Wednesday, December 1, 2010

Fish food

Carassius auratus auratus, the common goldfish, a much maligned creature, rumoured to have a memory-length sufficient for one circuit of its bowl.

What do Australian business readers have in common with this humble fish? There's the easy life and danger of obesity. Certainly a small pond.

And there's one more similarity. The presumption of their masters that they won't remember a thing. A case in point is a couple of recent comments by Alan Kohler and Stephen Bartholomeusz of Business Spectator.

Two days ago, Kohler mounted the case that:
... the Australian government should learn from Ireland’s mistakes. The amount of mining investment in the pipeline suggests that the next five to ten years will see a massive boost to national income and therefore government revenue. It should be used for infrastructure, or saved.

Yesterday, following sparkling performances by Glenn Stevens in the parliament and elsewhere, Bartholomeusz joined in with a piece that endorsed the Reserve Bank Governor's view that we should seek to save the proceeds of the current mining boom in a sovereign wealth fund. He wrote:
The sensible policy would be to dedicate the proceeds of the MRRT to establishing a new fund, creating a relief valve to ease the pressure on the domestic economy and taking out an insurance policy against a either a subsidence in the terms of trade or increased volatility in them and in our economic settings.

This blogger could not agree more with the argument, not least because it will help prevent any further inflation of the housing bubble and, if the fund is held offshore, would also alleviate pressure on inflation, interest rates and the high dollar. Meaning when the boom ends, we may still have something other than dirt to export.

But one has to ask, have Messrs Kohler and Bartholomeusz been nibbling the fish food themselves?

During the debate over the Resource Super Profits Tax (RSPT) neither commentator presented these eminently sensible viewpoints. Indeed, day after day, Bartholomeusz poured scorn on the tax. And although Kohler was more measured, his colleague Robert Gottliebsen later described how:
Here at Business Spectator, Alan Kohler, Stephen Bartholomeusz and myself realised that Rudd and Swan had made a diabolical mistake soon after it was announced. We decided to highlight every aspect of this terrible measure until it was changed.

Along with The Australian, these commentators led an attack against the tax that was more reminiscent of great white sharks than it was domesticated pets. Indeed the feeding frenzy was such that it helped tear the legs from under a Prime Minister.

That is not to argue that the formulation of the tax presented by the Rudd government didn't have its problems. It did, not least being its shared equity structure and the failure to put the money into a fund. But that is not this blogger's point. Responsible media nuts those problems out in a mature and reasoned debate that includes both pros and cons.

Rather, we had a wild attack on the tax, a government in complete panic and, ultimately, the disconcerting sight of vested-interests gutting the policy in the people's own Cabinet Room.

This blogger finds it a little ironic, then, when Kohler and Bartholomeusz now argue that the country should save the proceeds of the mining boom. And unsatisfied, Bartholomeusz also took the high hand to the Parliament over the issue:
Whether one can get sensible policy given the awkward balance of federal parliament is debatable, but at least Glenn Stevens has, in the RBA’s usual subtle way, lent his support to the concept that for a variety of reasons the windfall from the once-in-several-generations resources boom should be saved rather than frittered away."
Commentators might do well to recall that the goldfish actually has quite a long memory.


Thirra said...

Save the tax proceeds from the mining boom? Are we then running the nation like a household economy?
We have a fiat curency and there is no need for the government to have a piggy bank.That is actually quite counter productive.If there are tax windfalls or the like there are plenty of deserving infrastructure projects to spend it on.
The tunnel vision of many economists and associated feral creatures astounds me.

Anonymous said...

Don't worry, chaps! Whatever you can't do in Oz, get your subsidiary banks to do over here, in NZ.

"Westpac all set for 5 billion euros (NZ$8.8 billion) covered bonds programme"

Anonymous said...

Will that be covered by NZ deposits only or Australian ones as well?

Anonymous said...

My understanding is that it's NZ depositors money, solely, that will place foreign bond holders ahead of them in case of default. But what's to stop the parent Aussie bank raising funds for itself, using the poor old NZ public as the backstop!

Cameron Murray said...

I loved the goldfish analogy and couldn't agree more - but the three amigos are just a drop in the Australian media aquarium.

Most interesting of all is that almost all commentators have ignored the fact that leaving coal and minerals in the ground is also a defacto savings plan. Rather than take the risk of pooling Australia's saving in some offshore account that might invest any which way the government decides, some kind of limiting quota on mineral exports would do just as well.

Anonymous said...

Our marketable assets, mineral or otherwise, are only worth what someone else is willing to pay us for them. Australia isn't the World's only coal / iron ore producer, and most Industrialised countries are fully aware that, in the case of iron & steel, it's FAR cheaper to recycle than process de novo. Our main "captive market" China is cutting back heavily on production, AND developing their own mining industry. Most Industrialised nations have moved away from coal-fired generation, and the oft-proposed hopes of India "taking up any capacity shortfall" are about 10-20 years premature.

Maybe we should "make hay whilst the sun shines" and use the revenue for strategically useful developments? With the very short-termist attitudes of our Pollies I'm not holding out any hopes!