Paul Wallbank – Brilliant Communications

Category: politics

  • High cost politics – how the Australian election will fail business

    High cost politics – how the Australian election will fail business

    “Running costs have gone crazy” complains Sydney restauranteur Jared Ingersoll at the same time the Australian events industry warns it’s being crushed by a higher dollar.

    While the closure of an inner city cafe doesn’t mean that much, a bigger warning about Australian costs comes from Royal Dutch Shell who have put their gas investments on hold due to project blowouts.

    Natural gas investments are the core of Australia’s economic policies with the country’s Asian Century report identifying energy exports as being the country’s main revenue earner over the next quarter century.

    Costs of doing business in Australia have been steadily on the increase since the Howard government introduced the GST which triggered Australia’s transition to a high cost country.

    It didn’t have to be that way but Howard’s addiction to middle class welfare meant what should have been a opportunity to reform the economy during the mid 2000s was squandered with gifts handed out by one of the highest spending governments in Australian history.

    While Whitlam at least spent money on bringing sewers to the suburbs, Howard spent his on subsidies to rich schools and parking permits to self-funded retirees.

    It would take a brave government to undo Howard’s work which isn’t something we can expect from the populist and cowardly Australian Labor Party that lacks any of the honesty or strength required to confront the whining middle classes about their unsustainable entitlements.

    Which makes the election announced last week interesting. In her election announcement the Prime Minister made a mention of dealing with the high Australian dollar, which at least shows the Labor Party sees there’s a problem – although they certainly don’t have the stomach to make the tough decisions required.

    On the other side of politics though it’s all unicorns and magic puddings. Tony Abbot and his friends are partying like it’s 1999.

    The Liberal Party policy paper released last week is notable for not acknowledging the global financial crisis and maintaining that taxes can be cut while Howard’s middle class welfare state can be expanded.

    The best example of the Liberal’s addiction to middle class welfare is their promise to introduce a parental leave scheme. As their Strong Australia policy document explains;

    Paid parental leave ought to be paid at a person’s wage rate, like holiday pay and like sick pay, because it is a workplace entitlement, not a government benefit.

    Not only does the Liberal Party believe that high paid workers should get subsidies for their nannies, but that employers should pick up the bill, just like holiday and sick pay.

    Middle class welfare and a massive business cost increase to boot.

    In a Smart Company poll last week, the small business readers overwhelming endorsed the Liberal Party.

    They should be careful what they wish for.

    For those worried about getting Australia’s high cost base down there are serious debates to be had about our tax and welfare systems along with tackling issues like high property prices, over-regulation, aging population and workforce skills.

    Most importantly, we have to define what Australia wants to be in the 21st Century.

    Little, if anything about these issues will be discussed before September and in the meantime the Dutch disease will slowly strangle Australian business. We need better.

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  • Explaining the NBN on 702 Sydney ABC Radio

    Explaining the NBN on 702 Sydney ABC Radio

    I’ve covered what the NBN is previously on the ABC for Tony Delroy’s Nightlife and on Technology Spectator last year looked at the challenges ahead for the project in 2013.

    The National Broadband Network was always going to be one of the key issues in the 2013 Federal election, The Liberal Party’s policy launch on Sunday and Malcolm Turnbull’s comments on ABC Radio station 702 Sydney on Friday illustrated how critical it will be.

    His assertion that wireless should be affordable is laudable, but the indications are that it is increasingly going to become less affordable.

    It also puts the coalition in a bad position, losing the three to four billion dollars expected from the spectrum auction wouldn’t help their budget position.

    One comment from Malcolm that particularly sticks out is on subsidies;

    If I could just make one other point Linda, possibly the most important. The government as we know is spending a stupendous amount of money on building a national fibre to the premises broadband network. And the subsidies there run into the tens of billions of dollars –

    The member for Wentworth is facturally wrong; there are no subsidies for the NBN, the government is providing the capital for the project which they hope will be paid back by 2018.

    the value of the network once completed will be a fraction of what the government is spending on it.

    On what basis? Certainly fibre has a 25 to 40 year expected life cycle, but that’s true of a roadway or an office building; does Malcolm suggest we don’t spend on that as well.

    you could make a very powerful argument that the form, the channel of broadband communication which adds the most to productivity is in fact wireless broadband.

    Possibly, but let’s see that argument. Currently data downloads to fixed lines still dwarfs mobile, both are growing exponentially.

    Malcolm actually touches on the problem we’re facing with wireless — the shortage of bandwidth.

    The government has been very slow at getting it out. As of the last report there was only about eight and a half thousand premises connected to the fibre optic network that they’re building throughout all of Australia

    This is true, the rollout so far of the NBN has been disappointing. This is what observers are watching closely on this.

    The Fibre to the Node setup also creates another problem – that of ownership. If Telstra retain ownership of the copper cable from the node to the premises, it means providers have to deal with two wholesalers one of whom is their competitor.

    In fact it creates a whole rabbit’s nest of problems for retailers and could very quickly find us in a situation where telco access requires dealing with two monopolies — Telstra and NBNCo.

    One the disappointing things about the National Broadband Network has been the poor debate around the topic, indeed the whole debate at times has been wrong headed. Any hope it’s going to improve during the election campaign isn’t likely

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  • Australia’s grapes of wrath

    Australia’s grapes of wrath

    In a great post, The Wine Rules looks at what ails the Australian wine industry after the news of Cassella Wine’s problems.

    Three things jump out of Dudley Brown’s article – how industry bodies are generally ineffectual, the failure of 1980s conglomerate thinking and how fragile your position is when you sell on price.

