Mr Turnbull, it’s time we stopped selling off the farm
Malcolm Turnbull is rumoured to be very concerned about Australia losing its coveted AAA credit rating. Politically, it would be a terrible look were it to occur on his watch. Our shaky credit rating reflects the failure of successive governments to deal with our most pressing economic issue – the Balance of Payments Current Account Deficit. And I don’t see things changing soon.
While Fitch, Moody’s and S&P all maintained the AAA rating following the Government’s Mid-Year Economic and Fiscal Outlook (MYEFO) it is said the nation’s AAA credit rating is now hanging by a thread.
S&P has had Australia on a negative rating outlook since July 2016, meaning a downgrade over the subsequent two years is a one-in-three possibility.
The triple-A credit rating is important because its loss would raise the cost of government borrowing, which, in turn, would flow through to the rest of the economy.
And Australia can scarcely afford any additional costs.
For some years now I have been warning that unless significant taxation, ideological and structural reform begins now, we are firmly on the path to serfdom. As extreme as it sounds, the ultimate destination of the current strategy will have us literally working for, and renting land from, foreign landlords. By some measures its already well underway (read Bob Katter’s observations below).
As an Australian I hope I am dead wrong about the future I have in mind for our country if left in the hands of, or under the influence of, our politicians, few of whom appear to have any business or investing acumen.
The hard truth is that we are living beyond our means. Another hard truth is that Australian voters are hanging parliaments because neither major party has the temerity to lead. Kowtowing populism is not leadership.
It wasn’t Labour’s scaremongering on Medicare, the subject of negative gearing or superannuation that produced the 2016 election result; it was simply the lack of a clearly articulated long-term vision for Australia’s future prosperity and how we would get there.
You can get rich buying and selling but you only become wealthy buying and owning. So let me state the bleeding obvious: we won’t be prosperous if we don’t own our country’s assets.
Look at Harry Triguboff – currently the richest man in Australia. How did he get there? He’s built a business that makes things – apartments. He makes them cheaper than his competitors and sells them at a premium. Because he simply repeated the recipe for a long time, he’s now so profitable he can afford to pay his suppliers up front, so they love dealing with him, and in return they give him solid discounts, ensuring his future profitability. And here’s the clincher: he doesn’t sell everything he makes. He keeps some of the apartments and generates an income by renting them out.
If hypothetically it costs him $100,000 to build an apartment that might be sold for $700,000 he could generate an immediate return of $600,000. But what if he rented the apartment out? To a retail buyer a $700,000 the apartment might generate a yield of two per cent. But on Mr Triguboff’s cost of $100,000, that yield rises to 14%. And that 14% comes in every year. By the seventh year (unfortunately that is two election cycles, so no political party will have the appetite for it), assuming just three percent increases in rent, the apartment is free to Mr Triguboff and all subsequent rent is profit. Even if apartment prices halve, its no skin off his nose. He continues to generate free cash flow at the rate of 14 per cent per annum.
Australia should be taking a leaf out of Mr Triguboff’s investment guidebook rather than Mr Andrew Robb’s and the LNP’s assertions that ‘foreign investment’ is necessary and always good.
The debate about foreign investment in Australia seems to focus on two arguments. The first is a border issue with foreign investment supporters labelling their opponents xenophobic. The second is the economic rationalist argument that we need the capital. That latter argument is softened and packaged up with a sales spiel that we also can benefit from the foreign expertise, innovation and experience.
Neither side seems to either want, or is qualified to deal with, the most pressing issue: our Balance of Payments Current Account Deficit.
The reason for our Balance of Payments Current Account Deficit is that we don’t generate enough receipts from our exports to pay for our imports, and so we require a surplus of funds on the capital account in order to pay for the difference.
In order to achieve a surplus on the Capital Account we either need to borrow money from overseas or we need to sell our assets to get that capital in.
From speaking with Andrew Robb and Paul Fletcher I have arrived at the conclusion that there is a deep-seated ideology underpinning the LNP’s policies. That ideology supports the idea that selling assets is good because it attracts ‘foreign investment’. The reality however is quite simply the value of our imports is higher than the value of our exports. We are therefore living beyond our means and so need to sell what we own to fund our bad habits. Its no different to a home owner selling off a few bedrooms so that the kids can have an xbox.
