Jul 092014
 
barry-mckenzie-australian-politics

An interesting observation about life in Australia over the last twenty years is how the nation decided to look backwards and become insular in many fields.

One of the manifestations of this insularity is the sensitivity towards outside criticism by many of the nation’s business and political leaders.

Today saw an example with two Members of Parliament on the ABC’s The World Today program responding to criticism from a former Thatcher government minister, Lord Deben, over the government’s climate change policies.

GEORGE CHRISTENSEN STATEMENT (voiceover): The last time I checked, the House of Lords, that undemocratic anachronism in a modern British democracy, and its Privy Council, had no jurisdiction over Australia, thank God.

Yet Lord Deben has waded into Australian affairs, whingeing about what we are doing regarding climate change when we contribute less than 2 per cent to total global carbon dioxide emissions.

If this whingeing pom thinks the carbon tax was actually doing something for the planet, can he please advise us lowly commoners how many degrees the Earth would have cooled to because of the carbon tax?

IAN MACDONALD: I think the Australian Government and Australian policy should be run by Australians not by some retired English Lord.

MacDonald’s and Christensen’s sensitivity towards criticism from a ‘whingeing pom’ is notable – as is their contempt for the British House of Lords despite being members of a political party that supports the English Queen as Australia’s head of state.

On their own, the ramblings of a pair of insular rural apparatchiks doesn’t count for much but the same hostility towards educated outsiders was on show two days earlier when US economist Joseph Stiglitz appeared on ABC Television’s Q&A program.

An early audience question to Stiglitz set the scene;

Thank you for taking my question. My question is for Professor. Sorry, excuse me. What gives you the right, as an American, to come to Australia and criticise our budget, especially the $7 co-contribution payment, which is capped at $70 per year?

The ‘what gives you a right as an American?’ theme was gleefully picked up by Professor Judith Sloan, the token government apologist on the panel – faux news balance beings as alive and well in Australia as much as anywhere else in the world – who dismissed many of Stiglitz’s observations on the Australian economy as being the misguided views of an ill informed outsider.

Dismissing the whingeing poms and arrogant yanks harks back to an earlier time in Australia’s development. It may well be the nation has gone back to the days of Barry Mckenzie where Down Under is the working man’s paradise that the rest of the world desperately wants to be part of.

Strangely, the immigration officials in that 1972 movie could well pass for today’s Australian politicians.

As it turned out, the 1970s were a tough decade for Australia as it looked like the luck had run out. It may well turn out the Twenty-First Century is a lot tougher for the Lucky Country.

 

May 182014
 
ferry-sign-palm-beach-to-ettalong

Newcastle, a 160km north of Sydney is a drive easily done in less than two hours but for masochists and commuters there’s the three hour train trip affectionately known as the shitkansen by the locals.

The train trip itself has parts that are genuinely spectacular as it winds through the hills and rivers of the New South Wales’ Central Coast, albeit at speeds that are slower than in the 1933 timetables.

One of the reasons for the slow and spectacular trip is the Hawkesbury River and Broken Bay and that presents a natural barrier between Sydney, the Central Coast and Newcastle.

That natural barrier also presents an opportunity for a third, prettier route between the two cities using the private ferry service that runs between Central and Sydney’s northernmost suburb of Palm Beach.

Catching the slow train

slow-train-newcastle-sydney-shitkansen

Starting from the original Newcastle Railway Station, the trains run twice an hour during the day with one ‘fast’ service taking two-and-a-half hours and slow trips taking three.

interior-of-newcastle-sydney-slow-train

Inside the trains things are relatively comfortable although quite grubby. The purple colour scheme are the refurbished older carriages, the original 1970s ones being in a fairly awful green. The news trains feature a modern vandal proof colour scheme although the seats are more uncomfortable for a three hour journey.

Another weakness with the train service is the spartan facilities, apart from graffiti covered toilets there are absolutely no passenger amenities so bringing your own food and drink is essential along with fully charged electronics as there are no power outlets available.

closing-newcastle-sydney-railway-line

Amazingly, rather than improving the railway service to the state’s second biggest city the government plans to abandon the last five kilometers and replace the trains with buses. If there was one example of the 1960s thinking that dominates Australian politics, this venal and ill-thought out proposal is a wonderful example.

