AUSTRALIA AT THE CROSS ROADS: IS ABBOTT ITS MARGARET THATCHER?

The recent Australian Federal budget is surely a wake up call. Not only is it the end of entitlement: it is the end of the complacency generated by 23 years of real economic growth. That is now over, driven by a high real exchange rate and diminishing terms of trade. Real GDP growth could be zero, and with it the end of a plethora of high quality and free public services, whether they be world class art galleries or world class health care.

 

Predictably, there is a lot of squawking going on. Its always tough when things get smaller, whether its governments or companies. Much of the squawking is driven by those former Labour and Green politicians who squandered Australia's opportunity.

 

What they don't tell you, and what they did not disclose at the last Federal election, is that the Labour/Green government knew there was a massive fiscal problem. Wayne Swan, then Federal Treasurer stated "the fiscal situation is ruinous.... Federal government revenues have collapsed.." (Bob Carr: "Diary of a Foreign Minister" p. 362, 9th May 2013). The following week (May 14th 2013), Swan tells Parliament " the series of (budget) surpluses I announce tonight....". This after a subdued preview of the budget to the Labour party caucus (Carr, p. 364).

 

All of the squawking about broken promises of the new Federal Government could well rebound on the Labour party once the Australian electorate over time understands who created the fiscal problem and who tried to hide it from them.

 

Australia is at a cross roads: it could have continued to go down the southern European route, or it can have its Margaret Thatcher moment, with the benefits for Britons that stemmed from that. the choices are stark:

 

On the 24th February 2013, I published:

 

"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."

 

 

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

CAN AUSTRALIA TRANSFORM ITS ECONOMY?: VENTURE CAPITAL NEEDED

The Australian economy is in transition. The country is starting to experience aggregate declining living standards. There are two solutions: China or Venture Capital to finance a new Australian economy.

First, China. Australians used to have a saying: " if the US catches a cold, then Australia gets the flu". The risk now is, how far will deleveraging in China go, and what will happen to Chinese imports of iron ore and coal, price and volume. No one really knows.

To add to the uncertainty, since 2007, the advent of the Rudd/Gillard/Green party Governments, Australian Federal debt issuance has risen from c. AUD 50 billion to c. AUD 300 billion. This excludes State sovereign debt of a similar amount. Most of this debt is held by foreign bond holders. Further, Federal debt is likely to continue to rise substantially.

Australia is at substantial risk of China induced musical chairs. Worse than US induced flu. Especially worse since policy options are limited by the vast expansion of sovereign debt.

What are the options?

Australia has substantive numbers of world class manufacturers and innovative engineering firms. I have listed examples in previous blogs. For instance, HMAS Perth, an ANZAC class guided missile frigate, is considered to be the "most advanced vessel of its class in the world". This is because of its phased array and combat management system which is able to defend the ship against supersonic sea skimming missiles. This technology was developed in Australia.

Cochlear, commencing with a small R&D grant in 1981 now employs 2,700 people with a AUD 3 billion market capitalisation.

There are plenty of other examples and there could be hundreds more.

If the Australian economy is to transition and lessen the China risk, it will need to capitalise on all of these opportunities.

This will not be possible without a vibrant venture capital industry. Australia does not have one at present. Just AUD 111 million was invested in 2012/13. Although the country is reported to have the 4th largest funds management sector in the world, it will be a brave trustee that allocates to venture capital.

A prominent venture capitalist, Mark Carnegie, stated that "The venture capital industry has been its own worst enemy in Australia over a long period of time" and "the industry has performed incredibly poorly". That is certainly true, and with limited exceptions, the investment history of venture capital has been very poor in Australia.

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

THE POLITICISATION OF SCIENCE: BACK TO THE 1970'S?

The 1970's seem a world away from 2014, especially for younger people. Those people will not remember that the politics of science then, and especially what was then the new discipline of ecology, was about Global Cooling. One of the leading exponents of the day was one Paul Ehrlich, author of the Malthusian "Population Bomb".

Recent reports from credible German scientists predict a return to global cooling to a point equivalent to the mid nineteenth century.

This analysis seems to be consistent with measured facts. These facts include increasing areas of Antarctic sea ice reported by the US National Snow and Ice Data Centre and NASA. There can be many reasons for this of course, but the fact that Antarctic ice is expanding is an inconvenient truth for those, like the ill-fated Spirit of Mawson expedition led by Professor Turney, who found themselves having to be rescued from previously ice free areas of the Southern Ocean.

