Thursday, February 26

How to destroy Labor's electoral chances

1. If you're a Labor Prime Minister, run up the flag for socialism and announce you'll nationalise the banks. That's how the popular Ben Chifley handed the reins to Menzies in 1949.
2. In case that's not enough, get the Communist Party to call a crippling coal strike. In 1949, the commos made sure of victory for Menzies.
3. If you're the ALP's Federal Executive, meet inside a Canberra hotel to decide Labor's policy, and allow a journalist to photograph the parliamentary party leader and his deputy on the steps outside, waiting to be told the decisions. That's how the "36 faceless men" wiped out Labor's chances in 1963.
4. If a Soviet spy is about to defect, pray that it's just before an election, and for good measure, publicise any allegations against Labor staffers. It worked with Petrov.

But let's fast-forward to the past year in good ol' Sydney.
Tyro Labor Premier Morris Iemma is beginning to realise he inherited a mess when he took over from Bob Carr. Hospitals, schools, public transport, water and other infrastructure desperately need more money.
Treasury is warning that tax revenues are turning down sharply in the slowing economy, and the state's AAA credit rating is at risk. How is the state to finance looming investment in electricity generation?
Iemma and his Treasurer Michael Costa decide there is no alternative to privatising electriticy generation. Costa, himself a former unions chief turned economic rationalist, tries to sell it to the Labor Party's state conference.

So, how to destroy a NSW Labor government:
1. Make sure important policy is determined in a shouting match between Costa and the current Unions NSW chief John Robertson.
2. Make sure the night's TV news contains images of trade union and party branch delegates jeering and screaming abuse, so the public sees the measured and intelligent formation of Labor policy.
3. White-ant Premier Iemma with a serious of damaging leaks to the press.
4. Make Costa's position untenable, and when Iemma sacks him, step up the white-anting of Iemma.
5. When Iemma quits, see his place is filled by an amiable but pliable dill. So our newest Premier is Nathan Rees. Most people ask: Nathan Who?
6. When Costa resigns as a member of the Legislative Council, make sure the rump of the Labor Party votes for you, John Robertson, to fill the vacancy.
7. Let the word get around that you'd make a great premier of NSW. Don't worry that you've never faced the public in an election.
8. In the meantime, a senior ministry is needed. How about two of them, Prisons and Public Sector Reform? Public Sector may be justified as appointing the poacher to be gamekeeper, but by what twist of moral reasoning can a bitter opponent of privatising electricity generation accept the task of privatising two of the state's prisons?
9. And then the affair of the $500,000 office refit!

Robertson and his stooges appear to have no idea of how seriously they have destroyed the NSW Labor Government.
The former unions boss will never be Premier. Even if he does grab a rusted-on Labor electorate so that he can shift to the lower House, and then wins the leadership, the Labor Party cannot win the next election. Nor the next, and probably not the one after that.
Robertson will have to settle for Opposition Leader. That's if the Labor Party doesn't come to its senses.

For the record: Your Grumpy Old Blogger normally votes Labor, but is unlikely to do so in the next NSW state election unless he sees some big changes.

Thursday, February 19

The bruvvers, united, will never be defeated

The working class can kiss my arse
I've got the foreman's job at last

Why did this ditty come to mind when I read this story in The Sydney Morning Herald today that former New South Wales trade unions boss John Robertson would move into his new Cabinet minister's office after a $500,000 refurbishment?

Sunday, February 15

A short history of irrational exuberance

“We need policies that can be effective on the assumption that private financial systems are periodically prone to irrational exuberance" – Reserve Bank of Australia governor Glenn Stevens (pictured), speaking at a conference of central bankers in Kuala Lumpur last week.

Irrational exuberance is nothing new. No doubt one could peer back into ancient civilisations to find examples.

“Mania”, “bubble” or “boom” are well known. In 1996, top US central banker Alan Greenspan added to the lexicon when he said:

But how do we know when irrational exuberance has unduly escalated asset values, which then become subject to unexpected and prolonged contractions as they have in Japan over the past decade?

Of one thing we may be sure. Despite the lessons of the current Global Financial Crisis, there will be more manias, bubbles and periods of irrational exuberance in financial markets. Over-optimistic speculation is part of human nature, along with a belief that if you don't jump on the waggon you'll miss out. Investors get hurt, but sooner or later – usually well within a decade, in our fast-moving world – there'll be another wave throwing their money at over-valued assets.

It's been like that since tulip mania swept Holland. When tulips arrived from the Ottoman Empire late in the 15th Century, the Dutch took to the exotic blooms with passion. And when natural variations produced flowers with magnificent colouring, speculators bid insane prices for the bulbs.

One grower rejected a bid of 3000 guilders, roughly the annual income of a wealthy merchant, for a single bulb; in 1633 a farmhouse changed hands for three rare bulbs.

The bubble burst in 1637, amid widespread panic, when bulb prices dropped to one-hundredth of their peak.

