Category: Australia

Graphs, damn lies and the middle class

Graphs can give us a misleading picture of our society, particularly when we’re looking at the middle classes

Graphs are great for illustrating a story, and also excellent at misleading people.

A good example of where a graph can give an incorrect impression is the Sydney Morning Herald’s story Whatever Happened to the Middle Class.

The story is a very good explanation of the predicament Australia’s political classes have put themselves into – exacerbated by their 1950s view of dividing the workforce into poorly paid ‘blue collar’ workers and affluent ‘white collar’ office staff – but it suffers from the selective use of headline graphs.

Viewing the big picture

The first graph shows how Australians are identifying themselves as middle class and the trend looks staggering,

Graph of How Australians see themselves as middle class

Now if we add those who identify themselves as working class, the picture looks even more dramatic with some pretty volatile swings,

A graph showing How Australians see themselves as middle or working class

However if we now add in those who identify themselves as rich, or upper class, we get a better perspective as the entire range is now shown,

Graph showing How Australians see themselves as upper middle or working class

Selective choosing the Y, or vertical, axis will always give an exaggerated view of a trend or proportion. Once we take the full range in we see the real extent of things. It also has the benefit of showing the trends aren’t as volatile as first appear.

Middle class perceptions

When we look at the graph showing the full picture there’s a number of interesting trends and characteristics about Australian society that come out of it which are worthy of some future blog posts.

Most notably is the identification of Australians being middle class as their property values increased.

On this point, it’s worthwhile contrasting the Australian experience with the US, here’s a Gallup poll from last year on how Americans see themselves,

A graph showing how Americans see themselves as upper middle or working class

While the definitions are different – that Americans differentiate ‘working class’ and ‘lower class’ is interesting in itself – it’s clear that the same trend happened in the US with more people identifying themselves as being members of middle class when their property values were increasing.

In 2008 and 9 there’s suddenly a sharp increase in Americans identifying themselves as working class as the property downturn bites. The steady increase in those claiming to be ‘lower class’ from 2006 onwards is worth closer examination.

What this means for Australia

The implications of the US trends is that any Australian politician intending to dismantle John Howard’s middle class welfare state will have to wait until the property market falls before trying to win any popular support.

For this year’s Australian election though, what’s clear is that any attempt to stoke the fires of class warfare is going to fail dismally in the outer suburban marginal seats so coveted by both parties.

We’re going to see a lot more selective graphs during the course of this year, it’s worthwhile taking time to look at them closely. The stories may be different, and a lot more nuanced, than the headlines tell us.

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Australia’s software disadvantage

What does Australia’s high software prices tell us about the nation’s economy?

This morning ABC Radio 702 asked me to comment on Adobe, Apple and Microsoft being summonsed to appear before the Federal Parliament’s IT Pricing enquiry.

As has been widely reported, the committee has asked the software giants to explain why there are such price differentials between Australian and overseas prices.

By way of example, Adobe Creative Suite 6 is available on the company website for $1299 US which is AUD 1263 on today’s exchange rate. The listed Australian price is AUD 1974 – a mark up of 56%.

This is not new

Australia has long been an expensive place to buy things, I remember my parents in the 1970s asking relatives to send over Marks and Spencer underwear as prices in Melbourne were so expensive.

Books and music have long been overpriced, the publishing industry openly printed the price of books in various countries and the Australian price has always been substantially higher than UK and US charges given prevailing exchange rates.

The high exchange rate has focused attention on the high prices, while the Aussie dollar was low consumers were tolerant of the rip-off. With the Aussie dollar high, consumers are wondering why the prices of many imported goods, particularly software, has remained so high.

A lack of competition

One of the biggest reasons for Australians being overcharged for many items is the lack of competition in the domestic marketplace. Most distribution channels are dominated by one or two players which lends itself to price gouging in areas ranging from technology to food.

A good example of this is the brewing industry, a revealing Fairfax article examined the Australian beer sector and exposed the failings and lack of competition in the market which results in the multinational duopoly extracting five times the profits of local retailers.

The conservative nature of Australian consumers is their own worst enemy as locals, including corporations and governments, prefer to buy major brands rather than experiment with local or lesser known providers.

Where alternatives exist, the price differentials rapidly fall. The price differential for an iPad is far less than the software apps that run on it. The reason for this are the range of alternatives available to the Apple product.

