economy | Paul Wallbank - Communications Professional

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.

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

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.

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

Towards the post car society

Is the era of the automobile coming to an end as our society adapts to new technologies?

We don’t often think about it, but the design or our cities reflect the technologies of the day. Right now the way we live is built around the motor vehicle, but are we moving into a new era?

After a visit to Ford Australia’s Centre of Excellence For Design and Engineering, Neerav Bhatt has some thoughts on the role of the motor car in an era where people don’t have to travel to their workplaces.

One of Neerav’s points is that car use is falling among younger workers, a trend that’s happening across the western world.

Much of this is put down to the generations of Millennials and Gen-Ys being more interested in technology purchases rather than cars along with changing work patterns.

A more fundamental reason could be that we’re reaching the end of the motor car era.

If there is one technology that represents the Twentieth Century it is the motor car; the automobile has shaped our cities, our lifestyles and our culture.

However we are now in the Twenty-First Century.

The three eras of motoring

Roughly speaking, we could break the Twentieth Century’s love affair with the motor car into three phases; development, consolidation and dependency.

In the first period, the automotive industry was developing with thousands of manufacturers experimenting with the technology and production methods. At the same time governments were beginning to build road networks and communities were demanding improved links.

By the beginning of World War II, the motor car was an important part of life but ownership was largely restricted to affluent households and business.

Following World War II governments made huge investments in road networks and automobiles became cheaper to own.

This gave a generation a new taste of freedom as you could go anywhere with a tank of gas. It also changed the layout of our suburbs as people could now travel further to work, allowing them to move into bigger houses on the fringe of town.

As government investment was focused on road building, passenger train and tram networks were starved of capital with many cities abandoning their transit systems altogether.

Suburbs built in the early to mid Twentieth Century had evolved around trams and the legacy of that can still be seen today. However customers no longer wanted to fight for parking spots on crowded streets designed for horse drawn carriages and trams.

Responding to this developers started building supermarkets and shopping malls which became popular largely because they offered easier parking. Cheaper goods made available by improved logistics systems – another effect of the motor car – was the other main reason.

The beginning of dependency

With the advent of the 1970s oil shock, the role of the motor car turned from being a tool of liberation into one of dependency. The suburbs of the 1960s and 70s had been built around the assumption of universal car ownership and cheap fuel. When fuel ceased being cheap, then households budgets were affected.

Not coincidentally after the oil shock the reversal of ‘white flight’ – the movement of the middle classes to outer suburbs – started with the gentrification of inner suburbs that had been abandoned by the working class.

Through the 1970s and 80s the cost of owning a motor car became more expensive as governments stopped externalising the costs of maintaining roads and saw car use and petrol taxes as a revenue source.

At the same time the obvious effects of saturating society motor cars became obvious as roads increasingly became choked and planners began to realise that building more roads only attracted more traffic.

Times of decline

By the turn of the Twenty-first Century technology had also started to move away from centralised offices and factories. Today technologies like the internet and increasingly 3D printing mean that workers don’t have to commute vast distances. Automation also means many levels of management are no longer necessary.

Changing work patterns is also affecting incomes, with car ownership being expensive many employees – particularly young workers – don’t want to buy automobiles.

This all means that the era of the motor car is coming to an end, it’s not going to vanish quickly but the decline has started.

For business, this means the post World War II assumptions that saw the rise of the supermarket, shopping mall and big box discount store are no longer valid.

Some managers, most notably those of doomed department stores, won’t learn these lessons and will pass into history like the stagecoach companies.

Just as the end of the horse and carriage era saw the demise of buggy whip makers and blacksmiths, the rise of the motor car saw an unprecedented rise in wealth, employment and productivity. Not only were the lost jobs created elsewhere, but many more were created.

While the motor car isn’t going to disappear overnight, the decline has started and our society is adapting. For business and government leaders, the task is to understand those changes and adapt.