The argument that there is no risk from foreign investment is supported by Andrew Robb’s statement that we have been selling land to foreigners for 200 years. But that statement simply fails to acknowledge that we might have none left to sell if we keep doing it for another 200 years. And then what Mr Robb? Oh that’s right, you aren’t around to be held accountable.
Warren Buffett’s infamous allegory about the island of Thriftville and Squanderville paints an ominous picture of Australia’s future. In the allegory, Squanderville’s trade deficit worsens to the point that its “net worth,” so to speak, is transferred abroad at an alarming rate.
The industrious citizens of Thriftville save and invest, work 16 hours a day, producing more than they consume and exporting the excess to their trading neighbour Squanderville.
Squanderville love the products that Thriftville produce. Happy to work less but still wanting to enjoy the finer things in life, Squanderville funds the imports with IOUs called Squanderbonds denominated “of course” in Squanderbucks. Sounding familiar yet?
“Over time Thriftville accumulates an enormous amount of these bonds, which at their core represent claim checks on the future output of Squanderville. A few pundits in Squanderville smell trouble coming. They foresee that for the Squanders both to eat and to pay off–or simply service–the debt they’re piling up will eventually require them to work more than eight hours a day.
“Meanwhile, the citizens of Thriftville begin to get nervous. Just how good, they ask, are the IOUs of a shiftless island? So the Thrifts change strategy: Though they continue to hold some bonds, they sell most of them to Squanderville residents for Squanderbucks and use the proceeds to buy Squanderville land. And eventually the Thrifts own all of Squanderville.”
Buffett’s allegory ends with the residents of Squanderville having nothing left to trade and forced to work, not only eight hours just to eat, but additionally to service the debt and pay Thriftville rent on the land they sold. As Buffett observes, “Squanderville has been colonized by purchase rather than conquest.”
There is a solution. It requires some hard work and some investing in ourselves. And we have to start now. If all the entrepreneurs in Australia can be incentivised (see Singapore, London and Israel’s tax holidays for start-ups) to start businesses in sectors in which we export something the rest of the world is willing to actually pay a premium for (not just dirt and live animals), we may eventually build enough large industries that consistently earn enough to reduce our reliance on borrowings and the sale of our precious assets. Imagine then being able to be the foreigner acquisitor – we could buy and own all that foreign innovation and technology the Andrew Robbs of the world say we so desperately need.
Post Script:
For more on the subject of foreign ownership you may wish to read the Federal Member for Kennedy Bob Katter’s 2016 Letter here.
While I don’t support all of his utterances in the letter, I do believe his concerns with respect to the demise of our production of finished goods are valid in that it ultimately ends with the foreign ownership of our land and productive capacity.
A few conversation starters follow:
“The only registered Port in the Northern Half of the Australian Coastline has been sold to the Chinese (a) compromising USA defence usage, (b) creating a foreign owned tollgate, which under the China Free Trade Agreement provides the Port owner with the right to an “unlimited” toll charge on all Imports and Exports flowing ‘into and out of’ the North West quadrant of Australia.”
“It was reported in the media, following government statements, that 11% of Australia was foreign owned. Since 52% of Australia is on the World Register of Deserts and over 20% is “Aboriginal Land” for which no Title Deed is available or possible (and therefore no economic development), and 7% is National Park, 79% of Australia’s lands is ecologically and or legally precluded from any economic activity. So even in the early 2000s more than half of Australia’s usable land was probably foreign owned.”
“In the last six months:
- Minister Barnaby Joyce announced the Ord Stage 3 as a preferred recipient of Northern Australia $500m Water Fund. The Ord Stage 2 and Stage 3 are both Chinese owned. They will comprise Australia’s Biggest Farming Operation.
- The Van Diemen’s Land Dairy farms Australia’s biggest farming operation purchased by China.
- Cubbie Station Australia’s 2nd biggest farming operation is China owned.