If Australian buyers were to explore open source alternatives, smaller suppliers or locally developed products then the prices of imported goods would fall.

Structural weaknesses

The pricing inquiry illustrates  the structural weakness in the Australian economy where the nation has become a price taker both in the domestic consumer sector and bulk export industries.

Where Australia finds itself is an expected consequence of a generation of economic policies which favours debt driven consumer spending underpinned by selling assets and raw commodities.

Hopefully Australians are realising the price of software is just one of the consequences of current policies and start demanding the nation’s political and business leaders have a clear vision for what the country’s role will be in the 21st Century.

If that vision for Australia is a quarry with a few retirement homes clinging to the edge, then we’re well on the way to achieving that. At least software prices will be the least of anyone’s worries.

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Do kids really need laptops in school?

Computers are seen as essential to education, but are we mistaking the tools for the methods.

Are laptop computers really essential to educating our kids? Fairfax media reports this weekend that the Australian Federal government’s laptops in education scheme is near collapse.

What stands out from the story are the quotes from educators;

Chatswood High School principal Sue Low said her school was providing laptops to students in year 9 but the uncertainty over future plans was unsettling.

“Laptops are now just as much of the culture of education as are pens and paper,” she said. “To not have certainty over how we will administer laptops to our students is very disruptive, and we need that certainty as soon as possible.”

Some schools have come up with their own solution to the problem. One NSW school has made arrangements with a private provider under which parents can buy a laptop for $1341 or rent-to-buy for $90 with monthly payments of about $50.

That computers are important is not a debate, but are we putting to much emphasis on the tools and not enough on what education is trying to achieve?

One educator said a decade ago that they could teach an 80 year old to use a computer in a few hours, but an illiterate 15 year old may be lost for life. This is truer today than it was then.

Computers are flooding our lives with information and the tools to gather that information are intuitive and don’t need 12 years of school to master.

What we are all need are the critical and mathematical skills to filter out the dross and misinformation that floods onto our screens.

Old and young have the belief that if something is on the web, then it must be true. The biggest challenge for parents and teachers with the web is convincing kids that cutting and pasting huge slabs of Wikipedia into an assignment isn’t research.

Not that this is just a problem in the classroom – plenty of politicians, business leaders and time poor journalists have been caught out plagiarising Wikipedia and other websites.

In recent times I’ve been to a lot of ‘future of media’ events where the importance of ‘data journalism’ has been raised. What really sticks out listening to these is how poorly equipped both young and old journalists are to evaluate the data they’ve gathered.

This isn’t just a problem in journalism – almost every occupation needs these skills. We could argue those skills are essential for citizens who want to participate in a modern democracy.

Computers, and coding skills, are important but we risk giving students the skills of today rather than giving them the foundations to adopt the skills of tomorrow.

We also risk making technological choices that risk education departments, schools and kids being locked into one vendor or system.

Giving every child a laptop is not a replacement for them having the critical, literacy and numeracy skills to participate in 21st Century society.

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High cost politics – how the Australian election will fail business

The introduction of middle class welfare by the Howard government and Labor’s refusal to undo it is locking Australia into a high cost trap with little hope either party addressing the real issue.

“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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Managing unemployment perceptions

Why did we accept one in twenty workers being unemployed as a good thing?

Stephen Koukoulas has a look at the changing composition of the Australian economy in Business Spectator today where he looks at how things have evolved over the last 50 years.

One of the notable things is unemployment and how our perception of what an acceptable level is;

Australia’s unemployment rate is 5.4 per cent at present, it was 0.9 per cent in August 1970 while in August 1951 it was a staggering 0.3 per cent.

In the 1961 Federal election the Menzies government hung on by one seat, having been punished for allowing the unemployment rate to reach the dizzying heights of 3.5 per cent.

Through the Twentieth Century, Australia’s unemployment rate averaged around 5% as shown in this Treasury graph.

Australia's unemployment through the twentieth century

What’s notable in that graph is how high unemployment became the norm in the last quarter of the century. When it became obvious politicians and economists couldn’t move the needle below 5%, the process of convincing us that five percent was ‘good’ began.

One wonders what the acceptable level of unemployment will be for the next generation. Will they consider us the failures that our grandparents would?

Image of unemployed carpenters in 1935 courtesy of the NSW State Library via Flickr

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2013 – the year of the incumbents

Deloitte consulting’s technology, media and telecommunications predictions for 2013 sees smartphones, tablet computers and televisions causing a data crunch.

