Media Release ¹4 January 2010
Rudd and Swan Warned over 250,000 Mums and Dad Investors
Bank policies may be causing a second wave of corporate failures.
The Prime Minster Kevin Rudd and the Treasurer Wayne Swan have been warned over a second
wave of losses and corporate failures for the property industry which could be caused by the
bank lending policies in the $60 billion unlisted property trust sector.
In a video broadcast to be released tomorrow morning at 9.00am on the Light of Day website, and sent
to all Members of Parliament, Owen Lennie spokesperson for the Light of Day outlines the need for
Government intervention and a Senate Inquiry.
Mr Lennie said Light of Day has been formed by some of the 250,000 mum and dad investors in the
unlisted property trust industry who are concerned about the effects of bank lending policies on the value
of their investment. The current lending policies of some major banks, who have received the taxpayer
guarantee, are endangering the stability of $60 billion of investment of their own customers in the
unlisted property trust industry through interest rate and fee gouging.
“This situation appears to be flying well under the economic and political monitoring of the Prime Minister
Kevin Rudd and Treasurer Wayne Swan, who have worked hard to stabilise the economy and also
appears invisible to the Opposition.
“The Prime Minister and the Treasurer now need to make sure they are not blindsided by the issues
around Australian banks, which they have guaranteed and allowed to take over smaller rivals, while the
banks pressurise small but important sectors such as investors in the unlisted property sector,” Mr
Lennie said.
“This is happening at a time when the major banks’ return on shareholder equity after tax (and after the
provisioning) is still as high as it has been for more than twenty-five years, according to the Reserve
Bank of Australia Stability Review in September 2009.
“At the heart of the current crisis is the action of some banks to take advantage of the downturn
where the valuation of a property has reduced to force the unlisted property trust into a higher
rate of interest or to roll over their loan for short periods, incurring excessive fees.”
Mr Lennie said this action can be taken despite the property being well tenanted and the Fund
Managers meeting their interest payments, resulting in individual investors, many of them being
in self managed super funds, having their savings destroyed by the Bank’s policy.
As self-managed funds can have up to four members, up to a million people may be affected.
“In one case we are aware of, investors in a fund faced an interest rate increase of 50% overnight which
caused the fund to cancel distributions and suspend major building maintenance or improvements which
increase rents and make the investment perform.”
Mr Lennie said the domino impact on the property market of Australian banks forcing sales on unlisted
property trusts will ultimately flow on to lower valuations on a wide range of commercial property
securing banks’ loans, increasing provisioning and reducing funds available for bank lending to small
business.
Media Enquiries: Owen Lennie, Spokesperson, Light of Day Mobile: 0411 507 505
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