Paul Wallbank – Brilliant Communications

Category: economy

  • Santa says buy more stuff

    Santa says buy more stuff

    Around the world, today marks the annual peak of consumerism. It’s interesting how one of the most important dates in the Christian calendar has been adopted by commercial interests.

    In non-Christian countries, particularly in East Asia, the lack of a religious tradition shows the modern ritual for what it is – an orgy of consumerism driven by a century of advertising and opportunistic businesspeople.

    For the western cultures, the biggest symbol of the occasion is Santa Clause, a figure largely invented by the Coca-Cola Corporation.

    It’s often said that successful religions co-opt the festivals and practices of earlier beliefs, many European Christian celebrations are said to be modern interpretations of older rites which marked key harvest and calendar dates.

    Today the religion of consumerism has co-opted the older Christian festivals which makes Christmas the grand celebration of consumption that it is.

    Religions though are a product of their times, the successful ones adapt to change and thrive for centuries while many wither away as their relevance to society and the economy fades.

    The Western religion of consumerism is at one of these points now after a century of unchecked growth.

    Will Consumerism continue to thrive as living standards rise in Asia and Africa or will it fade as overfed Americans and Europeans wear out their credit cards and look to defining themselves by something more than the expensive toys they can buy?

    Should Consumerism fade, will it be replaced with older traditions or will something else rise to meet the needs of 21st Century society?

    Is hard not to hope for the consumerist orgy that is the modern Christmas celebration to fade, if not for our communities then at least for our waistlines and bank balances.

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  • Australia’s high cost quandary

    Australia’s high cost quandary

    “Around the world our towncars are usually 30% more expensive than taxis, in Sydney it’s 20% as the cabs are pretty expensive,” said Travis Kalanick on launching the Sydney version of Uber’s hire care booking service.

    It’s not just hire cars which are expensive in Sydney – the soaring cost of living in Australia is bourne out by Expatistan, a web site that crowdsources the cost of living in various cities.

    Expatisan’s comparisons find Sydney up with Tokyo and London as the most expensive towns on earth.

    That conclusion means Australian businesses, governments and policy makers have some important decisions ahead of them.

    Cholesterol in the veins

    High property prices have been the norm for two decades in Australia, the middle class welfare state that both political parties support gives tax and social security concessions to property owners while the banking system requires most business lending to be secured by property.

    As a consequence, generations of Australians see property as the only path to financial success. If Bill Gates, or any of today’s entrepreneurial wizz-kids, had been born in Australia, they’d be encouraged to get a safe job and buy property than to take the risk of starting a new business.

    The property obsession has another perverse effect in that it creates a short term outlook for Aussie business owners who have to consider getting,  and paying off, a mortgage quickly to secure their financial foundations.

    A few weeks ago a business owner was profiled in the Sydney Morning Herald, which some call the Sydney Morning Property Spruiker, who paid 1.1 million Aussie dollars (a million US) for a property in Redfern – which is Sydney’s Bronx.

    That poor guy not only has a fat mortgage to pay off, but he has to pass those costs onto his customers. Just to pay the bank is a fat chunk out of his business before he pays his staff, landlord and the various other expenses before he can take his profits.

    Having to pay the bank for living costs is the main reason why Aussie businesses don’t invest in capital equipment, which in turn makes  them less competitive than overseas competitors.

    One of the myths in Australian business is that competitiveness is solely due to labor costs, what the ideologues preaching this miss is that even if Aussie workers were paid a bowl of rice a day, Chinese and Mexican factories would still be more productive due to the investment in modern equipment.

    For the sake the argument, we won’t even discuss German, Japanese or Swiss manufacturers who are still competitive despite Australian level cost structures.

    This last point is what’s missed in much of the discussion about Australia’s economic future – apologists for Reserve Bank governor Glenn Stevens and the self congratulatory Canberra monoculture say that the high Aussie dollar is here to stay and mining will be driving the economy.

    Should the mining sector stall, which currently seems to be the case, then housing development will pick up the slack according to the policy-makers’ groupthink.

    That housing development is going to come at a high price, with Australian land and homes already among the world’s highest. Given Australia’s private sector debt is among the highest in the world already, it’s hard to see where the money will come from to fuel further property speculation.

    Right now Australia has a serious problem in determining what the future will be for the country.

    If the future is a high cost economy underpinned by massive property property prices, then the future has to lie in high value added sectors.

    The question is ‘what sectors’? Australian business, governments and society in general seem to think that property speculation is the future.

    Property speculation turned out not to be the future for Spain and it looks like China’s speculative boom is meeting its obvious end.

    Australians are going to have to hope that it really is different down under and that young people and immigrants are prepared to spend huge amounts of money to keep the economy afloat.

    If the policy makers are wrong, then the worry is that there is no Plan B.

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  • Stumbing into recession

    Stumbing into recession

    The Committee for Economic Development Australia (CEDA) today released its 2012 Big Issues survey looking at the responses of 7000 business people on the issues confronting Australian industry in 2012.

    One of the notable results is that business people don’t care about government surpluses. A third are neutral on the question “do you believe maintaining a government surplus is important” while 35% disagree that it is a high priority.

    Q10

    Yet despite the electorate and business saying the deficit is not a priority, the politicians still obsess about maintaining their surplus.