Almost a century later, British investors – led by royalty and the aristocracy – showed they could be even more gullible with one of the wildest speculations in history when the South Sea Company set out to raise millions of pounds to exploit largely illusory trading rights with Spanish colonies in South America. That bubble burst in 1720.

British investors were again to lose heavily in the railway mania of the 1840s.

Boom and bust moved in cycles through the decades, and Australia had its share – including some grandiose land settlement and railway development proposals.

In the 1930s, of course, Australia could not avoid the Great Depression which swept the world.

After World War II, Australia experienced its own moments of irrational exuberance with uranium projects, a flurry in oil stocks after Ampol's Rough Range find followed by the development of the Bass Strait oil and gas fields, and the mapping of mountains of iron ore in the Pilbara.

But for sheer irrationality, there was little to beat the Poseidon nickel boom of the late 1960s. Even the language of the reports, with terms like “massive sulphides”, excited investors. The hint of drilling at a “good address” would send shares through the roof.

That boom had to collapse, and then the 1970s oil shock overtook the world, bringing the new phenomenon of “stagflation” for which Keynesian theory had no answer. In Australia, the Whitlam government's problems added to the impact.

Ah! But the 1980s! That's when the world discovered the financial skills of the “entrepreneurs”. No one seemed to worry how they did it, but they sure got results. Everyone rushed to put their money on the new corporate engineers like Alan Bond, John Spalvins, Robert Holmes a Court, Christopher Skase, Laurie Connell, and a whole brigade of lesser entities and white shoe brigade property developers.

It's now clear many of them took high risks in “leveraging” – ie, borrowing heavily – to amass their corporate conglomerates. Prudent directors unwilling to take similar risks could not withstand raids by entrepreneurs with buckets of borrowed money. But it all began to unravel from 1987.

On top of that, few analysts could penetrate the thickets of interlocking company accounts.
One of the shrewdest investors of the time, Sir Ron Brierley (pictured), published “the definitive analysis” of John Spalvins's Adelaide Steamship group in September 1990, but his report was anything but definitive. He was unable to unravel the accounts.
The Adsteam group consisted of five publicly listed companies, all regarded as blue chip – Adsteam, David Jones, Tooth & Co, National Consolidated and Petersville Sleigh (the group also held Woolworths, Penfolds Wines, and stakes in many other quality companies). It's worth noting, too, that Spalvins was not in the same mould as the flamboyant “entrepreneurs”.

In 1990, Brierley said: “The major outstanding issue is the rationalisation of the convoluted and incestuous group structure.” His advice went unheeded. In 1991 the Adsteam group collapsed into receivership.

The moral may well be: If you can't understand an investment, no matter how well it appears to be going, walk away. Advice which might have benefited Babcock & Brown investors in 2008.

The next great thing to lure unwary investors was the “Japan Inc” miracle and the wider Asian economic boom – followed by a retreat which has been re-started by the Global Economic Crisis.
If a share spruiker or a finance journalist starts to rabbit on about a “new paradigm”, zip up your wallet. Such was the stuff of the dotcom boom from about 1999, when people began to throw money at digital technology and internet companies – many of them possessing no assets other than the promoters' dreams. Every bright idea was going to create another Microsoft.

Advisers would assure investors the digital age was a new paradigm, just as the railway boom had transformed economies 130 years ago. No one reminded them that most 19th Century railway projects failed, often leaving rich promotors and bankrupt shareholders.

Perhaps a little more awareness of history would have avoided the worst of the current Global Financial Crisis which – more than the booms and busts described above – resembles the Great Depression of the 1930s.
Your Grumpy Old Journo spent much of his career as a finance journalist, generally managing to avoid irrational exuberance and hopefully damping it in his readers.

Glenn Stevens's "remarks" are here, and are worth reading as he explains the problems confronting central bankers in the 21st Century.

Wikipedia has good entries on tulip mania, the South Sea bubble, the dotcom boom, Sir Ron Brierley and Greenspan's irrational exuberance remark. Investopedia also describes booms and busts, with this page offering further links at the bottom.

The tulip mania is well described in a book by Mike Dash, reviewed here.

The Poseidon nickel affair and the rest of the crazy Australian mining boom of the late 1960s and early 70s are well described by legendary finance journalist Trevor Sykes in The Money Miners – the Great Australian Mining Boom (1978).

Monday, February 9

Build trust and move ahead

    • Only 44% of the overall population believe that Indigenous people are open to sharing their culture with other Australians.
    • But 89% of Indigenous people say they are open to sharing their culture.

Reconciliation has a long way to go. The goodwill is there – but there's still an important problem. There's still too much misunderstanding and distrust between indigenous and non-indigenous Australians.

    • Only about 1 in 10 people feel there is a high level of trust in the relationship, with Indigenous people feeling this way about other Australians and other Australians about Indigenous people.

