For those of my readers following Australian politics, this is a sample of what the spin doctors don't tell you:

https://www.youtube.com/watch?feature=player_embedded&v=u-5RgFe9OX4

http://www.spectator.co.uk/australia/8955281/a-complete-and-utter-fraud-2/

 

 

My prognoses for the Australian economy are all coming true. It is not pretty. This new (old) prime minister is the same person who has squandered 96% of the government revenue generated by Australia's once in a century resources export boom according to recent independent reports.

 

It is the same person who doesn't have much of a clue about the true state of Federal Government finances and purports to seek re-election based on ever increasing expenditures which have no revenue base.

 

It is also the same person who is presiding over huge spending on government advertising trying to persuade people he has all under control. What rubbish. He might, just, be able to keep the genies in the bottle until election day (he will keep deferring the election I suspect), but there is a generation of landmines being laid which will cost Australia and its neighbours very dearly.

 

Australians will rue the day if he succeeds. Think United Kingdom under the Callaghan Labour government of the 1970's. It took Margaret Thatcher to fix the mess.

David Millhouse is an international entrepreneur with over 30 years in venture capital and private equity internationally. Based in Brisbane, Australia he is a specialist in venture financing and capitalisation, as well as the management of high growth companies, many of which proceed to IPO. He has conducted business in the UK, Germany, Switzerland, USA, Canada, Singapore, Hong Kong, Australia and New Zealand. A scientist by original profession, with an MBA and LLM from Bond University in Australia. He is a trustee of Bond University, Australia’s premier private University, and was formerly a trustee of the Queensland Art Gallery/Gallery of Modern Art. There are 30 years of publications and media on his professional activities and he has had a stellar career at CEO level since 1983.

For personalised solutions to the issues raised in the blog, please contact CORPbuilders TM at www.corpbuilders.com.au or call 0413 748 844

 

 

 

"CORNINESS, INSINCERITY AND TOKENISM"

Not my words. This was written and published by a prominent Labour ex-Minister, Gary Johns, in the Australian of the 16th July. To quote:

"Whatever he has promised, Kevin can't. He can't deliver. Kevin can't because he is full of cant -corniness, insincerity, and tokenism".

"He can't balance the books, although he spent the money. He can't deliver prosperity because he can't so no to the unions. He can't scrap the carbon tax by renaming it a carbon price."

And this was only the start of the article, the themes of which are being picked up by much of the mainstream Australian quality press.

Australia had the opportunity (and did in 2007) for zero net public debt, reducing taxation, and at the same time investment into quality infrastructure. That opportunity has been well and truly squandered by the Rudd-Swan-Gillard-Rudd socialist government.

Australians now face a declining standard of living, rapidly rising un- and underemployment, a slowing economy, and public debt likely to rise to European levels.

Rudd, between wrapping his arms around whoever will tolerate him, ignores these realities and promises anything designed to win a vote. Ask Gary Johns. Yesterday, yet another business tax hit in an economy reeling from uncertainty and disgust.

He makes much of "saving" Australia from the Great Recession in 2008 onwards. In fact, recent objective analysis including that from Dr Doug McTaggart, formerly Professor of Economics at Bond University and CEO of the Queensland Investment Corporation, makes it crystal clear that in 2008/9, it was net exports that saved the economy. He writes: "The collapse in discretionary consumption, aided by a collapsing exchange rate, leading to a collapse in imports was a key reason why Australia did not have a recession". It had nothing to do with government spending, despite Rudds' protestations.

If this guy is returned at the next Australian federal election, Australians are likely to rue the day. Lower living standards will be the inevitable result.

David Millhouse is an international entrepreneur with over 30 years in venture capital and private equity internationally. Based in Brisbane, Australia he is a specialist in venture financing and capitalisation, as well as the management of high growth companies, many of which proceed to IPO. He has conducted business in the UK, Germany, Switzerland, USA, Canada, Singapore, Hong Kong, Australia and New Zealand. A scientist by original profession, with an MBA and LLM from Bond University in Australia. He is a trustee of Bond University, Australia’s premier private University, and was formerly a trustee of the Queensland Art Gallery/Gallery of Modern Art. There are 30 years of publications and media on his professional activities and he has had a stellar career at CEO level since 1983.

For personalised solutions to the issues raised in the blog, please contact CORPbuilders TM at www.corpbuilders.com.au or call 0413 748 844

INVESTING IN VOLATILE TIMES: INFLATION OR DEFLATION?

This week, I had the pleasure of being invited to a lunch with Glenn Stevens, the Governor of the Australian Reserve Bank. The red wine was dry, but Stevens was dessicating. Apart from the odd joke.

There were two, one of which sent currency and capital markets into a tail spin. The second was a reference to his wife of thirty years wanting "long service leave". Just a joke I am sure.