Whatever the reason, the scientific community would gain much greater respect and credibility if it stuck to discovering and reporting facts, rather than following a political agenda and hoping that the facts will support it.

In Turneys' case, who boasted about being reported in Times Square NY, the facts on the ground (to be accurate, ice bound ocean), did not support his script. How inconvenient, and scientifically challenging, since climate modelling suggests that ice cover should be shrinking rather than growing.

Climate is infinitely variable, and climate science uncertain.

The costs of Professor Turney's rescue pale into insignificance against the costs of the political agendas supported by uncertain climate science.

Those costs are borne by people who do not have high paying academic or government jobs, and in Australia, are losing their jobs because of the destruction of industries caused by climate "science" driven policy.

Just how disreputable and ignored recent climate science has become, witness the reopening of lignite (brown coal) mines in Germany and elsewhere in Central Europe. These will vastly increase carbon emissions in Europe, and especially given the closure of the German non-carbon emitting nuclear power industry.

Perhaps these emissions will mitigate the suggested period of global cooling being predicted by some German scientists?

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

AUSTRALIA CAUGHT BETWEEN SHIFTING TECTONIC PLATES

My Ping Pong Pang blogs on this site generate a lot of interest. Here is my prognosis for how Australian industry is being trapped between the rapidly shifting tectonic plates of the United States, German-led Europe, and China. If this prognosis is correct, it will have profound implications for investors.

The US dollar is certain to rise against most major currencies. It is still the only safe haven currency in an increasingly volatile world and this will attract a premium. Federal budgets are becoming increasingly under control and much of the money printing replaces the money which evaporated since 2008. Hence no signs of inflation.

Add in near self sufficiency in energy, comparatively low energy costs, low unit labour costs in manufacturing, and the world's best technology base, and you have the ingredients for a strongly growing economy and a fiery US dollar rally.

US$ investments in emerging markets are likely to be repatriated with severe consequences for emerging market economies which might include the collapse of shadow banking systems in those countries. More on China in a minute.

The US today is probably at its most competitive since the 1950's consumer product revolution. It is sucking in talent and innovation from around the world, and can make and export products very competitively across multiple industries. These products include military equipment, the demand for which may supplant rapidly declining demand for mining equipment.

 

The US can also meet its own consumption of almost everything, so will not be as exposed as others to unfolding events elsewhere.

In German-led Europe, monetary policy is akin to a return to the Gold Standard of the 20th Century with a constrained supply of credit. For the moment, this is adding to the intrinsic competitiveness of German industrial exports. Unless there is a Damascene conversion of monetary policy in Frankfurt (unlikely), only rising bond yields in the US are likely to have an effect on the cost and availability of euro denominated credit.

German industry is in prime position to capitalise on the next wave of development in China: the move towards a consumer society. German vehicles, machine tools, pharmaceuticals and chemicals are sold as soon as they are made for Asian consumers with less regard to the price point than virtually any other country's exports. The value of the German brand: even in Australia, advertising for German cars includes German language. German industry captures not only manufacturing profits, but also brand profits.

 

These products are often produced by privately owned and run Mittelstand companies. These are small and medium sized enterprises often located in smaller towns and villages. Usually without external equity financing.

 

China is the big enigma. The war games are likely to generate an increase in armaments production in Japan, Sth Korea and the US. Perhaps 2014 reflects 1914, except that the players are different. Gunboats and sabre rattling to detract from major internal problems.

 

Chinese credit growth has been explosive and unprecedented. As any CEO and political leader will tell you, it is far harder to tell people to tighten their belts than it is to inflate an economy with cheap money. Many Americans have learned this lesson the hard way. Australians are about to learn.

 

So whereto for China? Probably managed devaluation of its currency. Competitively with Japan.

 

Where does this leave Australia, its industries and investors?

 

More than 40% of Australian exports go to China, and most of this is iron ore. Australia, and its governments, are massively exposed to events in China. There used to be a saying that if the US catches cold, then Australia gets the flu. Today, if China reduces Australian iron ore and coal imports, (volume and/or price) the Australian economy and its tax base will suffer enormous consequences. A heart attack, not the flu.

 

This is at a time when Australian industry has been damaged for a decade by the destruction its previous major comparative advantage (cheap and abundant energy). This destruction is a direct result of the Labour-Green government of 2007-13. Energy costs are unprecedented in Australia and are now a negative factor when companies determine whether or not to invest in new projects or continue with their present ones.