The Central Coast

While the parts of the ride between Sydney and Newcastle are spectacular, the stretch south to the Central Coast are the boring parts featuring little more than housing estates and low grade scrub until arriving at Gosford where the train runs alongside Brisbane Water until Woy Woy.

woy-woy-shopping-centre

On alighting the train at Woy Woy, the immediate impression is a town that won’t win any heritage awards with its neglected main street and an anonymous shopping mall. All of which is a pity as its location between the hills and waterways is sensational.

Sadly there’s little reason to hang around so getting a bus to Ettalong is the best thing to do.

bus-woy-woy-to-ettalong

From Woy’s Woy’s dismal transport interchange – a fate that waits Newcastle’s truncated railway service – buses leave every few minutes for the 15 minute journey to Ettalong. If you have a Sydney transport travelpass then your ticket is valid on the private bus service.

Ettalong

If you’re stopping for lunch or a break during the journey, Ettalong isn’t a bad choice with a lot more coffee bars, restaurants and bakeries than the rather depressing choices at Woy Woy.

Since this writer’s last visit to the town three years ago when its centre was struggling with many empty shops; its fortunes have improved dramatically and it’s gone back to being a good destination for a day trip in itself.

Catching the ferry

ettalong-palm-beach-ferry

The ferry itself is a twenty minute trip including a brief stop at the village of Wagstaffe. Its route winds through the sandbanks of Brisbane Water before getting to the open water of Broken Bay.

lion-island-hawkesbury-ettalong-to-palm-beach-ferry

Midway across the bay, the ferry passes Lion Island and the mouth of the Hawkesbury River before entering Pittwater and the Northern Suburbs of Sydney.

Palm Beach

arrival-at-palm-beach-ferry-wharf

The wharf at Palm Beach is a classic wooden structure in a lovely location. Across the carpark and road is a general store, the Barranjoey House restaurant and a fish and chip shop.

For a takeaway meal, the fish and chip shop is nicer than the general store but you can enjoy either at the park alongside the ferry wharf.

For a sit down meal, Barrenjoey House has an expensive restaurant along with a bar with an outdoor seating area if you’re looking for a cold drink while waiting for a bus to Sydney.

The bus to Sydney

l90-bus-from-sydney-to-palm-beach

The bus back to Sydney takes about 90 minutes. It isn’t the most comfortable journey however the views of the city’s gorgeous Northern Beaches are worthwhile if you’re sittiing on the left side when heading south.

Once past Long Reef, the journey is mainly suburbia except when crossing the Spit and Harbour Bridges. A more interesting option that will add another hour to the journey is to switch buses at Warringah Mall and travel to the city via the Manly Ferry.

Taking the Slowkansen from Newcastle to Sydney isn’t the trip for anyone in a hurry with it adding up to two hours to an already slow three train hour journey but it’s a lot more interesting than the regular way to travel between the two cities.

May 122014
 
Sydney-harbour-australian-business

Today I have a piece up in Technology Spectator on PwC’s Expanding Australia’s Economy report, the headline for which probably guarantees I’ll never get a job in a large Australian corporation again.

While the headline – which wasn’t mine – is inflammatory, there is an element of truth to it as Australian companies have become far more insular and comfortable in the last twenty years.

It wasn’t always like that, for a brief period in the late 1980s and early 1990s corporate Australia was prepared to take on the world. But something happened in the mid 1990s.

John Winston Howard

One of the key turning points was the election of the Liberal government in 1996, John Howard’s fundamental belief was that things were better in the 1950s and Australia should return to those days. He delivered.

The Australian people thought his vision was a great idea, having become exhausted by the reform agenda of the 1980s Hawke and Keating Labor governments that had opened and reinvigorated the economy.

Howard was helped by the Labor Party abandoning its reformist agenda with its successful 1993 campaign against the Liberal’s policy of changing the tax system. As George Megalogenis pointed out in his book The Australian Moment, Paul Keating’s populist victory over John Hewson demolished any appetite for meaningful reform among Australia’s political classes.

Cosy clubs

The centerpiece of Keating’s economic reforms was the compulsory retirement savings system; while the idea was good in principle, the practice of private fund managers looking after the savings has meant most of the investment has been concentrated in the top ASX stocks.

