New York City. Turn of the century. Markets are booming. Champagne is flowing. Good times.

A group of Australian chief executives has been flown to the city that never sleeps by investment bankers, Merrill Lynch.

The CEOs are in a hotel conference room together with the chief investment officers of firms such as Capital Asset Management and Fidelity.

They had all come to hear Merrill Lynch’s then Australian-investment strategist, Hugh Dougherty. But at least half the room did not like what they heard.

Dougherty said strategists at the thundering herd, as Merrill Lynch was known, were “underweight” Australia in the global portfolio they managed.

The CEOs were livid. They were in America to sell their companies as listed stocks. CEOs rained abuse upon Dougherty. The Australian Consul General in New York sent a telegram to Canberra questioning Dougherty’s patriotism and Merrill Lynch’s commitment to Australia.

Dougherty soon found himself on a plane back to Australia and in Prime Minister John Howard’s Canberra office.

The undercurrent of the meeting was why should Merrill Lynch get any business from the Australian Government. A Merrill Lynch investment banker who sat beside Dougherty squirmed.

“The thing that saved me was that people in Howard’s office knew me, some from my days in government policy advice,” recalls Dougherty, laughing as he recalls events.

“I was able to explain that my talk on investment strategy was blown out of proportion. I was also able to explain the rationale of our global strategy and our view of Australia in a global context,” he says.

Merrill Lynch went on to win its fair share of investment banking mandates from the Government. But walking out of Howard’s office, Dougherty was told by the Merrill Lynch investment banker that if there were any negative repercussions for the Wall Street firm Dougherty was solely responsible.

“I told the banker, ‘Don’t tell me what I can say and not say, I already know I have responsibility for what I say,’” he says.

The 51-year old Dougherty has always trod his own path. Inspired by Macquarie University’s renowned economics professor Victor Argy, he was the recipient of a Reserve Bank of Australia scholarship to complete an honours thesis.

He joined the central bank’s research department upon graduation in 1982. Soon after, Australia floated the dollar and embarked on unprecedented financial and economic liberalisation.

“Deregulation was a very chaotic thing,” says Dougherty of that time. “Policy was made on the basis of ‘oh we’ve gone down this route, we better keep going because of all the distortions in the system.’”

Did he ever dream of becoming governor?

“I soon realised the limitations of my own capabilities of running the place,” says Dougherty.

Financial deregulation opened up jobs in the private sector at three times the pay people such as Dougherty were earning at the central bank.

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