- Chinese purchase Nicoletti Farms, Australia’s biggest grain grower.
- Terra Firma Australia’s biggest cattle producer disclosed 60% of its operations are to be Indonesian owned.
- Queensland 2nd biggest cattle station Wulugurang (Wentworth) sold to China.
- Glenrock, reportedly NSW most valuable ($45m) cattle property (Hunter Valley) sold to China.”
“At this juncture we have to buy almost all of our essentials from overseas, but we now have no money to buy these essentials.”
“So we Australians are … only staving off bankruptcy through ‘bit by bit’ selling off the farm (our politicians call it “foreign investment”).”
“In 1990 wool exports at $6000 billion exceeded coal exports. Paul Keating started his “free market” solution by announcing the deregulation of the wool marketing scheme in 1990. Between 1990 and 2015 the national sheep herd dropped 64%. Wool exports are now fairly negligible.
“In 1989 we were on target to (over 10 years) catch up to Thailand’s annual prawn farm production. Restrictive environmental bans decimated the industry down currently to around $75m. Thailand’s prawn production now runs at around $10b per year.
“In the early 2000s, the Fed Govt. approved the sale of over 90% of our Coal Seam Gas (CSG) reserves to foreign corporations. CSG has negligible operating costs (wages). Price transferring means they pay negligible tax. CSG sales next year are expected to exceed $25b.
- Wool exports should now be earning Aust. $15b per yr – they’re now fairly negligible.
- Prawn exports should now be earning Aust. $10b per yr – they’re now fairly negligible.
- CSG exports should now be earning Aust. $23b per yr – they’re now fairly negligible.
Other countr[ie]s when they ran out of indigenous oil introduced or increased the levels of ethanol content (health enhancing and smog reducing) in motor vehicle fuels.
Australia didn’t.
So instead of $21b a year going into Rural Australia for ethanol and biodiesel, we send $21b a yr to the Middle East for oil
- Ethanol and Biodiesel production in Australia should now be earning Aust. $21b a yr – it’s earnings are negligible.
We won’t talk about food imports increasing nearly 10% a yr whilst food exports increase at only 3% a yr.
“Clothing, footwear, whitegoods, motor vehicles, petrol are now almost all imported. House building materials, cement, steel (roofing iron) will on present trends soon be 40%. Hundreds of billions of dollars going offshore each year.
“It is not that these considerations constitute Armageddon in themselves. But they are flashing red lights signalling that the barbarians are at the gates…”
Again, you can read the full letter here.
Roger Montgomery is the Founder and Chairman of Montgomery Investment Management. Roger has over three decades of experience in funds management and related activities, including equities analysis, equity and derivatives strategy, trading and stockbroking. Prior to establishing Montgomery, Roger held positions at Ord Minnett Jardine Fleming, BT (Australia) Limited and Merrill Lynch.
This post was contributed by a representative of Montgomery Investment Management Pty Limited (AFSL No. 354564). The principal purpose of this post is to provide factual information and not provide financial product advice. Additionally, the information provided is not intended to provide any recommendation or opinion about any financial product. Any commentary and statements of opinion however may contain general advice only that is prepared without taking into account your personal objectives, financial circumstances or needs. Because of this, before acting on any of the information provided, you should always consider its appropriateness in light of your personal objectives, financial circumstances and needs and should consider seeking independent advice from a financial advisor if necessary before making any decisions. This post specifically excludes personal advice.
andrew ronan
:
It’s a common story around the developed world, and it’s a result of the long term drift towards a leftist society which is an economically unsustainable one and relies on growing debt to fund its idealistic activities and its bloated public sector who are kept busy imposing anti business and anti job regulation on anyone or anything that dares to move , Sadly I think there is no solution to this problem for now ,there is now a whole generation indoctrinated into this system and they are the about under 35 year olds, they think this so called system is normal .It will require severe economic shock to change their mindset, and quite a few years of pain .There are now many older experienced individuals who are predicting exactly that, and if it comes it will be a very hard lesson in a very big classroom.
Roger Montgomery
:
Perhaps ANdrew, it is how otherwise rational intelligent people have,, in the past, elected dicatators!
