carbon emissions reduction, gas, wireless telecommunications, health and pharmaceuticals are some of the themes that will dominate our lives in the years ahead. Another is deleveraging.

Households and financiers in the Western world will now focus on reducing their debt, both deliberately, by reducing consumption and repaying loans, and accidentally, by going bust.

The long boom in banking and finance is over. That doesn't mean good banks will go bust themselves, but that their asset growth and margins will shrink. They will also start looking for equity pretty soon as arrears grow. In general, these are the worst of times and the best of times. Don't waste them!

For further information visit the Eureka report website.

Reference: October 2008, volume 78:09, p. 14-15