 

Recent examples including the scaling down of production of aluminium from its raw material in Gladstone, Queensland, and the likely closure of aluminium production by Alcoa at is Geelong, Victoria factory.

 

Australia will not process its raw materials any longer: raw commodities will be exported for processing. This is happening across all industries, including the recycling of plastics wastes.

 

The worlds' highest energy costs are being replicated in the LNG industry, to the point where there is uncertainty not only about high prices but also about domestic availability to industry.

 

This is leading to a downwards spiral where reduced energy consumption (industrial and household) generates further prices rises to accommodate fixed costs structures.

 

Energy costs impacts and China are likely to have profound impacts on Australia's industrial and tax bases in the near to medium term, and thence to its housing markets and banks. These impacts will include more company closures, less employment (skilled and unskilled), government fiscal problems, and increasing housing unaffordability at todays' price points. In short, no, low, or slow growth in an environment where the US and Germany will do well. Or even a contraction, depending on China. All of this suggests a markedly lower Australian dollar.

 

The tragedy is that Australian industry makes many world leading manufactures: its doesn't capture the brand value (yet) that the German brand captures, but it can. It can also compete (as Germany does) with high unit labour costs and a strong currency. The Australian Mittelstanden are the unsung heroes of the economy and its likely medium term saviour.

 

However, what will be required is a weaning of the whole country off China, and an end to the Australian complacency, including in Canberra. The country needs its "Margaret Thatcher moment" and it is likely to be painful.  Whether the new government in Canberra is up to the policy challenge will be a recurring theme in 2014.

 

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

HOW GOVERNMENTS DESTROY INDUSTRIES

The world is a globalised place and much of it already knows that Qantas, GM Holden, and other Australian businesses are in deep financial strife. They don't understand how Australian governments have contributed to it.

There are tens of thousands of small and medium sized enterprises in Australia facing similar issues,  but without the political or union power to do much about it.

This struck home to me last weekend on a visit to Noosa, a much loved holiday village north of Brisbane. In the 1980's, some people proposed a fee to walk on the beach there. Beach visits have been an Australian icon since time immemorial and have been free.

Not any more.

Do you know where Australia's most expensive toll road is? It is not in Sydney, Melbourne, or Brisbane, or on any freeway connecting them. It is at Noosa. Why?

The previous Queensland Government, addicted as it was to Forms and Fees, decided to levy Australia's most expensive toll to drive on a gazetted road which in part uses a wide sandy beach.

The traffic jam was caused by the present need to pay the toll for which you spend 30 minutes filling in a form in a government office so that the government can exact the toll. Not only does a pleasant day at the beach become an exercise in useless form filling (the government does not need most of the information required), but the toll at A$11.50, for which the government provides nothing, is the most expensive in Australia. By far.

If you are really lucky, you can seek the assistance of one of the government officers to assist in the form filling. The catch is that the toll rises to A$16.00. For that premium, you also get a large dose of Attitude with a capital A. How inconvenient for a customer to drag someone from an airconditioned desk just so that you can pay a premium price for something which provides nothing that wasn't previously available for free.

This little example is just one of thousands which make Australia the uncompetitive and costly place it is today. Hence the swathes of empty shops, factories and offices in which people used to work. Much of it an outcome of deliberate government policy, in this case, an addiction to form filling which serves little purpose.

The Great Australian Complacency is coming to an end. Governments should lead the way by reducing their Forms and Fees, eliminate policies and procedures which reduce demand, and stop destroying industries.


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

IS AUSTRALIA THE NEW SOUTHERN EUROPE?

Most of the world thinks Australia is a quarry and a farm. A nice place to visit, albeit expensive. The country also manufactures things. And often does so well, but receives little credit internally and for the most part externally.

Internal criticism is normally directed at the futility of endless public subsidies for commoditised industries in a globalised world. Passenger cars are a prime example. Australians' don't buy many Australian built cars. They prefer European or Asian models, even if they are ridiculously expensive by world standards. Cars would be much cheaper in Australia if there were no domestic car manufacturing industry.

Interesting then that the examples of very high value adding manufacturing in Australia are lost in international perception and domestic Australian politics. And a great pity, because this is where the future lies and would stimulate a venture capital industry if government policy was as smart as the manufacturers.