Kyle McGeechan
:
Great article Roger. Its so alarming. I really worry about the nations economic future, I really do.
Roger Montgomery
:
Me too. I wonder what kind of country my future grandkids will grow up in. Will it feel as safe as it does now?
xiao fang xu
:
Frederic Bastiat vs. the Protectionists:
13.9
I was at Bordeaux. I had a cask of wine which was worth 50 francs; I sent it to Liverpool, and the customhouse noted on its records an export of 50 francs.
13.10
At Liverpool the wine was sold for 70 francs. My representative converted the 70 francs into coal, which was found to be worth 90 francs on the market at Bordeaux. The customhouse hastened to record an import of 90 francs.
13.11
Balance of trade, or the excess of imports over exports: 40 francs.
13.12
These 40 francs, I have always believed, putting my trust in my books, I had gained. But M. Mauguin tells me that I have lost them, and that France has lost them in my person.
http://www.econlib.org/library/Bastiat/basEss13.html
Some time afterwards, M.T. dispatched another vessel with a cargo also of the value of 200,000 francs, composed of the products of our native industry. This unfortunate ship was lost in a gale of wind after leaving the harbor, and all M.T. had to do was to make two short entries in his books, to this effect:
“Sundry goods due to X, 200,000 francs, for purchases of different commodities dispatched by the ship N.”
“Profit and loss owed to sundry goods, 200,000 francs, in consequence of definitive and total loss of the cargo.”
At the same time, the customhouse books bore an entry of 200,000 francs in the list of exportations; and as there was no corresponding entry to make in the list of importations, it follows that Mr. Lestiboudois and the Chamber will see in this shipwreck a clear and net profit for France of 200,000 francs.
There is still another inference to be deduced from this, which is that according to the theory of the balance of trade, France has a very simple means of doubling her capital at any moment. It is enough to pass them through the customhouse, and then pitch them into the sea. In this case the exports will represent the amount of her capital, the imports will be nil, and impossible as well, and we shall gain all that the sea swallows up.
This is a joke, the protectionists will say. It is impossible we could give utterance to such absurdities. You do give utterance to them, however, and, what is more, you act upon them and impose them on your fellow-citizens to the utmost of your power.
The truth is, it would be necessary to take the balance of trade backwards (au rebours), and calculate the national profits from foreign trade by the excess of imports over exports. This excess, after deducting costs, constitutes the real profit. But this theory, which is true, leads directly to Free Trade. I make you a present of it, gentlemen, as I do of all the theories in preceding chapters. Exaggerate it as much as you please — it has nothing to fear from that test. Suppose, if that amuses you, that the foreigner inundates us with all sorts of useful commodities without asking in return — that our imports are infinite and exports nil. I defy you to prove to me that we should be poorer on that account.
https://mises.org/library/balance-trade
Protectionists of all stripes often rail about trade deficits. An unfavorable balance of trade. One of the catch phrases of these people, because at some level they realize the value of trade, is that they want “fair trade.” That’s just protectionism under the guise of being pro-free trade.
https://fee.org/articles/how-bastiat-toppled-the-balance-of-trade-bugaboo/
A leading illustration of this point involves the twin concepts of “balance of trade” and “balance of payments.” These two concepts, which sound innocuous in name, often form the basis for erecting barriers to foreign goods. With the demand for “protectionist” legislation on the rise throughout the world, we can expect to hear more about them in coming months.
https://fee.org/articles/is-there-an-unfavorable-balance-of-trade/
Starting with the fallacy that countries, not individuals, engage in international trade, it’s then much harder to realize that it’s individual American companies and consumers who are penalized, taxed and disadvantaged by trade protection. By understanding that only individuals ultimately trade, it’s then much easier to see that trade barriers typically protect a concentrated, small but well-organized group of inefficient domestic producers from more efficient foreign competition, while imposing huge and significant costs on other Americans – domestic companies that buy imported inputs and ultimately millions of U.S. consumers.
Kennedy Bob Katter is Kowtowing populist, economic ignoramus and demagogue.