Image courtesy of a Norwegian motorway by Ayla87 through SXC

Australia and the Dutch Disease

Australia’s greatest management challenge is dealing with the country’s dose of the Dutch Disease

This week sees the launch of the annual G’Day USA festival where Australian exporters and various celebrities extol the virues of the country across the United States.

One of Australia’s success stories of the last decade has been Yellowtail Wines which carved a niche for Australian wines in the US in the same way Jacob’s Creek did a decade earlier in the UK.

Today the Australian Financial Review reports that Cassella Wines, the maker of Yellowtail, is in breach of its banking covenants due to the high Australian dollar.

Cassella Wines is another victim of Australia’s Dutch Disease infection.

Dutch Disease owes its name to the Netherlands’ gas boom of the 1960s. By the early 1970s the strong Guilder damaged the rest of the Dutch economy which didn’t profit from extracting natural gas.

Having sleepwalked into the Dutch Disease, it’s fascinating how Australia’s electorate, policy makers and business leaders are in denial about the effects as successful exporters like Cassella Wines struggle with a high dollar and accelerating costs.

When commodity prices and the dollar turn, and they always do, its going to be tough for the economy to adapt as much of the industry capacity that was competitive at lower rates won’t be available to take advantage of the lower costs and to pick up the slack from a declining mining sector.

For Australian businesses, the onus is on managers and proprietors to protect their organisations from the short term effects of a high currency and the medium term effect of a falling dollar pushing up the input prices of imports.

In other words, getting costs down without becoming too reliant on offshored labour or suppliers. The companies that manage this are going to be very strong after the initial adjustment, but it’s a tough management task.

While that task can, and will be, done by smart and hardworking leaders no-one should expect any recognition of the scale of this task from governments, media or business organisations who seem to be in denial of reality.

The Dutch and Australian flags image is courtesy of Emilev through SXC

Revolution and disconnected leaders

Revolutions are unexpected, but the causes are often obvious to all. The West shouldn’t be too smug about the economies of other nations.

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.

Proudly designed in Gyeonggi

Asian manufacturers are moving up the value chain. Could Korea, China and Taiwan start competing with Apple?

“Designed by Apple in California ” is the boast on the box of every new iPad or Macbook. That the slogan says ‘designed’ rather than ‘made’ says everything about how manufacturing has fled the United States.

Last year the New York Times looked at Apple’s overseas manufacturing operations, pointing out that even if Apple wanted to make their product in the the US many of the necessary skills and infrastructure have been lost.

Now the US is facing the problem that Asian countries are looking at moving up the intellectual property food chain and doing their own designs.

In some ways this is expected as it’s exactly what Japan did with both the consumer electronics and car industries during the 1960s and 70s.

The big difference is that Japanese manufacturers travelled to the US and Europe to study the design and manufacturing methods of the world’s leading companies. In the 1990s and 2000s, the world’s leading companies gave their future competitors the skills through outsourcing and offshoring.

In the next decade we’ll see the latest consumer products coming with labels reading “Designed by Lenovo in Fujian” or “Developed by Samsung in Gyeonggi”.

For western countries, the question is what do we want to be proudly be putting our names to?

Image from Kristajo via SXC.HU

Digital hunter gathering

Digital hunter gatherers are another mis-reading of history and the economy. We should be careful about these labels.

It has come to this – we’ve had the digital natives, the digital immigrants and now we have the digital hunter-gatherers.

This is the logical end of the ‘sharing economy’ philosophy which sees retweets, mentions and Facebook likes a hard asset.

Unfortunately having 100,000 Facebook friends giving the thumbs up to your latest retweet of an article of dubious value doesn’t translate into income – most of the digital curators find themselves living a hunter-gatherer lifestyle.

Life as a hunter gatherer is not pretty or easy – it’s short and brutal. The only certainty as a hunter gatherer is if you don’t find something to eat today, you will starve tomorrow.

