25 July 2010
The Hon Julia Gillard MP
Prime Minister
Parliament
House
Canberra
ACT 2600
Dear
Prime Minister,
Re: THE COOPER RECOMMENDATIONS ON ART
AND SUPERANNUATION
The
purpose of this letter Prime Minister, is to ask you to review these recommendations
very carefully, and to ensure that in its current form, the recommendations are
NOT implemented.
I am a
member of the
Australian Indigenous Art Trade Association, and am asked by the chair of the
Association to advise you that this letter has the full support of the
organisation, in terms of its content and the suggestions made.
Preamble:
Throughout
history, successful cultures have valued and encouraged the arts. Their artworks have become their rich
heritage.
In the
not so very distant past, Australia has suffered from being tarred with the
brush of being remote, out of the picture, and generally unsophisticated in a cultural
sense. We are only now recovering from
the famous ‘cringe’.
We
now have one of the worlds most unique, culturally significant, sought after, and
respected contemporary art movements in our Indigenous art - and our
non-indigenous art is a vital and important part of our relatively young
country’s developing identity. It is
exciting. And it is important. It is even valuable. Our Government policy should reflect that.
Our
current Superannuation Legislation allows for investment in art, but does not
allow investment art to hang on its owner’s wall where it could be enjoyed! Please consider the kind of national culture
that would even conceive of, let alone enforce such a notion! So much valuable, beautiful, art -- our
heritage – but we mustn’t look at it & we mustn’t enjoy it. It must be wrapped up and hidden from view in
the dark, or rented to someone else to enjoy.
Clearly we have a long way to go.
It was
hoped that we would have a progressive government again – one which would
foster the arts as an important part of our culture, and review and reverse ridiculous legislation such as
this. The review came and went – but it
did not deliver.
Its
recommendations as far as art go, are the antithesis of what we would expect
from a contemporary government.
Furthermore,
and without exaggeration, implementing the Art related recommendations of the
Cooper Report would be a dangerous and retrograde step for any government to
take.
The
recommendations clearly demonstrate a lack of understanding of the arts
industry, its importance to our culture, and the need for balance and
equilibrium to sustain such a sensitive market.
If
Government must intervene in a country’s markets, it should only do so when
market forces fail and problems cannot be addressed by other means. It should be done with a specific purpose in
mind, a clear understanding of the market, and with appropriate finesse. It is not a job for amateurs.
Would
we raise interest rates by 10% suddenly and for no apparent reason? No.
But Mr Cooper wants to take over 20% of trade out of the art market, and
to cut established values by over 50% by forcing sales. This is the antithesis of finesse – it is
vandalism. Its effects will be far reaching.
Regrettably, Mr Cooper is not answering questions from his
detractors, and so we are forced to direct these questions to you Prime
Minister:
- Why has Mr Cooper disregarded the core LABOUR PARTY philosophy of CONSULTATION with
people involved, those in the industry, those to be financially affected,
and industry and labour economists knowledgeable about the arts industry?
- Why has Mr Cooper clearly not properly informed himself
about the complex arena in which these determinations are to operate?
- Why has Mr Cooper not done his sums, his research
and analysis, carried out due process as far as attempting to quantify the
size and the nature of body of the SMSF investment in art (before he
sacrifices it without reason to a five year fire sale)?
- Why has he not gained advice from the art industry about the effect of selling
of an enormous body of important artwork in a short time frame onto an
already GFC depressed market? – this is the equivalent of forcing stockmarket investors to sell when prices are down.
- Why is he not concerned about the thousands of genuine investors losing
their hard earned Superannuation funds
by being forced to sell art investments before the investment comes of age? The terms of reference clearly state
that this review is to maximise value of superannuation funds to
Australians. How do his
recommendations do that?
- Why has he, if art is such a poor
investment, not applied the same
rules to big business who can still have art as an asset class in their superannuation funds? This inequitable and virtually criminal proposal
applies only to the small SMSF owners, who in the majority of cases, take
great care, and maybe even better care, to select investment art for their
funds?
- Why, while we are on that point, has
he not investigated the buy and
sell prices that have already been achieved through superannuation art
investments? Does the fact that
an Emily Kame Kngwarreye painting,
,achieved an auction price of over a million dollars – a gigantic leap from its purchase price, not validate its purchase via superannuation funds? Not all works sell at this level of course, but it is very common for artworks to outperform stocks and shares – perhaps he could have researched this also. The information is available.
- Why has Mr Cooper not considered the effect on art
prices of his 5 year mandatory sell-off plan? Everyone in the industry knows that
premium artworks will now be coming on the market for the next five years
in a situation of FORCED SALE. SMSF’S either rush to sell, or wait til
the last minute to sell. Whatever
their strategy, prices will tumble as they do in the stockmarket
when there is a sell off – it’s the same principle. Big superannuation funds will have a
field day as they scoop up premium artworks at a bargain price – and this
will happen at the expense of ordinary Australians. Their SMSF’s will simply lose dollar value…
and please, what is the reason or justification for this? There is none – it will be seen as just another
dumb government policy change, wreaking havoc through ignorance.
- Why has Mr Cooper seemingly not even considered timing factors:
It is bad enough that the recommendations are flawed, but their negative impact will be multiplied many times, as he has clearly not taken into account that the Art industry is operationally almost on its knees at the moment.
As a result of the GFC (1);
with resources stretched to the limit to accommodate the ramifications of
the welcome (but time consuming and difficult to manage) Indigenous Art Commercial
Code of Conduct (2); and further
stretched to breaking point trying to accommodate the ill written,
bureaucratic, and almost unworkable piece of Resale Royalty legislation - an
artwork in itself! (3), which applies to indigenous works from their VERY FIRST SALE on the market (not for
Resales as it was surely meant to be), the
industry is extremely fragile.