As a consequence, Australia’s top companies were relieved of the chore of answering to stroppy shareholders as their registries were dominated by their friends from Sydney’s Balmoral Beach Club and the hallowed halls of the Melbourne Club.

Domestic duopolies

Compounding that problem was another failure of the Hawke-Keating years of allowing domestic monopolies to develop on the basis that Australian companies needed a strong local footing in order to compete in global markets.

For a while that worked until Australia’s now powerful duopolies decided it was more profitable to exploit their domestic market strength rather than competing as global players. This happened around the time Keating won the 1993 election, by time Howard became PM the practice was well established.

The combination of tame shareholders and comfortable markets is why Australian corporations haven’t responding to global pressures; they simply don’t have to. Which leads us back to the conclusions of the PwC report.

Australia needs to lift its game. We are lagging behind our peers globally and are not considered a leader of innovation. The Organisation for Economic Co-operation and Development in its Science, Technology and Industry Outlook 2012 rates Australia as average against its key drivers that measure competency and capacity to innovate. Change is required.

It’s difficult to see where change is going to come from for Australia while everyone – business leaders, politicians and the population at large – are comfortable. As the long as The Lucky Country stays lucky it can afford not to invest in the 21st Century.

May 022014
 
uber-logos

I’ve a story up on Technology Spectator that pulls together Uber’s fight with taxi regulators around the world with the Australian government’s Commission of Audit.

While the story is written in an Australian context, the key message about business disruption is universal; as barriers to entry fall, no incumbent can assume they are immune from having their business upended.

For Australia, this is a particularly important message as the affluent economy is kept afloat by consumer spending underpinned by a favoured and protected housing market.

The economy though is nowhere near as untouchable as it looks; along with being way over invested in property, Australia’s industries are hopeless uncompetitive and have a cost base similar to Germany’s.

It’s an entire country ripe for disruption, it will be interesting to see if the Lucky Country’s luck holds in the 21st Century.

Apr 152014
 
australian-flag

Today has been a big day for Australian navel-gazing with a range of reports released on the country’s prospects on in the Twenty-First Century.

One of the reports was the Joined Up Innovation survey commissioned by Microsoft and written by PwC, I wrote a story for Business Spectator on the results.

While the Microsoft report focused on the small business sector, Startup Aus released their Crossroads report that warns Australia is falling behind the rest of the world. Smart Company’s Rose Powell has a more detailed summary of the report.

Alan Noble, head of Google’s Australian Engineering operations warns, “we still lag behind many other nations, with one of the lowest rates of startup formation in the world, and one of the lowest rates of venture capital investment.”

“If we fail to address this, we risk forfeiting over $100 billion in economic benefits from emerging tech companies, and an irreversible decline in Australia’s competitiveness.”

Looking in from the outside

Particularly notable from the two surveys is that the discussion about Australia’s tech competitiveness is the debate is being led by two local employees of US Multinationals.

For a local perspective, the Macrobusiness blog joins the day’s chorus with a long examination of the risks to Australia’s living standards by being too far down the global value chain.

In the Business Spectator piece, I compared some of PwC’s recommendations with the efforts of the UK and Singapore to rebuild their manufacturing industries.

Australia’s collective decision

For Australia, it’s probably way too late to worry about most of the manufacturing industry as in the 1980s the country made a collective – and almost unanimous – decision to shift the economy to being resources and high value added services.

The high value added services haven’t eventuated; mainly because the internet has shifted the global dynamics towards lower cost centres and partly because Australian business leaders decided it was easier to exploit their domestic market power rather than compete globally.

Mining proved to be a better bet, more by the accident of China’s turn of the century boom rather than any deliberate policy, however the industry employs less than ten percent of the workforce and the vast majority of Australians living in the South East corner of the country have little contact with the resources industry.

A consumerist utopia

For most Australians, employment and prosperity relies upon a growing population driving city GDP growth with domestic wealth supported by buoyant property prices. Australia truly is the consumerist utopia.

As a result of a booming, seemingly unstoppable, housing market and an expending resources sector, Australia’s exchange rate has soared while the nation’s productivity has slumped.

Making matters worse is that outside of mining and a few agricultural markets most of Australia’s industry is grossly expensive by global standards and suffering from chronic under-investment.