    Selling on price

    It’s tough being the cheapest supplier, you constantly have to be on guard against lower cost suppliers coming onto the market and you can’t do your best work.

    Customers come to you not because you’re good, but because you’re cheap and will switch the moment someone beats you on price.

    Worse still, you’re exposed to external shocks like supply interruptions, technological change or currency movement.

    The latter is exactly what’s smashed Australia’s commodity wine sector.

    A similar thing happened to the Australian movie industry – at fifty US cents to the Aussie dollar filming The Matrix in Sydney was a bargain, at eighty producers competitiveness falls away and at parity filming down under makes no sense at all.

    Yet the movie industry persists in the model and still tries to compete in the zero-sum game of producer incentives which is possibly the most egregious example of corporate welfare on the planet.

    When you’re a high cost country then you have to sell high value products, something that’s lost on those who see Australia’s future as lying in digging stuff up or chopping it down to sell cheaply in bulk.

    Industry associations

    “It’s like a Labor party candidate pre-selection convention” says Brown in describing the lack of talent among the leadership of the Australian wine industry. To be fair, it’s little better in Liberal Party.

    There’s no surprise there’s an overlap between politics and industry associations, with no shortage of superannuated mediocre MPs supplementing their tragically inadequate lifetime pensions with a well paid job representing some hapless group of business people.

    Not that the professional business lobbyists are any better as they pop up on various industry boards and government panels doing little. The only positive thing is these roles keep such folk away from positions where they could destroy shareholder or taxpayer wealth.

    Basically, few Australian industry groups are worth spending time on and the wine industry is no exception.

    Australia conglomerate theory

    One of the conceits of 1980s Australia was the idea that local businesses had to dominate the domestic market in order to compete internationally.

    A succession of business leaders took gullible useful idiots like Paul Keating and Graheme Richardson, or the Liberal Party equivalents to lunch at Machiavelli’s or The Flower Drum, stroked their not insubstantial egos over a few bottles of top French wine and came away with a plan to merge entire industries, or unions, into one or two mega-operations.

    It ended in tears.

    The best example is the brewing industry, where the state based brewers were hoovered up in two massive conglomerates in 1980s. Thirty years later Australia’s brewing industry is almost foreign owned and has failed in every export venture it has attempted.

    Fosters Brewing Group was, ironically, one of the companies that managed to screw the Australian wine industry through poorly planned and executed conglomeration. Again every attempt at expanding overseas failed dismally.

    In many ways, the Australian wine industry represents the missed opportunities of the country’s lost generation as what should have been one of the nation’s leading sectors – that had a genuine shot at being world leader – became mired in managerialism, corporatism and cronyism.

    All isn’t lost for the nation’s vintners or any other Aussie industry, Dudley Brown describes how some individuals are committed to delivering great products to the world. There’s people like them in every sector.

    Hopefully we’ll be able to harness those talents and enthusiasm to build the industries, not just in wine, that will drive Australia in the Twenty-First Century.

    Picture courtesy of Krappweis on SXC.HU

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  • Revolution and disconnected leaders

    Revolution and disconnected leaders

    China expert Patrick Chovanec has a provocative blog post on What Causes Revolutions, building upon the Financial Times’ description of how the Chinese Communist Party is struggling with corruption.

    In his article Chovanec quotes Richard Pipes’ Three “Whys” of the Russian Revolution which looked at how the fall of the Tsarist government was largely unexpected.

    This is true with the fall of all great regimes, in the late 1980s the idea that the Soviet Union would cease to exist within a decade was unthinkable.

    Chavonec quotes a key part of Pipes’ book;

    In 1982 [Pipes writes], when I worked in the National Security Council, I was asked to contribute ideas to a major speech that President Reagan was scheduled to deliver in London.  My contribution consisted of a reference to Marx’s dictum that, when there develops a significant disparity between the political form and the socio-economic context, the prospect is revolution.

    “A significant disparity between the political form and social-economic context” could be just as applicable to Western democracies.

    The Economist article makes a point about the French revolution “the widely accepted theory now is that the French Revolution was one of rising expectations that eventually could not be met.”

    As Stratfor’s George Freedman pointed out last week, a generation of Americans have expectations that are not going to be met. The same is true in Europe.

    While there’s no doubt the China’s political structures – like those in all totalitarian nations – are more brittle than those in established democracies, it might not be a good idea for those of us in the West to be smug and complacent about our own systems.

    Zapata image is courtesy of Ferferfer through SXC.

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  • Did online democracy ever exist?

    Did online democracy ever exist?

    “Democracy is dead” proclaim online pundits as Facebook closes down their corporate governance feedback pages.

    The question though is whether democracy really exists online; the internet is largely a privately run operation which makes the hysteria about the International Telecommunication Union’s attempts to impose standards on the web all the so more fascinating.

    As a consequence of almost every internet service being run by private organisations, rights and concepts like “democracy” are pretty well irrelevant and have been since the first connection to ARPANET.

    When we use services like Facebook, or even our internet provider’s email account, we are only being allowed to do so within the companies’ interpretation of their terms and conditions.

    Often those interpretations are wrong or bizarre as we see with Facebook’s War on Nipples and often the results of misinterpretation are costly for businesses.

    But we have little recourse as these sites are private property and the owners can do pretty well what they like within the law.

    Just a like a shopping mall, if the managements of Amazon, Google or Facebook want you to leave their service then you have no choice but to do so.

    We can squeal about rights online, but in reality we have few.

    That’s something we should keep in mind when investing our time or business capital into any particular platform.

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