Clement
:
A foreigner owning the entire assets in Australia is unimaginable. I personally do not believe it will happen. If history is a good predictor of the future, we know that by the time the Thriftville owns the entire of Squanderville, the Squanderville will create a law to stop Thriftville to continue purchasing the lands/asset. The Squanderville government may even force the Thriftville to return the ownership to the squanderville without paying a cent.
Roger Montgomery
:
Only problem is our track record of standing up to our neighbours (see Freet Trade AGreement/Andrew Robb) has little to write home about.
Pascal Marrot
:
Great article Roger,
I think one of the best I have read from you. After very recently visiting China and spending time with a lot of Chinese, I can’t help but draw the conclusion that in 50 years, the only thing to be exported from Australia will be……..Australians.
karl
:
Australians, including our dim-witted politicians, have almost no comprehension of how little credit we deserve for our wealth. A good 50% of it is tied either directly or indirectly to the fact that we can dig, fish, farm etc., which requires a tiny amount of the labour force. If we had to compete with the world based on our human capital we’d be marginally more useful than the Saudis, and each year as our population grows the share of this ‘lucky’ wealth diminishes.
The day of reckoning will arrive eventually, but in the meantime we’ll continue with outrageous tax-breaks for property owners and superannuants, pay construction workers six-figures for low-skilled work, and prioritise middle-class welfare over productive infrastructure.
Roger Montgomery
:
Hi Karl, You might like this piece written in 2015 by Tim Dunlop on the ABCs The Drum…
The myth of Coalition economic management
OPINION
The Drum By Tim Dunlop
Updated 13 Mar 2015, 10:14am
Very few people ever called out the Howard government’s economic failings.
We need to stop passively accepting “truisms” that long ago ceased to be true, and we should start with the myth about the Coalition’s superior economic credentials, writes Tim Dunlop.
Tony Abbott and Joe Hockey are on track to destroy one of the most commonly held beliefs in Australian politics, namely, that the Coalition are better economic managers than Labor.
Indeed, smashing this “truism” may be one of their few lasting legacies.
Still, even as they undermine it, it is remarkable to see just how sticky the myth is. For instance, during his recent speech at the National Press Club, Mr Abbott intoned:
“This government will deliver Australia’s economic future because only a Coalition government can. As Liberals and Nationals, sound economic management is in our DNA. We’ve done it before and we are doing it again.”
What’s remarkable about this is not that he said it, or even that he believes it, but that his assembled audience of media heavyweights didn’t burst out laughing.
I mean, what exactly does the government have to do before the press gallery and other distinguished commentators not only stop playing along with this little fantasy, but acknowledge that the Abbott Government is on track to be one of the most useless economic managers of modern Australian history?
It’s not just that unemployment is rising and that the budget deficit persists; nor is it simply that the budget is stalled and in a complete shambles (imagine the conniptions sections of the media would be having if Labor were in this mess). It is that the Government simply don’t seem to have a clue about what they are doing.
Take the Medicare co-payment. This was simultaneously sold as a way of staunching the budget deficit and as a way of creating a medical research fund. Talk about magic pudding logic.
The health portfolio is now onto its second minister and there have been, what, three other variations on the copayment theory? Tony Abbott now says the copayment itself is “dead, buried and cremated”, but Tony Abbott says a lot of things.
Or take industry assistance. The government patted itself on the back about not offering grants to struggling industries and assured us that this was part of their tough, no-nonsense approach to curbing expenditure.
Great, except that as of this week, they’ve changed their mind. They are now providing up to half-a-billion dollars for the car industry, and as Laura Tingle noted on Twitter, they did it without so much as a press release.
These are not just adjustments brought on by a measured rethink or changed circumstances: they are incompetence, plain and simple, brought on by desperation and confusion.
But wait, there’s more. Delayed payments for those on unemployment benefits is being reconsidered by new minister, Scott Morrison. The PM’s precious “captain’s call” parental leave scheme has been dropped. Defence have got the pay rise the government said they wouldn’t get.
And this doesn’t even include the measures that are simply being blocked by the Senate such as the inequitable higher education funding arrangements. The Government seems to have no clue as to what to do about that.