In some ways, it’s fair to say the modern social media expert is not dissimilar to the prehistoric hunter gatherers in that their days are numbered and starvation is a near certainty.

One conceit of modern times is that life was so much better in the pre-industrial era; that before the industrial revolution people worked less and primitive man lived a noble life unshackled by possessions.

That’s all nonsense. Mankind shifted to an agricultural and then an industrial society because life is a lot better than fighting sabre toothed tigers for buffalo or trying to live on berries.

Myths like this are part of masking the steady decline in middle and working class incomes. George Freedman, the CEO of the Stratfor security consultancy, discussed this in his blog post The Crisis of the Middle Class and American Power.

The rise of the precariat, workers employed on a casual or project based basis, is part of that erosion of incomes. As Freedman says, the “the decline of traditional corporations and the creation of corporate agility that places individual workers at a massive disadvantage”.

In this respect, today’s digital hunter gatherers are more like the day labourers of a hundred years ago where workers, like my great-grandfathers, would wait at the gates of the factories or docks hoping to be picked for the day’s work.

One of the truths of today’s workforce is that it’s a harder place than a generation ago and the expectation of naturally rising incomes is gone for the bulk of the population.

This means we have to re-imagine our own roles in a changed economy. The assumptions of the post-war economy which have sustained us for over fifty years no longer hold.

Hunter gathering hopefully won’t be option which we end up with.

Reproductions at the Museo del Mamut, Barcelona 2011 from quinet on Flickr

How Australia’s nanny state hurts business and society

Australia has changed in the last quarter century as governments of both persuasions have found it easy to legislate rather than lead. The nanny state has had effects on business and society in general.

It’s becoming popular to describe Australia as a ‘Nanny State’ as governments respond to moral panics and the need to do something about anything from bicycle helmets to unpasteurized cheese.

Unquestionably Australia has changed in the last quarter century as governments of all persuasions have found it easier to legislate rather than lead. This has had effects on business and society in general.

A good example of how the regulations have built up over the last twenty years in Australia is a sign at my local beach.

That’s a fine welcome and it compliments the $7 an hour parking fees the local council levies. In itself, those parking fees are a good example of the price pressures driving Australia’s high cost quandary.

Possibly the saddest regulation is the alcohol ban on ferries. Twenty years ago it was normal to see a group of friends unwinding on the way home from work with a cold beer or wine. Today you can’t do that because some bureaucrat decided drunks were a problem and rather than enforce existing laws it was easier to ban drinking entirely.

The press and moral panic

Much of this nannyism is being driven by the media who drum up hysterical reports demanding ministers do something. In turn the government’s panicky PR obsessed apparatchiks respond with pointless and unnecessary laws and rules. Often duplicating those that already exist.

A good example of cynical media hysteria was the story of Malea, a Sydney mum minding her own business while legally cycling with her child in a trailer.

While out riding a discredited journalist filmed Malea and passed the footage onto a current affairs TV show which portrayed her as a reckless mum and demanded such behaviour be banned.

Fortunately in that case the politicians ignored the confected outrage, but that’s the exception rather than the rule.

Doing something

The media though doesn’t have to force Australian politicians into adopting the nanny reflex. Often governments will create their own outrage in order for attention deprived politicians to get press coverage.

A good example of this was the incompetent Carr government which decided its contribution to the War On Terror after the 9/11 attacks would be to turn the Sydney Harbour Bridge into something similar to what welcomes Guantanamo Bay detainees.

It’s worthwhile comparing the same view on San Francisco’s Golden Gate Bridge and ask which is the greater terrorist target?

When Sydney genuinely was a larrikin city, climbing the Harbour Bridge in the dead of night was a rite of passage. Today, if you can get around the security guards, barbed wire, CCTV and motion detectors you risk a $3,300 fine and being branded a terrorist.

If you try to climb the bridge and get caught, the fine is only half that of stepping on the hallowed turf of the Sydney Cricket Ground.