    Now Australia’s mining boom has come to an end – along with the blue sky economic assumptions that underlie both sides of politics’ spending plans – governments are desperately trying to fudge the books and continue the pretense that their budgets are in the black.

    Driving this obsession with avoiding deficits is the religious belief among Australia’s political classes that Triple – A credit ratings from the discredited Wall Street ratings agencies is more important than educating the nation’s children, caring for the country’s sick or building the infrastructure to compete in the 21st Century.

    The real danger with this deficit obsession is that there is a very high possibility that state and Federal governments are going to tip Australia into a recession driven by European style austerity. Already we see this developing as various states start slipping backwards according to the ABS’ latest accounts.

    graph courtesy of Macrobusiness

    Another interesting result from the CEDA report is how business’ view the Australia in the Asian Century report with nearly 80% of respondents saying the issue is important or critical.

    It is questionable whether Australian business is prepared to face the realities of an Asian Century as David Llewellyn-Smith writes at the Macro Business Blog, Australia’s businesses are looking more at getting help from the government to cut domestic costs rather than sell into Asia. That inward focus of Australian business since the mid-1990s is the topic for another blog post.

    The sad thing is that the government aspects of Asian Century report is stillborn as surplus obsessed politicians carve into skills training and innovation programs in a vain attempt to balance the books while failing to reform the tax system or address the middle class welfare that’s squandered most of the returns from the last decade of prosperity.

    Australia’s politicians are very soon going to have to decide who they govern on behalf of, the corrupt and incomptent ratings agencies or the people who vote for them and pay the taxes which support them and their political parties. For some, this might be a tough choice.

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  • How the film industry cons governments

    How the film industry cons governments

    “I would never make a movie where I didn’t get an incentive and I don’t ever intend to” states Michael Benaroya, producer of the movie Margin Call, in a New York Times story on movie studio subsidies.

    While we focus on the cost of subsidies to motor manufacturing, one sector that beats all others for playing governments for suckers is the global film industry.

    “Incentives” are a huge factor in determining where studios will film their latest blockbuster, Australia’s learning this the hard way as rent seekers looking for fat subsidies parade Hollywood stars in an effort to convince publicity hungry ministers that giving fat payments to the major production houses is good for jobs.

    The problem with this is that these susbidies aren’t that great for employment – Accompanying the New York Times’ video is a story on how Michigan’s dream of building a film industry has foundered.

    “Film is one of the few industries that’s really well subsidised and that’s a really attractive thing” Michael Benaroya says in the video.

    Before Michael even made the movie, he sold the rights to the New York production subsidies to investors. Who says financial engineering is the purview of Wall Street?

    The question for governments, taxpayers and those who want to build a sustainable movie industry in their city, state or country is do you want to attract “entrepreneurs” like Michael Benaroya who are shopping around the world for the best deal.

    New York might be the flavour today, but tomorrow it might be Sydney, Toronto or Prague. If the incentives aren’t fat enough then the movie productions may not come back for decades.

    In the meantime the crews, production assistants and catering companies who make up most of the employment on a major production move onto other jobs so the skills and industry infrastructure is lost.

    The biggest challenge is for governments, it’s estimated that New York state gives away over $400 million in subsidies and it’s difficult to see how that sort of expenditure can be justified as politicians face cuts to basic spending in today’s austere times.

    For the taxpayers, we need to be demanding fair value and real long term plans behind the subsidies doled out to the film, motor manufacturing and other industries.

    During the good times it was easy for opportunist politicians to dole out money to rent seekers for a media opportunity or to boost votes in a key electorate, but today that spending has to be strategic with real value and outcomes.

    As Michael Benroya shows, when an entire industry is based around government subsidies and incentives the leaders are those who know how to manage the bureaucracy and fill in the forms properly. Is that what we want our industries to become?

    If the answer is ‘yes’, then the next question is ‘can we afford it?’

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  • Is Australia missing the Indonesian opportunity?

    Is Australia missing the Indonesian opportunity?

    Mary Meeker’s annual State of the Internet Report looks at the trends driving the online economy. One area that should be of concern is that Australian entrepreneurs are overlooking one of the world’s biggest growth markets that is sitting right on the nation’s doorstep.

    Early in Mary’s overview, on slides 5 and 7, she shows the growth of various markets. Indonesia is the second biggest growth market for internet users – 58% year on year to 55 million – and eighth in the world for smartphone growth with a 36% increase last year taking total users to 27 million.

    Given the penetration of both smartphones and the internet are low with only one quarter of Indonesians connected to the internet and less than one mobile phone in ten currently being a smartphone, there is massive potential for the savvy entrepreneur.

    While there’s a steady stream of stream of Australian app developers and entrepreneurs heading to Silicon Valley, London and a few to Singapore there’s very few looking to their biggest neighbour.

    This ignoring of Indonesia is one of the many omissions in the Australia in the Asian Century report; despite being one of Australia’s closest neighbours with the world’s fourth largest population and an economy growing at over 6% per year, both businesses and governments tend to overlook the nation.

    For Australia, the tragedy is that Indonesia has a lot offer businesses that do more than just dig up coal and iron ore.

    Perhaps now the mining boom is over, entrepreneurs and governments might start to take markets like Indonesia, and other South East Asian countries more seriously. It’s an omission that’s currently costing the country dearly.

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