The first aside was far more serious. He said that the banks' board deliberated "for a very long time" on interest rates. Others inferred that this was bank speak for a lowering of Australian official interest rates. Many were and are still predicting this outcome. It demonstrates just how sensitive world capital, currency, equities and bond markets are to the slightest whiff of volatility.

JP Morgan, in a note to their clients said "Glenn started a joke, which started the whole world cutting". "We were confused by both the content of this statement, and the manner in which it was delivered". (Australian Financial Review 5th July).

Lost in these inferences however, is a much more serious message. Many people in the community do not understand that low interest rates (whilst good for mortgage holders) are the harbinger of recession. There is not the demand for money from businesses and households, and the velocity of its circulation is reduced. i.e. there is a lot less economic activity per dollar on issue.

This has been the situation in Japan, Southern Europe, United Kingdom, and the United States (until recently: please see my Ping Pong Pang blogs on this site).

The real message from Stevens is reported in the Australian Financial Review (4th July). "Reserve Bank of Australia governor Glenn Stevens issued a dramatic pre-election request that the government restore the budget to surplus as soon as possible, and for the first time since 2008, a step which he believes will restore economic confidence". He urged that "Federal finances need to be brought back under control"and "that commitment will be heightened in the future".

It is true that monetary policy in Australia still has room to move. The problem is that money can be free (as it has been in other jurisdictions) and still not be in demand. In those circumstances, monetary policy loses its effectiveness, and is like pushing on string. That is the situation Australia faces today and reflects what has already happened in other countries.

As I have reported before, these conditions are reflected in true un- and underemployment rates approaching those in France and other European countries. The truth of this was manifested on Australian mainstream television this week (Four Corners, ABC). Don't be duped by the aggregate data coming out of Canberra.

Stevens, then may be the emperor without real clothes. His equivalent central bankers in other countries have had the same problem. These include Ben Bernanke, Mervyn King, and Mario Draghi. Each of them, together and separately, participated in a worldwide effort to prevent the advent of another Great Depression.

What is clear is that those countries that have bitten the bullet of fiscal policy and sound public finances are going to be the winners. That includes the US, United Kingdom, and the northern part of the Eurozone. Return to growth in those countries will provide investment opportunities on the upside. The rest, including probably, Australia, will be on the downside.

That is, unless the Australian government (and its constituent states) returns to sound public finances. Short term pain for long term gain. That will shake Australia out of its China induced torpor. If the Canberra soufflé rises twice, it won't happen.

THE CHALLENGE FOR AUSTRALIA'S "NEW" GOVERNMENT

Australia has a "new" government. Perhaps.

Most probably, it will be painting over some quickly growing cracks which were rapidly becoming an electoral tsunami which destroyed the "old" government.

Reports in the Sydney Morning Herald this morning state that four of six of Australia's states are in recession measured as declining state final demand. It also states that unemployment in Bankstown (an area of western Sydney) is twice the national average. And some, if you read my previous blogs on Australia's underemployment problem. The most reliable source of data seems to be Roy Morgan Research, not the Australian Bureau of Statistics. It is not just Bankstown.

Australia's true un- and underemployment problem is not that far away from France and other European countries. Ask the people who cannot find work, are losing their jobs in droves, and are moving back into their parents homes.

The SMH also carries an interesting article about Cash Converters, being a large listed pawnbroking firm. Middle income families are visiting the pawnbrokers. Professional people are starting to visit Centrelink, the Australian government's social insurance agency.

Interest rates, as set by the Reserve Bank, appear to be heading lower, a rare generational event. That doesn't assist small business since the banks do not reduce their lending rates accordingly. Or credit card holders. Or pensioners relying on fixed income. It does assist mortgage holders to reduce debt, an essential strategy since the deflation in house prices means that they end up in the same position viz a viz their bank loan covenants.

Electricity prices in Australia are now amongst the highest in the world, and rising. This is self inflicted in a country which has endless energy resources of most forms.

Energy price inflation is increasing. In addition, the relative decline in the value of the Australian dollar will mean significantly increased petrol prices.

This is a  double whammy for Australian business and households in an environment of deflating end product and services prices.

Some of these problems are a result of the China led boom in commodities. Most of the problems faced by businesses and households are inflicted by their own "old" government, previously led by the same person who now purports to head the "new" government.

The only saving grace may be that the leader of this "new", "old" government, may actually listen to Prof. Ross Garnaut, whom he knows well. If so, the magnitude of the problem may be realised in Canberra. Whether or not there is political will to accept the truth and do something about it remains to be seen, and will in part be determined by the fact that Australia is due to hold a Federal General Election this year. The date of this is now open (it was to have been 14th September). The date of the G20, that platform for middle power peacocks, will be a factor in setting the new date.

For Australian businesses and households, that date with destiny cannot come quick enough. Then perhaps, there can be a true NEW government, not a recycling of the failures of the recent past.