At the cricket, if you’re foolish enough to bounce a beach ball, start a Mexican Wave or sing out of tune and you’ll be out before you can say “Shane Warne is a safe driving ambassador.”

The Age newspaper gave a good example of Australian sports administrators’ Stalinist mindset in this fawning article which gloats over the efforts MCG staff go to in harassing their customers.

On level three of the Members’ wing is a secure room with the best seats in the house, although the occupants only manage an occasional glance at the game on hand. It is the MCG command post, where ground security, police and Securecorp officers constantly watch a bank of computer monitors and camera screens.

…

Dohnt says the camera operators will check the froth on a punter’s cup of Coke to see if it has been topped up with smuggled grog.

Forcing cricket fans to buy overpriced drinks or visitors to spend over $200 to climb the Harbour Bridge brings us to the core motivation behind many of Australia’s nanny state regulations – protectionism.

Hidden protectionism

This sign, which is attached to the back of the one at the beginning of this story, bans vendors who sell from boats. It’s questionable whether the council actually has the power or resources to enforce this ban but if it helps the local shopkeepers then so be it.

One of the hubristic traits of Australian exceptionalism is that the nation is a ‘free trade’ economy hard put upon by sneaky Japanese, American and European protectionism. The reality is Australia is just as good as Japan or the EU in introducing sneaky regulations to protect the well-connected locals.

A very good example of this is bananas where the Australian domestically produced product is substantially dearer than imported bananas sold in the US, UK or Europe.

In early 2011, Cyclone Yasi devastated Australia’s banana crop and prices soared. Not one imported banana was allowed in to ease the shortage. Remember that the next time you hear a politician or journalist boasting about Australia’s free trade credentials.

Banana prices are another example of the costs passed onto Australian households and industry through nanny state regulations. Compliance costs are real and add to the cost of production and employment. They are another reason why Australia has become a high cost economy.

More importantly, those regulations tend to favour incumbents making it harder for entrepreneurs and new entrants into markets making the economy even less flexible.

The burden of regulation is also unfairly dropped upon the smaller business who don’t have the resources to comply with or challenge unfair rules. The Howard government was very good at this with slapping small business with the responsibilities of raising the GST and complying with draconian laws like Workchoices.

At this stage it’s worth noting that the Australian nanny state isn’t a Labor party creation, it’s come from both sides of politics and often because poorly drafted laws require mountains of regulations to overcome the legislative flaws.

Workchoices was probably the best example of badly thought out laws where the Howard government panicked into slapping a whole level of punitive rules for businesses who failed to keep log books of staff hours worked – the legislation was so bad that had it not been repealed by Rudd, the sight of bundy clocks would have become common in Australian offices.

Nanny and risk

One of the unfortunate effects of the nanny state is that it saps the entrepreneurial spirit – why take risks when nanny is there to support you?

There is an unintended effect of this though – because we think nanny will always protect us we lose the ability to evaluate risk.

Where this is most obvious is in financial matters. Too often people are fooled into investing in dodgy schemes because they think that regulators will protect them. They find out this isn’t the case when the money is long gone.

That failure to understand risk though becomes pervasive through the community as the nanny state mentality becomes established. We could argue that inability to identify risk was the core reason for the global financial crisis.

The future nanny state

While the nanny state has been rampant around the world for the last fifty years, its days are numbered as cash strapped governments find they can no longer bear the cost of maintaining armies of bureaucrats to enforce silly rules.

As society deleverages from the excesses of the credit boom, governments are going to find revenues falling short and while it won’t be the first casualty of the new austerity, the nanny state will almost certainly be a victim.

Santa says buy more stuff

The Age of Consumerism has its biggest annual celebration at Christmas, but will it remain relevant for future generations?

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.

Australia’s high cost quandary

Is property the answer to keeping Australia’s high cost economy afloat?

“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.

Stumbing into recession

An obsession with surpluses and satisfying the ratings agencies is going to have harsh consequences for Australians

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.

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.

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.