Tag Archives: Business & Industry

Beware of right wing revolutionaries calling themselves conservatives

Rob Burgess had an interesting post in the May 2 Business Spectator on the commision of audit.  He discusses the competing, and very different ideological positions dividing the political right  as well as pointing out that “Australia has more to lose from radical change than just about any country in the world.”
The competing ideological divisions within the right wing of Australian politics might be described as:

  1. The revolutionary neo-liberal position that says that “the system is fundamentally flawed and needs fixing.”   Their preferred fix are the radical steps required to remove the the restraints on our economy caused by the “dead hand of government.” Vs
  2. The conservative liberal position that says we are actually doing quite well and we should limit our efforts to incremental change.   They might say something like: “In this situation it doesn’t make sense to be risking our gains by making unnecessarily dramatic changes.  If you like: “If it aint broke why fix it?””

There is a similar division on the left of politics between those who want radical change (Think the end of capitalism) and those who favour incremental improvements.

The key question here is whether the current state of the Australian economy really justifies the sort of radical fix advocated by the Audit Commission.  A comparison between Australia and other developed countries might be a good start:

  1. According to The Conversation, Commonwealth net debt “is about 11% of GDP, the third lowest in the OECD (the average is 50%), and low by historical standards”    Not a crisis. 
  2. Rob Burgess provided the following:
    • Combined federal, state and local tax rates ran at a bit over 30 per cent during the Howard years, dropping to  about 27 per cent during the Rudd/Gillard years. (State taxes account for around 4 per cent of GDP, and local taxes (rates) hover around 1 per cent of GDP.)  By comparison, Singapore’s total tax-to-GDP ratio is around 14 per cent, the US 27 per cent, Switzerland 29 per cent, and Canada 32 per cent.  Not a crisis  but it would be interesting to know the reasons behind the low Singaporean rate.  It is worth noting that people may actually be better off in a “high taxing” country if the high taxes mean that the state pays for services that other, lower taxing countries make people pay for themselves.
    • In terms of GDP corrected for purchasing power parity (PPP) we rank 10th on the World Bank and IMF scales. We could do better.  A key factor here is how expensive it is to rent/buy a house in Australia compared with places like the US or Spain where house prices were really hit by the GFC.  In our case, the problem really took off when Peter Costello offered negative gearing to people who could afford to borrow money to buy investment properties.  His first home buyer schemes also tended to push up the price of houses rather than help first home buyers.   However, fixing home prices is no win territory.  It is a bit challenging to please existing homeowners and new home buyers at the same time when it comes to prices.

    • Australia does much better when we use the ‘human development index’, which factors in longevity (as a proxy for good health), educational attainment, gross national income and, in recent years, measures of inequality. On that scale we jostle for the number one spot with Norway. Not 6th or 10th. Number one.  Definitely not a crisis.

    • Best news of all is that last year’s Credit Suisse survey  showed Australia having the highest median wealth per adult citizen of any nation.  Definitely not a crisis although inflated home prices may have helped a bit here.

Conclusion: Australia’s alleged budget crisis is either the product of a fevered imagination or a deliberate attempt by neo-liberals to justify the imposition of their questionable ideas.

None of this mean that there aren’t many things in Australia that would benefit from radical change.  However, the case for these radical changes should be justified by fact based, logical conversations about the specific issues.  Definitely not based on ideological assertions about the dead hand of governments or private is best.

Deja vue all over again: the new NBN

Laura Tingle reckons the arrival of Turnbull’s NBN Strategic Review is deja vu all over again:

The raw politics of this is that, no matter how much the Coalition can complain that it has been left to clean up a Labor mess, a mickey mouse broadband network is now a mess that it owns and has insisted it will put its own stamp on. The cost of this decision is that we have to go back to the start to redesign NBN Co itself; the technological platform of the broadband system, the competition regime and a myriad of contracts.

This will take time.

There is going to be a cost benefit analysis and a review of NBN regulation. There will be changes to procurement strategy, renegotiation of deals with Telstra and Optus, of the special access undertaking lodged with the ACCC, reviews of NBN Co’s fixed wireless and satellite programs, a corporate plan, possible legislative and regulatory changes to access multi-dwelling units and utility infrastructure.

Tony Boyd spells out some of the detail. Significantly, the ‘multi-technology mix’ (MTM) is going to mean that

the entire NBN network technology management system will have to be redesigned. The IT systems will have to be changed and operational processes will have to be modified to support copper, HFC and FTTN.