I have provided examples before of high value adding firms which employ lots of people. A recent reported standout is CEA Technologies, based in Canberra. CEA has "designed, manufactured and marketed a naval defensive system more advanced than anything else on the world market" (Australian Special Report Defence 2nd November 2013). This protects naval surface ships from incoming very high speed missiles which have been almost impossible to destroy. "Like shooting a bullet with a bullet". And at very high closing speeds with unlimited manoeuvreability.

CEA has done it and major units of the Royal Australian Navy are being equipped with it. There are other examples in the defence sector where Australian engineering innovation and technology outstrips the rest of the world.

The strategic commercial basis is a customer with special needs and a budget to match. Just as post World War 1&2 economies were driven by the commercial application of military technology innovated at taxpayer expense, so can companies like CEA export their products to the rest of the world, provided regulations permit.

Just think what else could have been achieved had the subsidies provided to the motor industry been invested in manufacturing firms producing high value add products, not commoditised consumer products.

Anyone in government heard of the concept of opportunity cost? The alternative is the Southern European outcome, already underway in Australian cities and regional towns.

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

A TALE OF THREE CITIES (PLUS TWO)

I have been on business in three vibrant cities recently: London, Berlin, and Paris. You might think from media reports in Australia that these places are closed for business and all is doom and gloom.

Not so. Far from it. There is a building boom in London, both in the City and in the Westend. There is an air of confidence. New found I was told, but there nonetheless. London is open for business. To a large extent, London is its own economy, and is not a proxy for the rest of the UK.

Berlin, more sedate, provincial even (especially the airport), but since I was there to observe the elections to the Bundestag, and call on old friends, it didn't matter. What struck me about Berlin (I had not been there for several years) was the amount of building and the style of the building. In Berlin Mitte, Prussian Berlin is being reconstructed from original materials stone by recovered stone. The communist demolishers recorded where they sent the post-war rubble. In Potsdam, the Stadtschloss is finished and looks just like the original. In West Berlin, the style of the late 19th/early 20th century, complete with ornamentation and gold leaf, is making a comeback. So is Albert Speer if you look at one the new hotels.

Paris, frenetic, and in deal making mode. Which we did. Similarly Singapore.

There are two things that struck me back here in Brisbane: the clear air and the number of properties for lease, rent and sale.  I did not see this anywhere else in the parts of the cities where I was (perhaps the air was not as clear!).

My first read of the Weekend Australian told me why (5-6th October, p.16). John Black is an insightful statistician and demographer. He concludes : "Our labour market is now increasingly unemployed, under-employed, under-utilised or discouraged, and vulnerable....." I have written before that Australia was following the European road. That reality will dawn over the next few months as truth comes out. Australia is likely to enter a period of low growth just as the major Northern European economies are regaining confidence.

As John Black writes: "Cheers, Tony, It's all yours."


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

THE POLITICISATION OF SCIENCE

I have written extensively on the impact that political views have on science and how scientific viewpoints then feed into public policy like a feedback loop. All well oiled by copious quantities of taxpayers cash.

The assumption that carbon dioxide is a poison of course is a fallacy. Carbon has been demonised. Television pictures of clouds of gases being emitted from electricity generation cooling towers have impact. Its a pity therefore that the television journalists do not inform their readers that those emissions are largely water vapour.

They also don't tell you that water vapour is a very potent greenhouse gas, far more so than carbon dioxide.

European forests have increased in area by some 5,000 sq. kilometres in recent decades. Some of this is "direct action" in the form of man made plantings, and some is the reversion of former agricultural land into forest. If you travel to western Poland you can see it.

Increases in water vapour and carbon dioxide should (are) sustaining increased vegetation growth, both in density and in geographic spread. There have been recent scientific publications, including satellite photography which illustrates the point. How rich the earth was in former geologic times, the evidence for which is found in an abundant fossil record. These were times when the atmosphere contained far more water vapour and carbon dioxide than it does today. Plants and animals thrived.

How interesting it would be then, if instead of this constant "we are all going to be ruined" harping from the green-politicised scientific community, we could envisage a world where northern Canada, Siberia, Saharan Africa, and Australia became the food bowls of the world. All it takes is water, warmth, and plant food: carbon dioxide.

For my readers who are interested in pursuing these themes, Ian Plimers' excellent book, Heaven and Earth is a good start. So is Taxing Air:Facts and Fallacies about Climate Change, but Messrs Carter & Spooner.

