Bank deposits ‘too risky’ for Town

Hedland councillors have turned their noses up at $426,000 in potential income because they fear a doomsday financial crash not seen since the 1920s and 30s Great Depression.

The potential interest generated using banking deposits, which are normally considered among the safest investment tools, would have been enough to cover the councillors’ fees and allowances for the 2015-16 financial year ($426,065).

Town of Port Hedland staff had hoped to earn the extra interest by gaining council’s permission to invest its $160 million income from the lease of its airport into short-term Australian bank deposits.

Town executive officer Peter Kocian told councillors Australian banks deposits would yield a much greater return than holding the money with the WA Government.

“The Town could achieve an increased return on investment of approximately $426,000 (over a four-month period) by investing in term deposits ... with no risk impact whatsoever, ” he said.

However, deputy mayor Camilo Blanco and councillors Jan Gillingham and Louise Newberry disagreed and voted against the proposal because they said it was too risky. While Mayor Kelly Howlett and councillors David Hooper, Julie Arif and Richard Whitwell supported the Town’s plan, it needed six votes to pass and so lapsed.

The decision means the WA Treasury Corporation will now temporarily hold the Town’s $160 million on a lower rate of interest return until an independent board is set up to assume control of the money for the next 50 years.

In arguing the money was only safe with WA Treasury, Cr Blanco said Treasury guaranteed the full investment of $160 million, while under Federal Government laws, Australian banks only guaranteed $250,000.

He also said local governments had lost money in the recent Global Financial Crisis and that he predicted an even larger financial meltdown was on the way.

However, critics accused Cr Blanco of throwing away money and scaremongering.

Cr Richard Whitwell said the Town did not propose to invest in rogue banks or exotic investments.

Mr Kocian backed this by saying Australian banks, such as those the Town proposed to invest in, had never defaulted on term deposits, even during the Great Depression.

He said Australia’s banks and financial system held premium credit ratings and were widely regarded as among the world’s best regulated.

He said the Town also already had $87 million invested in similar term deposits.

The loss of potential income to the Town’s budget contrasts with vocal calls for greater relief for Hedland ratepayers.

An extra $426,000 would equate to almost half the Town’s predicted 2015-16 income from rates paid by commercial businesses.

It would also roughly equate to the Town’s predicted 2015-16 bill for cleaning Hedland’s streets ($496,000) or operating the community sports stadium in South Hedland ($485,277).