Bigger, quicker and more congested are the predictions from consulting firm Deloitte’s 2013 Technology, Media and Telecommunications survey.

In Sydney last Friday, the Australian aspects of the report were discussed by Clare Harding and Stuart Johnston, both partners in Deloitte’s Technology, Media and Telecommunications practice.

Most of the predictions tie into global trends, with the main exception being the National Broadband network which Stuart sees as addressing some of the bandwidth problems that telecommunication companies are going to struggle with in 2013.

Technology predictions

For the technology industry, Deloitte sees 2013 as being a consolidation of existing trends with the trend away from passwords continuing, crowdfunding  growing, conflict over BYOD policies and enterprise social networks finding their niches.

Some technologies are not dead; Deloitte sees the the PC retaining its place in the home and office, with over 80% of internet traffic and 70% of time still being consumed on desktop and laptop computers.

Deloitte also sees gesture based interfaces struggling as users stick with the mouse, keyboard and touchscreen.

Media predictions

Like 3D TV two years ago, the push from vendors is now onto smart TVs and high definition 4K televisions. As with 3DTV, much of the market share of smart and hard definition TVs is going to be because television manufacturers will include these features in base models.

Deloitte’s consultants see 2013 as one where “over the top” services (OTT) like Fetch TV and those provided by incumbents delivered start to get traction on smart TVs with 2% of industry revenues coming from these platforms.

Catch up TV is the main driver of the over the top services with 75% of traffic being around viewers watching previously broadcast content. This will see OTT services firmly become part of the incumbent broadcasters’ suite of services.

The bad news for some incumbents is the increase in ‘cord cutters’ as consumers move from pay-TV services to internet based content.

Smartphone and tablet computer adoption which is expected to treble will be a driver of OTT adoption as viewers move to ‘dual screen’ consumption, the connections required to deliver these services will put further load on already strained telco infrastructure which is going to see prices rise as providers respond to shortages.

Telecommunications predictions

The telecommunications industry is probably seeing the greatest disruption in 2013. With smartphones dominating the market world wide as price points collapse.

One of the big product lines pushed at this year’s CES was the “phablet” – while the Deloitte consultants find it interesting hey don’t seem convinced that the bigger form factors will displace the standard 5″ screen size during 2013.

As a consequence of the smartphone explosion is that apps will become more pervasive and telcos will try and build in their own walled gardens with All You Can App to lock customers onto their services.

With smartphones moving down market, largely because of the cost benefits for manufacturers, Deloitte also predicts many new users won’t access data plans given they’ll use the devices as sophisticated ‘feature phones’.

Data usage will continue to grow, particularly with the adoption of LTE/4G networks, although much of the growth will still be on the older 2 and 3G networks as lower income users choose plans which don’t require high speed data.

The looming data crunch

There is a cost to booming data usage and that’s the looming shortage of bandwidth, Deloitte sees this as getting far worse before it gets better.

With bandwidth becoming crowded, prices are expected to rise. In the United States, the “all you can eat” nature of internet plans is being replaced with “pay as you go” while in Australia data plans are becoming stingier and per unit costs are rising.

The London Olympics were cited as an example of how the shortages are appearing – while the Olympic site itself was fine, outside events like the long distance cycle races strained infrastructure along the route. We can expect this to become common as smartphones push base station capacity.

Where to in 2013

Deloitte’s view of where the telecom, technology and media industries are heading in 2013 is that incumbents will take advantage of their market positions as technology runs ahead of available bandwidth.

In Australia, governments might be disappointed as telcos internationally aren’t interested in bidding huge amounts for bandwidth. As Stuart Johnston says “globally what we’re seeing is that carriers are not as willing to spend. It’s not the cash cow that governments are expecting.”

For government and consumers, we’re going to get squeezed a little bit harder.

While things do look slightly better for telcos, broadcasters and other incumbents there’s always the unexpected which eludes all but the most outrageous pundits, it’s hard to see what the disruptive technologies of 2013 will be but we can be sure they are there.

The main takeaway from the 2013 Deloitte report is that smart TVs, 4K broadcasting, tablet computers and smartphones are going to be the biggest drivers for the technology, media and telecommunications industry for this year. There’s some opportunities for some canny entrepreneurs.

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Australia’s grapes of wrath

The Australian wine industry is a good example of where the country’s industrial policies and business leadership have failed.

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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