Taxing Air is challenging: it tolls the bell on what the so-called climate change is really about: extending the tax base for green-left governments. What next: a royalty on rainwater falling in your garden? Don't think it can' happen, especially now the government knows who has rainwater tanks.

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

ROBIN RUDD IMPOVERISHES THE POOREST

Australian real interest rates are near zero. That's right: close to zero. Monetary policy is similar to that in the US, UK, EU and Japan. Why?

The domestic Australian economy requires serious stimulation. It isn't happening, because the "politicians have made investment too dangerous". So writes Robert Gottliebsen in Business Spectator (www.business spectator.com.au).

Interesting then that the effect on un- and under-employment is yet to be debated. This from Morgan Stanley to their clients: "We think the real downturn is only about to begin". Specifically their comments refer to a savage decline in engineering and construction activity which, given many people fly into large resources developments from their home towns, is likely to spread the effects of such a downturn widely throughout the economy. It is already happening in once prosperous regional cities like Mackay in Queensland. Real estate prices are deflating there.

A zero real interest rate is not enough to provide business confidence to invest and employ these people. Uncertainty about income does not stimulate property prices, no matter how low the interest rate. Buyers beware.

Contrast this with a country which has few natural resources, but massive trade surpluses with every one of its major trading partners/blocks: Germany. Why? Why should Australians envy and strive to emulate the Germans?

Political stability is one reason. Angela Merkel, the present Chancellor has provided stable leadership in very difficult economic circumstances, and almost certainly will retain power in the forthcoming Federal elections (two weeks after Australia). Contrast this stability with the childish, selfish behaviours evident in Canberra these last years.

Investment requires stability, confidence, and certainty. I have found these qualities across the German polity, legal system and corporate governance systems over a long period of time. They have not been evident in Australia for many years and are not evident now. Not at least until the next government has had at least 12 months of settling in.

Doubtless, Australia's self styled fiscal conservative prime minister, his predecessors and their respective ministers think they are assisting the poorer segments of Australian society by taking from the "rich" and distributing to the "poor". In fact, the result of their collective policies is the reverse. Robin Rudd stands out as a wrecker, deliberate or not, which will take a long time to fix.

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

HENRY THORNTON & ALAN KOHLER ON THE DESTRUCTION OF THE AUSTRALIAN ECONOMY

On the 5th June this year I reported:

 

Henry Thornton is the non-de-plume of a highly reputable Australian economist. This week he writes: "Australia is no longer the miracle economy, and seems to be heading almost heedless into very difficult times". He goes on: "The current government has steered Australia into a situation of great economic disequilibrium whose main manifestation is a loss of competitiveness of Australian business". "Spending tax payers money has provided no preparation for the sacrifices that will be necessary to reform Australia's international competitiveness". "The budget has fallen apart and has been shown to be in far worse shape than the Treasury and the Government ....believed until recently".

 

Last week, the government unveiled a massive deficit with no realistic prospect of improvement. And their mea culpa is probably not even accurate.

 

If anyone doubts Thorntons' view, or mine in these blogs, look no further than Henry Thornton and Alan Kohlers' articles in the Australian of the 6th August (today).

 

Thornton writes: " Leaders in denial as we head for a recession we don't have to have". "The nations leaders are walking unknowingly into a new economic crisis, ironically just as other developed nations are showing signs of recovery" (Please read my Ping Pong Pang Series: all coming true). "The only excuse for the steady tramp into recession is the insularity and self congratulatory hubris of successive ministers and officials..." Listening to lightweight politicians and their syncophant commentators on the TV current affairs shows makes me cringe. Australians are Lions being led by Donkeys. So much misplaced trust.

 

Alan Kohler, another well respected economist writes today on the same page: "The men and women in federal cabinet over the next three years are the ones who will finally have to confront this challenge, more than 11 years after it was identified. It can be put off no longer".

 

In short, the China boom ended two years ago and Australia and the world is adjusting to new economic realities while China reforms and transitions its economy and the United States undergoes a rebirth based on cheap energy, cheap labour (by Australian standards), technical innovation and the availability of venture capital.

 

Well may the Australian Reserve Bank reduce the cost of money. That will not save the Australian economy from recession. A nasty period of price deflation in assets, products, and services costs is the inevitable result. But it will cleanse the profligacy which so defiles the opportunities for the Australian people today. Most people know others who have lost their jobs or are on reduced hours.

 

If you haven't already got assets denominated in US$, Euros, or Sterling, then its probably not too late, although it would have been better to act a year ago.