Continue reading Deja vue all over again: the new NBN

The General goes

holden21_275Abbott, Hockey et al would have you believe that GM have made a decision to cease manufacturing in Australia. Kim Carr and Jay Weatherall have been saying that GM were willing to continue and had specified exactly what was required. My recall is that Weatherall said they wanted the Government to chip in $130 million. Carr told Waleed Aly that the price was significantly less than $150 million. Carr said further that the hectoring and bullying by Hockey, Abbott and others clearly let GM know they were not wanted.

I think Carr is right. The Government wanted to make the decision look as though it was made by GM alone and to a degree they have succeeded.

Tim Colebatch, in a column written before the decision was announced (sadly, his last) was clear that the decision was made by Abbott. He thinks it could precipitate a recession. And:

car programs cost $400 million a year, nothing like the $3 billion a year for diesel fuel rebates to mining companies, or the $5 billion to subsidise negative gearing. The budgetary cost of losing this industry will dwarf the cost of keeping it.

Continue reading The General goes

Hockey’s Graincorp decision

grain silos_image_300Terry at Saturday Salon has raised the issue of Treaurer Hockey’s decision to disallow the US company Archer Daniels Midland’s (ADM) A$3.4 billion 100% takeover bid for the Australian company GrainCorp. As Terry said, Judith Sloan went ballistic, Bernard Keane and Glenn Dyer were scathing at Crikey, as was Geoff Kitney at the AFR.

For a straightforward account of what happened, try Michelle Grattan at The Conversation. She does call GrainCorp an agri-giant, although it’s not a large company in Australian terms, may just rate as a ‘mid-cap’. In American terms it’s a tiddler. Nevertheless it would have been ADM’s biggest acquisition to date. ADM is worth about $US27 billion. Graincorp after the post-bid price fall in now worth about $A2 billion.

Must reads, I think are Laura Tingle’s article and Hockey’s statement.

There are at least three reasons why the bid was rejected.

First, there is a lack of competition in the eastern seaboard grain handling market. Graincorp owns 7 out of 10 terminals and handles some 85% of the grain. From Grattan:

“Many industry participants, particularly growers in eastern Australia, have expressed concern that the proposed acquisition could reduce competition and impede growers’ ability to access the grain storage, logistics and distribution network,” he [Hockey] said

Given the transition to a more competitive network was still emerging, “now is not the right time for a 100% foreign acquisition of this key Australian business.”


A “further significant consideration” was that the proposal had attracted a high level of concern from stakeholders and the broader community.

Allowing the bid to proceed “could risk undermining public support for the foreign investment regime and ongoing foreign investment more generally”.

Thirdly, and down-pedalled somewhat, there were issues about ADM’s motivation and longer-term priorities and its record of providing service in its home market, in other words, questions of character. The sweetener of $200 million for additional investment and promised price caps for handling fees was too late to be persuasive. In any case there was no guarantee that farmers would not pay in the long run. Continue reading Hockey’s Graincorp decision

Has Macfarlane gone mad?

There is a bit of a meme around that the MSM are giving the LNP Coalition a free ride in government. On Friday the Australia Financial Review did its bit to buck the trend by asking the above question in an editorial.


When federal Industry Minister Ian Macfarlane spoke about a “final” assistance package for GM Holden last week, The Australian Financial Review took it as a sign that someone was finally standing up to the car makers’ protection racket. But Mr Macfarlane’s latest comments indicate a more protectionist mind-set. He agreed that Australia “needs” a car industry. He wants to reverse Ford’s decision to cease manufacturing cars in Australia after 2016. He wants an Australian industry to make cars that are driven “all over the world”. And he flags the option of an Australian car industry that is “supported by the government long term”. “I’m going to do everything I can to work with the companies to make sure that car workers’ jobs are protected, so we can have an industry long-term, so that Australia can be proud of its industry base,” he said on Thursday.


Has this normally sensible minister gone mad? It’s one thing to politically show you are doing everything you reasonably can to keep an industry going. But it’s another to use the language of the mendicants and rent seekers…

The AFR says that putting uncompetitive industries on permanent subsidy mocks Tony Abbott’s vow to make Australia open for business. It says that Joe Hockey and company should stand up to this lunacy.

At stake is whether the Abbott government has the wit and gumption to tackle the serious task of reviving Australia’s stalled productivity growth. Mr Macfarlane should be the first person to recognise this.

Continue reading Has Macfarlane gone mad?