To top it all off, Joe Hockey has been “floating” little ideas about changing the way we access our superannuation. Tony Abbott has said that it is a “perfectly good and respectable idea”, but even Peter Costello groaned:
We went through all of this back in the mid ’90s. We had a look at it, we decided, because we thought superannuation should be for retirement savings, we decided not to allow superannuation to be available for housing.
At this stage it is less the efficacy of the policies themselves that matters than the fact that the government flits like a drunken butterfly from one measure to another and back again, and back again, without any apparent governing logic.
Look, it is important to stop retelling ourselves this ridiculous fable about the Coalition’s economic credentials because it distorts so much of the rest of our political debate. Indeed, one of the reasons people are shocked – to the point of denial – about how bad the Abbott Government is at running the economy, is exactly because very few people ever called out the Howard government’s economic failings.
As economist Stephen Koukoulas noted back in 2012, Howard and Costello were accorded a respect their actual economic record didn’t deserve:
The budget papers … show that the Howard government was the highest taxing government in Australia’s history. In 2004-05 and 2005-06, the tax to GDP ratio reached a record high 24.2 per cent. In addition, there have been only seven occasions where the tax to GDP ratio has been in excess of 23.5 per cent of GDP and all seven were under the Howard government.
In a similar vein, in the last 30 years, there have been 10 occasions when the tax to GDP ratio has been below 22.0 per cent of GDP and all 10 were under a Labor Government. To put simply, the Howard government was a high taxer, while the current Labor Government is a lower taxer.
In terms of government spending, there have been only five years in the four decades leading up to 2012-13 when real government spending was cut in real terms. None of those cuts were delivered by a Coalition government.
Maybe if these facts were better known, if they were hammered by the media in the same way they hammered 20-year-old stories about Julia Gillard’s time as a lawyer, the incompetence of Messrs Hockey and Abbott would not have been such a well-kept secret.
So here’s a suggestion. Who leads the government is an important matter and the media are right to cover it. But Tony Abbott’s dying swan routine is one thing: the underlying incompetence of his government is something else altogether.
So can we reprioritise a bit? Can we please stop talking quite so much about the leadership mess that the government is in because in the end, it doesn’t much matter who leads a bad government.
Let’s instead start telling the truth about how bad they actually are, and let’s begin by not passively accepting “truisms” that long ago ceased to be true. Let’s actively challenge this damaging, childish myth about the Coalition’s superior economic credentials.
It’s great that some journalists are calling them out, but it is not enough as long as the myth persists.
The truth is, the only sense in which the Coalition are the better economic managers is the sense in which every parent thinks their kids are smarter and better looking than everyone else’s kids: they may believe it in their hearts, but it doesn’t necessarily stand up to objective, unsentimental analysis.
Tim Dunlop is the author of The New Front Page: New Media and the Rise of the Audience.
karl
:
Thanks Roger I felt yours a good article to unload my first rant of the year.
Tim Dunlop’s critique of the Liberals unfortunately remains relevant today despite the new leadership. The problem with the Liberals is they’re ideologically opposed to government involvement – ‘cut taxes and do nothing’ is their version of success. Try telling the leadership of the four asian tigers that government investment and policy can’t influence growth.
Roger Montgomery
:
Indeed Karl! Regularly visiting Singapore tells me what can be achieved when you have a benevolent dictatorship.
Jeff
:
I would imagine the flow of money out of Australia from foreign owned agricultural investments would be significantly less than the money from foreign ownership of Australian companies. My understanding is approximately 50% of the shares on the ASX are foreign owned (only 16% is held by Australian superannuation funds). Page 5 of this link….
https://treasury.gov.au/~/media/Treasury/Publications%20and%20Media/Publications/2016/Foreign%20investment%20into%20Australia/Downloads/PDF/TWP_201601_Foreign_Investment.ashx
Roger Montgomery
:
Thanks Jeff. May be significantly less but both are large.
jimbo james
:
I don’t think the Triguboff example is highly supportive of your argument Roger. Most of his sales are again made to Chinese, further inflating prices to the detriment of locals looking for reasonably priced shelter. Not to mention the flow on effects in our now bloated cost of living thanks to land prices being a fundamental input to all goods and services. By all means encourage innovation and production in our economy again, but we need to kill the overall property parasite that now holds the economy to ransom before we can move forward with any meaningful global competitiveness.