However, a survey released today shows many Australians would like more contact with Indigenous people. While just over half (58%) of Australians currently report contact with Indigenous people, more than three quarters (76%) say they would like contact in the future.

There is also a level of interest in helping disadvantaged Indigenous people, with more than a third of people (37%) expressing a wish to do so.

A critical finding is that only 20% of Australians say they know what they can do to help disadvantaged Indigenous people.

Overall, however, those of us who seek greater progress in reconcilation will be encouraged by the initial Australian Reconciliation Barometer, released today in time for Friday's first anniversary of the national apology to the stolen generations. Reconciliation Australia plans to repeat the survey every two years to measure progress.

Despite the misunderstandings and distrust indicated by the excerpts above (taken from the survey's Executive Summary), Indigenous and other Australians have much in common when they see themselves as family oriented, proud, good at sport, easy going, friendly, good humoured and welcoming.

Attitudes to one another differ more on values like co-operative, disciplined, hard working and respectful.

The Sydney Morning Herald's report this morning can be found here. As well as the executive summary, other sections of the Barometer report can be accessed through the Reconciliation Australia link above.

Of interest: The Australian's media section today says the National Indigenous Television Network has commissioned well-known human rights lawyer Geoffrey Robertson QC to run a new Hypothetical show. Closing the Gap. His panel will include Tony Abbott, Germaine Greer, Marcia Langton and "indigenous rapper Wire M.C." (perhaps one of you young fellas could tell me who he or she is).

It should be a lively show, to be broadcast on NITV this Friday, Feb 13 (anniversary of the Apology, remember!), at 8pm AESDT. as well as on some subscription and specialist channels. This report on the NITV website calls its broadcast an "exclusive premiere", so we city types without pay TV may get to see it later.

Sunday, February 1

Let's have many "conversations" about our national day

Back on Australia Day two years ago, Grumpy Old Journo posted this suggestion that we celebrate our national day a week later:

Sometimes, when I'm feeling mischievous, I suggest European settlement of Australia really began with a drunken orgy on February 6. Perhaps we should observe that date as Australia Day.

After all, it's the day white women joined the settlement.

On that day in 1788, after the male convicts had laboured for more than a week setting up rudimentary buildings at Sydney Cove, it was time to land the women convicts. The disembarkation took all day.

Then the sailors asked for rum “to make merry with upon the women quitting the ships.” From contemporary accounts, all that night there were scenes of debauchery and riot which beggared description. Even a sudden Sydney thunderstorm could not drown the revelry.

Nobody putting their hands up for February 6? What a lot of wowsers we've become!

More seriously, how about January 1? In 1901, that was the day on which Australia became a nation, rather than an assortment of British colonies. It would be a day for all Australians – it's not for nothing that many Aboriginal activists refer to January 26 as Invasion Day.

On Australia Day this year, when Aboriginal leader Mick Dodson – co-author of the Bringing Them Home report which told Australians about the Stolen Generations – received the honour of Australian of the Year, he pushed the issue back into public debate.

After first saying he had considered rejecting the honour because January 26 represented a “day of mourning” for his people, Professor Dodson moderated his words and asked for a “conversation” about the date on which we celebrate Australia Day.

Your grumpy old blogger trembled. Surely the appeal would see every ratbag crawl out from under a rock to sneer at the idea of accommodating the feelings of Aboriginal Australians. It's true that a few did – the same old predictable names. Grumpy Old Journo didn't post a comment at the time, preferring to sit back and think it over.

But overall, we had a mature debate. A worthwhile conversation. Most of those who blogged or wrote to newspapers understood the view of many Aboriginal Australians. But at the same time, most agreed with Prime Minister Kevin Rudd – “respectfully, no” – to any change.

With some misgivings, and with a plea to indigenous friends to understand my views, I agree with the Prime Minister. But my reasons may differ.

Today, it's not easy to select an alternative date. Some have been suggested, but few really commend themselves.

The landing of the First Fleet convicts, guards and officers in 1788 (and the claiming of Aboriginal land as British territory) did represent a milestone in the development of the Australian nation – although it also introduced the disease, dispossession and exploitation that did untold damage to the original Australians. Most reasonable people today accept that interpretation.

But the arrival of the Brits would, over time, also bring some of the benefits of the European Enlightenment, along with a robust legal system and the foundations of political structures essential to the development of a nation in the modern world.

Today, we are well along the path of reconciliation between indigenous and non-indigenous Australians. We will have many more “conversations” before we get to our destination. Perhaps some date symbolic of that arrival would serve as Australia day.

But I would like to see Australia reach another milestone which could mark our national day of celebration. It would be the day on which Australian became a republic. A republic which acknowledged its debt to Britain, along with that to its indigenous people, and indeed, to all those, Australian-born or immigrant, who have come together to make up our nation.

That would be the day it became possible for an Australian to be our head of state – not a British hereditary monarch who must, by 18th century English law, be a member of the Church of England.

But that's another conversation, isn't it?