An unsustainable economic model

That model is not sustainable, it will take one shock to Australia’s housing market to see the good burghers of Brisbane, Sydney and Melbourne impoverished so the nation’s continued prosperity requires something to drive the economy beyond low interest rates and Chinese commodity purchases.

Whether Australia’s business and political leadership are capable of hearing and reacting to these reports remains to be seen, but they will have no excuse to say they weren’t warned.

Mar 262014
 
sense-t-tasmania-iot

On Networked Globe I have an interview with Sense-T’s director, Ros Harvey.

Sense-T is a project to connect the entire state to the internet of things using a sensor network monitoring soil, water and other environmental conditions to help the state’s agriculture and business communities.

Harvey’s ambitions for the project are high where she sees Sense-T even having the potential of rekindling the interest of the state’s students in science and technology courses.

It’s a brave project that means a lot to a state that’s doing it tough.

Feb 272014
 
Jetstar plane at sydney airport

Yesterday I interviewed Alex Bard, Senior Vice President for Service Cloud at Salesforce for the Decoding The New Economy YouTube channel.

Alex’s interview will be up tomorrow, but during the conversation afterwards he made a comment about modern management saying, “you can’t cost cut your way to growth.”

This is at odds with 1980s management theory where CEOs like Jack Welsh at GE and Al ‘Chainsaw’ Dunlap at Scott Paper slashed costs to bring listless businesses back into profit.

During that period, many businesses were overstaffed and poorly managed so leaders like Welsh and Dunlap were the right men for their time.

To a generation of bean counting executives, Dunlap and Welsh proved that any business problem could be fixed by cutting costs. They were truly men of their times.

Which brings us to Australia’s Qantas Airlines who, at the time Alex Bard and I were having coffee, announced 5,000 job cuts; close to 25% of the company’s workforce.

Qantas certainly does have problems as shown in its $252 million loss and some of them, as with all legacy national carriers, lie with long outdated labour arrangements.

However the airline’s problems are much deeper than a featherbedded workforce and most of the blame for Qantas’ dilemma lies with the company’s management.

Management mistakes have included maintaining an old fleet of Boeing 767s and 747s while pouring investment into their discount subsidiary, disastrous international alliances in Asia that have seen them kicked out of Vietnam and planes for their Japanese venture grounded in Europe.

Probably the biggest mistake though for Qantas though was management’s assumption it had a cosy position in its domestic market.

Like most Australian industries, the nation’s aviation sector is a duopoly dominated by Qantas, a result of the 1980s theory that the country could sustain global champions subsidised by hapless domestic consumers.

This theory has proved disastrously wrong for Australian consumers with the duopolies becoming very good at exploiting their domestic market power after deciding it was simply to hard to compete outside the home country.

For Australia, the consequence of this strategic mistake by the country’s business and political leaders has been to make domestic industries hopelessly uncompetitive as local managers are largely isolated from genuine competitive pressures.

Qantas is the classic case study of Australia’s insular corporate mentality as the airline steadily abandoned its international routes and focused on maximising profits on its domestic operations, particularly those unfortunate rural routes where the Flying Kangaroo has no competition.

Unfortunately for Qantas’ shareholders; Virgin Australia, the other duopoly player in the Australian airline industry, wasn’t going to play by the rules that keeps the rest of the country’s complacent corporate sector relaxed and comfortable.

As a consequence, Qantas found itself in a damaging price war as it sought to protect its 65% domestic market share. Worse still for the airline, its competitor started offering Business Class services and competitive lounge facilities that started to erode its most lucrative fares.

For Qantas, the sensible option is to focus on its strengths and build in its most profitable areas but instead the airline’s CEO, Alan Joyce, chooses to fight for the airline’s precious two third market share while slashing staff numbers.

Alan’s response is classic ‘cutting for growth’ and it won’t work – the airline desperately needs investment and visionary management, both of which it won’t get.

Cosy management can prosper in a cosy market, but it leaves those companies exposed to disruption from keener competitors and that’s what Qantas is learning.

Sadly for Qantas’ management, they aren’t in the 1980s and Joyce is no Jack Welsh. Today, as Alex Bard points out, the game is customer service and slashing your workforce is the wrong starting point.