The tax system favours speculation over innovation by many orders of magnitude. Why bother innovating when you can simply flip houses to the next ‘investor’ for large profits? People will generally look for the path of least resistance. Just like our banks who won’t touch a potential innovator unless they have a decent stake in a property as security. With current prices it won’t be a young entrepreneur, they can’t take a risk when their head is in the $500K+ mortgage noose. Hence they depart overseas where opportunities are better and we’re left lamenting the brain drain.
Turning this around will be akin to turning the Queen Mary around in the Yarra River.
Roger Montgomery
:
many share your conclusion Jimbo.
xiao fang xu
:
I have Question for you:
If I (nenad is my name ) buy $100 000 toyota land cruiser from mr. Shinzō Abe what happen to my Balance of Payments Current Account. ?
what if I spend $ 1 000 000 buying 10 toyota land cruiser from mr. Shinzō Abe.
what happen to sydney balance of payment ????
individuals or corporations represented by individuals trade –countries/nations do not trade.
what is our our Balance of Payments Current Account Deficit with Melbourne,adelaide,perth… ???
Budget deficit is problem — our politicians are selling australian asset and land because they need to pay for our votes.
Property rights are problem, lack of it.
Big government is the problem.
No freedom.
No honest money.
No free trade ( all managed trade NAFTA, TPP..)
To have small numbers of laws and regulations ( Ten Commandments )
If I plan to be wealthy i should learn from wealthy person.
Same goes to learn how to make our society better — learn and copy from examples that produce good result.
switzerland political system
USA Articles of Confederation
american constitution
Kennedy Bob Katter is Kowtowing populist, economic ignoramus and demagogue.
Lindsay
:
Hi Roger,
It’s clear that this country is being poorly managed by it’s CEO and board of directors.
What you say makes complete sense.
Can you please speak with these bafoons to arrest the escalating discontent, disillusionment and distrust that the Australian workers are feeling about the “system”.
The old model that ” If you work hard in Australia you will get somewhere” is broken. The politicians have let Australians down by how you rightly put living in “Squaderville”. All the ingredients are here to make a healthy economic balance but there is just a mess of disparity.
Will the next election end up in a desperate Trumpesque result ?
Kind regards.
Roger Montgomery
:
It wouldn’t suprise me to see some very shocking and left-field election results in the future.
Peter Todd
:
Scary stuff.
Last weekends ABC Landline China special did point to some counter arguments including foreign investment in agriculture did assist with market access. Not really sure however if the market access extends beyond the Chinese owned corporations.
There is no doubt China is playing the long game whilst Australia is fixated on the short one.
Roger Montgomery
:
Indeed, allowing/trading the right to purchase our land (forever) for the right to sell stuff that they arguably will need and want anyway, is incredibly short-sighted.
Anton
:
“The reason for our Balance of Payments Current Account Deficit is that we don’t generate enough receipts from our imports to pay for our experts, and so we require a surplus of funds on the capital account.”
I believe this is a typo – should be “from our exports to pay for our imports”.
Agree with the substance of the article – 3 or 4 year tax holiday for startups is a no brainer. Even if the government loses on company tax receipts, it still earns a fair clip from GST, PAYG on employee payroll in the new venture, not to mention the reduction in the franking credits to shareholders when profits/ dividends from this holiday period are ultimately paid.
If the government was really creative, it could tap into having the ‘first right’ to contribute additional capital to the growth of these ventures (for those that are profitable and require additional funds for growth). For those that succeed remarkably, this will create a scenario where the government has minority ownership of an asset, and the public benefits from being an early stage investor in a growing enterprise.
The problem is, not many in government have owned and run a business of any kind – and Aussies are used to middle class welfare. Both will bite us in the longer term.
Having said that, Australia is the best country in the world, and as an immigrant, I am teaching all of my children to invest and run a business as soon as possible.
Thanks!