 

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

WHERE TO FOR AUSTRALIA?

Australia is at a cross roads. As I have previously written, the country can go down the road of old school socialism or it can have its own Margaret Thatcher moment. Only Australians can decide at the forthcoming Federal election on the 7th September.

Under the Rudd, Gillard, Rudd governments, Australia was taken down the socialist road, at huge cost to its economy, industries, and the welfare of its people. Despite the fact that Rudd marketed himself as a "fiscal conservative".

What he has actually done is to create a mountain of Federal Debt. Net Federal debt is now some AUD 250 billion and growing at a rate only exceeded by Spain and Slovenia. To plug the gap, he now proposes to tax bank deposits (Cyrus ?), despite the fact that these are already insured. For my non-Australian readers, State and Territory government debt is about the same volume as Federal debt, which should not be seen in isolation.

As a highly respected economist and former Reserve Bank board member, Warwick McKibbin, reports (Australian Financial Review 2nd August), there is a growing problem with deficit spending to fund social programs. Australia is not growing its debt to fund productive infrastructure. Concurrently, Rudd policies are reducing economic activity and employment significantly.

Monetary policy is following other countries, not yet at the money printing stage, but interest rate reductions will not work in an environment globally of credit contraction, including in China. It is this credit contraction and the reduction in the speed of money circulation that multiplies the sins of taxing and spending governments.

People are becoming debt shy: the shift to part time work and underemployment, and the ageing of the population serves to emphasise that trend.

There will be no return to the "normative", pre-Great Recession times. This is the new normal, and there is no China boom on the horizon to alter that. Indeed, the maturing of the Chinese, Indonesian, Malaysian, Thai and Indian economies will mean that their highly educated populations will manufacture quality products, and provide high quality services to Australian consumers. This is at the same time that Australian government policies have significantly increased the costs of production and delivery in Australia.

The choice is clear: more of the same which will result in the rapid export of the country's best talent and industries, or have its own Margaret Thatcher moment.

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.

"SOFT EMPLOYMENT GROWTH GETS SOFTER"

So writes Michael J Knox, Chief Economist of RBS Morgans (Economic Update 19th June 2013), as it happens concurrently with my reporting yesterday of the unemployment and underemployment statistics from Roy Morgan Research (19th June 2013).

 

He continues: "Unemployment in trend terms continues to steadily drift up. Unemployment is rising and jobs are getting harder to get going into a Federal election. Most people are not economists. But everybody looking for a job knows that the economy feels worse".

"The last growth recession that Australia encountered where fiscal stimulus was not an option was back in 2002". Fiscal contraction is happening across Australia.

Michael is one of Australia's most prescient economists and his reporting is reflecting what you see in the suburbs, and, I understand, the increasing number of professionals visiting Australia's Centrelink social support network.

It probably means a reduction in Australian short term interest rates. Whether the exchange rate follows depends on the international money printers.
 

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

 

 

 

 

 

 

 

 

INVESTING IN VOLATILE TIMES: THE SEARCH FOR ALPHA

"The message to come out of this latest period of profit downgrades is that the (Australian) economy is in far worse shape than the movement in the overall share market would indicate". Tony Boyd, Australian Financial Review 19th June 2013.

The Australian Bureau of Statistics reports Australian unemployment to be 5.5%. Roy Morgan Research in its monthly sample of 330,000 people reports it to be 9.5% plus another 7.8% who do not have enough work. This is a total of 16.3%.

What this data does not say, is that these people (2.1 million) are concentrated in the younger (<30) and older segments (>50) of the labour market, and in geographies where European levels of real unemployment are being experienced today.

It is all very well for the Federal Government and institutions to quote aggregate data which are heavily skewed by the resources industries, but the reality is that there are significant and growing areas of Australia where the social consequences of un- and underemployment are readily apparent.

These organisations are projecting that other industries will somehow fill the economic gaps being left by the tapering off of resource industry investments. This will require entrepreneurial effort and the drive for alpha and will take a decade at least.

I have written extensively in these blogs how, for investors, the search for alpha can drive investment returns in such a volatile macroeconomic climate. I have also written how government debt and market interventions crowd out industries which are able to generate alpha.

In Australia, alpha generation, if it is understood at all by governments, is severely hampered by government policy, including the upfront income taxation of Employee Stock Option Schemes in venture backed investments.