With an impeccable sense of timing, and clearly for the
beleaguered art industry’s highest good,
Mr Cooper proposes, on top of all the above, to combine a reduction in
sales demand (through cutting SMSF purchases entirely) with a concurrent five
year panic sell-off, which will send
prices of artwork crashing. Hmmm. Severely reduced demand + panic sell =, as one
of the many detractors has dubbed it – a perfect storm! There will be wholesale collapse of art
enterprises, and with that, the livelihoods of thousands of people.
- Why has Cooper not even considered the employment prospects of the vast
number of artworkers, from artists to galleries,
to all those who provide ancillary services to the industry. What will they do when the market
collapses.
THE THINKING BEHIND THE RECOMMENDATIONS
IS ALSO VERY STRANGE
Strange to narrow down the diversity of asset
classes, when this is generally thought a good thing. Is it the beginning of the end for SMSF’s – a
plan to make it so difficult and so risky that the big Superannuation funds
will once again get control?
Strange at the same time to support the asset
class in commercial Superannuation funds.
Strange to legislate to prevent people
investing in art, when the overwhelming majority of superannuation funds, both
private and corporate, have lost demonstrably more money per capita from stockmarket volatility?
And when all major investment organisations include investment in art.
Strange, that the Cooper Review terms of
reference require it to make people’s superannuation nest eggs more robust and
secure, and yet Cooper’s recommendations
themselves, will cause direct and
measurable loss to the very nest eggs they should be designed to protect!
Strange
to introduce policy that will impact Australia’s art industry so badly
in terms of both lost revenue and diminished values, that it will directly and measurably affect the
financial survival of thousands more
Australians (many who live interminably on low incomes simply to
live out their passion for art). It
would slash their already meagre employment prospects and have a domino effect
on unemployment in the sector.
Strange that the government is not worried
about its welfare bill – from the cities to the remote aboriginal art centres,
incomes in the art sector will be decimated.
Guess who will be picking up the tab
SO WHAT SHOULD COOPER HAVE DONE – OR NOW
BE SENT BACK TO DO?
IF he believes there are problems with art as an asset class
in SMSFs, the problems can be rectified in a more mature and market friendly
manner as follows:
- Assess whether there is a real (or
merely perceived) problem here,
via research and
consultation with knowledgeable and involved parties;
- Conduct professional level analysis of the current situation and
identify any areas where improvement is demonstrably needed and is unable
to be achieved through legitimate
market operations;
- In consultation with expertise in the field, identify strategies to remedy any issues identified
(NOT via ‘throwing the baby out with the bathwater’ strategies as he
proposes now, but through developing appropriate guidelines to remedy any
problems;
- Conduct
feasibility testing
to ensure there are not major or unforseen negative effects, prior to
putting forward any recommendations;
- Simply make fine tuning adjustments to the Superannuation guidelines where needed in order to improve
the scheme.
In taking these steps, Mr Cooper should
be mindful that his recommendations should be for the public good, and not as
they are now, to the demonstrable detriment, of all legitimate parties, and he
should take care that he is:
- Not
to advantage big business over individuals
(SMSF’s);
- Not
to
directly and significantly reduce
the personal superannuation resources of everyday Australians;
- Not
to dishonour existing government policy
and undertakings without an extremely serious and demonstrable need to do
so;
- Not
to knowingly and directly create adverse
effects on related industry structures and employment prospects;
- Not
to disadvantage one asset class against
another (art vs stocks and shares), in a way that is disproportionate to the potential
returns involved. Note that art
is already limited to 5% of SMSF funds.
Isn’t this disproportionate enough?
- Not
to make any recommendations at all until he has a clear understanding of
the implications and has demonstrable and absolute justification for the
recommendation;
- Not
to ignore the voices of stakeholders in
this arena, those who will be affected by his recommendations, and those who
can bring a greater foresight and understanding to his findings.
Even if Mr Cooper was not aware of the many ways in which his recommendations are flawed and potentially injurious to many parties, he should now be required, in the terms of reference, to accept and consider representations now made to him on the matter, and if he still ignores such advice, he should be required to justify his reasons for so doing, on factual evidence, before any recommendation is accepted.
Prime
Minister, I do hope you will consider the fact that your government will be most seriously
judged by the outcome of this issue. The
timing is not good for you either.
Much
of your ground support has come from supporters of the Arts. Many of us have been long term Labour
supporters, believing that Labour Parties bring a more balanced approach to the
frequently differing needs of business and the individual.
The
Cooper Report, if accepted in its current form, will be the last of many straws
for your supporters in the arts industry, and perhaps the final completion of a
steady disillusionment with the Australian Labour Party’s recent performance in
the industry. If this revew is implemented as it stands, I can assure you that
very many people in the arts and associated industries, will not support your
party again.
We ask you to look for logic, substance, and
reasonableness in the arts related recommendations of Mr Cooper’s review. We ask that you consider the wide ranging
consequences should the ‘art investment sell off’ and ‘reduction in art market
participation’ jointly begin their domino effect.
We ask
you also, if a wilful, misguided and uncalled for reversal of (trusted) government
policy, which reduces the superannuation assets of thousands of its people as a
result, is consistent with Labour Party philosophy and policy as you see it.
Finally,
we hope you will find that Mr Cooper should be sent back to the drawing board
on this one – perhaps he could start with the points listed above.
Yours
sincerely,
Kate
Owen
Director
|
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Kate Owen Gallery
& Studio |
