Those who have been following my blogs will see a consistent trend. Confidence in a US led, German supported recovery, irrespective of whether you are a China Bull or Bear. Why? Because the troops fight harder when their officers point a gun at their backs.
And so it is in the US and Europe. There is change and it will now come quite quickly. In the US, innovation rich manufacturing is replacing outsourcing to China. Why? Radically reducing energy costs; flexible labour markets, declining real wages, and a huge technology base. China's reported unit costs are inexeorably increasing. China's actual unit costs have always been higher once you include what are euphemistically referred to as "transaction costs". These are the costs of State involvement in industry.
We used to have them in Australia. Organisations like the State Banks of Victoria and South Australia which sent those States bankrupt. Yes, Australi has had its Peoples' Republics, and there is one operating out of Canberrra now, although it is falling apart, as centrally managed economies always do.
So whilst the Americans are about to profit from an energy renaissance and a competitive manufacturing economy, Australia, led by political donkeys, has gone in the opposite direction:vastly increased unit costs from rapidly rising energy and labour unit prices. Thats' OK though since the economy is doing really well. Isnt it Julia and Wayne?
Except that it isn't for many people, and especially the SME sector (Mittelstand for my German readers).
As an employer, I always looked at the job ads in the Saturday papers to see whether my competition might want my employees. For instance, in the Brisbane Courier Mail, there used to regularly be 120-130 pages of advertising. Last week, there was 16 pages, and I do not believe it was because of a shift to online ads.
German led Europe has a real chance of a return to growth and stability. The banks are recapitalised and in Germany, there is a property boom, especially in Berlin.
Whither Australia? A wasted year. Policy instability. It demontrates very clearly how the present Federal Government does not understand or does not care about business.
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