Other jurisdictions, including the United States and the United Kingdom are already more alpha friendly than Australia. As these countries move out of recession, Australia is heading into one, at least a "growth recession".

The next Australian government will need some serious policy incentives to solve the employment problem and retain its entrepreneurs. There are moves in this respect presently in the review of the Corporations Act to accommodate the use of social media for capital raisings ("equity crowd funding") but Australia is behind other jurisdictions.

Unfortunately, given the political uncertainty in Australia, it will be at least a year before investors and entrepreneurs are likely to see real change.

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

PROFITING IN A VOLATILE INVESTMENT CLIMATE

For my readers in 28 countries, you might be interested to see how we are going to generate profits from these volatile times. There is a lot of strategy generation in these blogs and its implementation can be found below.

Please visit ACF Equity Research in London at:

http://www.acfequityresearch.com/millhouse/

for a more detailed analysis.

THE SEARCH FOR ALPHA IN INVESTMENT STRATEGY

Do you hedge against inflation or deflation? Some economists predicted a massive inflation surge from the money printing occurring in most major economies. Yet there is little evidence of it in the real economy for tradeable assets and services, and especially given the slowdown in China and other Asian countries. There is massive supply of underutilised capacity.

In those sectors, it looks as though investment strategy should be profiting from a deflationary environment.

That is not the case with non-tradeable assets in the worlds' two growth economies, being the United States and Germany. In some cities and regions, including California, New Zealand, and Berlin, real estate prices are inflating. Some years ago, I constructed the Deutsche Property Trust, and had a Term Sheet from Lehman Bros for USD 200 million. That was in 2007, so no guesses what happened shortly after.

Now, wherever you invest, you are investing in volatile conditions. That volatility creates opportunities, the windows for which could be quite short, and sometimes strategically and rapidly obsolete.

In the United States (where I have along predicted a resurgence in growth (please see my Ping Pong Pang blogs), the volatility is on the upside at present and in my view likely to remain so even if the money printing stops. This view stems from the US and Canada being able to source  and export their energy needs from domestic sources at lower than present world prices. There will  be a resurgence of manufacturing as the key strengths of the US economy build on this advantage.

Germany similarly, and whatever the present difficulties in the European Union, it is important to note that Germany is playing a long term game which is likely to result in more Europe rather than less (refer my blog on Joschka Fischer recently). Manufacturing and employment is growing strongly in Germany and this is now reflected in inflating real estate prices.

Generating alpha from opportunities in these two countries will be from upside potential including in the IPO markets.

Other countries, including Australia, will be on the downside, and include acquisitions of deflating asset prices, including some real estate. That is likely to continue for at least another year, and certainly until the political and economic mess in Canberra is resolved. Until then, the present socialist Federal Government has seen fit to destroy Australia's comparative advantages, disincentivise its entrepreneurial and aspirational workforce, and destroy the country's previously enviable fiscal position. Hence, every day, in most the mainstream press and commentaries, there are predictions of recession. Hello, I predicted it in these blogs nearly a year ago. Australia is looking more like France everyday.

Nonetheless, alpha is there to be earned, but on the downside.

Alpha generation is the true skill in private equity and hedge fund investing. But one size most definitely not fit all, and all investor presentations need to reflect that.

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

PROFESSOR ROSS GARNAUTS' VIEW OF POOR PUBLIC POLICY

For my readers who are the remotest bit sceptical of these blogs, please have a read of the speech given yesterday at the University of Melbourne by Professor Ross Garnaut and reported extensively today in the Australian Financial Review and Australian newspapers.

Garnaut is one of Australia's leading economists and can be credited in part for Australia's 20 + years without a recession for his advices and guidance provided to Australian Federal Governments. He is worth listening to.

His message is quite simple: Australia wake up from your slumbers or face destruction (rather like Smaug the Magnificent in Tolkiens' Hobbit). Destruction in this sense means a slide into European style recession and unemployment.

One firm I should have included in my list of nine prospective industries we could have is one which is long established and manufactures and exports very specialist electronics based products - Codan, based in Adelaide. Codan fits nicely with a sustainable competitive advantage in astrophysics and the management of space. It is part of the defence related cluster in Adelaide and could become a key participant in such an industry.

Codan, like Cochlear, Resmed, CSL and others I mentioned yesterday demonstrates that you can successfully manufacture and export from Australia, at todays labour and exchange rate regimes, without tariff protection and without constant subsidy.

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