AUSTRALIA'S MARGARET THATCHER MOMENT

Margaret Thatcher came to power in the UK on the 28th March 1979. It did so on the back of a decade of dysfunctional government policies driven by militant trade unions which, bit by bit, destroyed British industry. I know. My family was there and ultimately emigrated as a result. My father was a chief plannng engineer with Rolls Royce aero engines and played an important role in the development of the RB211 engine which powered the Boeing 747. My uncle (his twin) ran the foundry which manufactured the blades you see inside the cowling at the front of the engine.

Rolls Royce became bankrupt or close to, and a generation of skilled engineers, including my family, were asked to take (very) early retirement. Skills lost for ever.

I recall clearly the tales of their frustration with the destruction of their workplace by union organisers. The impact destroyed their careers and the company as it then was. This was an era where British steelmakers were forced to buy British coking coal even though it was more expensive and British car manufactures had to buy British steel, even though it was more expensive.

Not only were inputs more costly, but productivity was low. These industries, and the jobs and families they supported were forced out of business, and ultimately only were revived by foreign capital, foreign management, and the passage of the 1980 Employment Act which commenced the process of trade union reform.

This destruction of skills and a generation of families is happening here in Australia TODAY. Instead of Rolls Royce, take a look at what is happening at some of Australia's technological and manufacturing icons: Cochlear, Resmed and others. These companies run the risk of being exiled or destroyed by the abuse of trade union power. That abuse has and is being facilitated by the Rudd, Gillard, Swan, Shorten government.

Their crocodile tear response to placate those "workers" who are switching to Abbott in droves is a Manufacturing and Innovation Statement which plans to use centralised government planning and the Canberra bureaucracy to drive innovation. I don't think so. What it will do is to further drive the innovators and the much vilified entrepreneurs offshore.

There will be more of this from a government desperate for revenue as a result of four years of ill conceived spending and who believe that good policy is to hobble initiative and business as part of their class warfare strategy. There is not a dollar in the bank to encourage either innovation, entrepreneurship, or the venture capital industry to finance such admirable objectives.

The forthcoming Federal election needs to be Australia's Margaret Thatcher moment. The new government needs to emulate Singapore which is a beacon in how to turn pro-business policy into tangible benefits for the whole of the country.

These old school socialists presently in charge will have a lot to contemplate in their voter forced and well funded retirement as they try to avoid responsibility for ruining the modern progressive Labour Party which did so much to improve Australian business under the Hawke-Keating governments.

LIONS LED BY DONKEYS

When mainstream economists like Tim Hughes (Brisbane Courier Mail 18th February) start to talk about the "fiscal mess", we know there is a problem which can only be fixed by increased taxation or massive reductions in government spending.

Australians are acknowledged worldwide for our entrepreneurial attributes. A big pity then that we don't have the Swedish Treasurer, Andreas Borg, running the Australian Government. Judith Sloan (Australian 16-17th February)  quotes him as saying "entrepreneurs are the source of job creation" and he reduced taxes and charges in response to the GFC. So did the Singapore Government amidst earlier economic volatility.

What does our mob do? Slams "rich entrepreneurs and mining billinaires even if they do create jobs" according to Judith.

It is not just the high profile end of town which has been slammed.

It was this government of course, presumably because they do not like poorer but hardworking people become wealthier -the so-called aspirational class - who killed off employee share schemes -which internationally are well recognised as key drivers of any entrepreneurial economy. The fact that such employee share schemes benefit employee and employer alike didn't seem to matter.

So it shouldn't be much of a surprise that, as the government created "fiscal mess" demands money to fix it, the business sector, and SME's in particular are not going to provide it. Even if they wanted to.

In short, everyone loses. Except for those sacked and retiring Federal politicians who are paid for life by the taxpayer and never have to work again.

HOW GOVERNMENTS FUND SPENDING

"From the Reformation .....land had been seen as the most secure asset economically.... the confidence in the stability and security of the land was undermined; faith in a future like the past was much diminished, and the demands of an increasingly hostile, predatory, and instrusive state had to be met. Accordingly, economic decline had its effect, not only on finances, but also on minds, not just on their wealth, but also on their self esteem".

Sound familiar?

The attacks by the present Australian Federal Government on entrepreneurs and wealth held in superannuation are not disimilar to the above when the British Government was required to finance the growth of the welfare state.

A nation which makes its entrepreneurs and savers anxious for their future risks losing both minds and savings. I have written previous blogs about this.

Yet, this is where we are at in 21st Century Australia under present governance.

The quote above properly belongs to the time of Downton Abbey and the David Lloyd George Peoples' Budget, but the parallels are striking.

For the UK, they led to long term economic decline, the export of capital, and ultimately the mass emigation of generations of talented and educated people. Including to Australia.

(The full quote can be found at The Decline and Fall of the British Aristocracy by David Cannadine, Random House 1992).

THE WORLDS A SMALL PLACE

 I have one of the top 5% most viewed @LinkedIn profiles for 2012. http://www.linkedin.com/pub/profile/21/74b/562

AUSTRALIAN UNEMPLOYMENT

For my readers who may be sceptical about my views of Australian real unemployment in recent blogs, please read Robert Gottliebsens' account in todays' Australian 8th Feb 2013. Further insighful analysis can be viewed in the latest edition of Business Acumen (February 2013).

Walking around the suburbs gives you a very different perspective from the aggregate data provided by the top end of town. This economy is in serious and increasing difficulty. That is why the major home builders are starting to "give" stock away.

1991-4 here we go again.

AUSTRALIA'S BEST EXPORTS

Yesterday I compared the US and Australian trend costs of production, particularly energy and labour. It is reported today that one of the best examples of Australian venture backed technical innovation may move its manufacturing offshore.

Why?: because of Federal Government policy. And it has nothing to do with the exchange rate. It has everything to do with the anti-entrepreneurial culture pursued by the present Australian government and its mendicant status to the trade union movement.

Resmed is one of the few examples of successful venture backed technical innovation in Australia: alongside Cochlear and CSL.

It takes a generation and many hundreds of millions of dollars to found and build these international corporations. It also provides opportunities to build a viable venture capital industry in this country.

Present Federal Policy is putting all of this at risk: TODAY. Australian employees will suffer most - shareholders won't - and many will become Australia's best export: talented entrepreneurs, scientists, and engineers. The US and Singapore beckon.

This is far cry from the entrepreneur friendly policies of previous labour governments: to wit the Smart State of Peter Beattie and the Clever Country of Barry Jones, Paul Keating, and John Button.

What we are witnessing in Australia is old school socialism imported from the valleys of South Wales which is incrementally destroying the primary generators of employment in this country. Forget the notional unemployment figures. That is why the UK lost a generation of highly talented people educated at the taxpayers' expense to the US and the Commonwealth, including here. It devastated the ability of the UK to regenerate its manufacturing. It led to the Winter of Discontent.

Make no mistake, this can happen here if commodity prices slump. The rest of the economy is not going to take up the slack in the short run. It will take another generation and REAL LEADERSHIP.

2013: A YEAR OF RECOVERY: FOR THE SELECTED FEW

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.