I wrote a post just last month that laid out the reasons why the banks would probably not be dropping rates independently of the RBA, even though the current funding climate could allow them to do so. Indeed current interest rates are comparable to when we were in the depths of the Global Financial Crisis however our, and the vast majority of others worldwide, economy is no longer struggling. These are things you don’t usually see going hand in hand because when times are good people like to borrow and spend which usually leads to a healthy credit market. It seems that punters are still wary of another GFC-esque situation as whilst the economy has vastly improve the desire for credit hasn’t which is quite odd, but nothing to be concerned about in the grand scheme of things (unless you’re a lender, of course).
It was for those reasons that many did not expect a rate cut from the Reserve Bank yesterday as all the pressures that prompted past cuts (decline in demand for Australian products, Eurozone Crisis, etc.) have run their course. It came as something of a shock then that they decided to cut another 25 basis points off the current cast rate bringing it to a record low 2.75%, dipping below even the lowest rate available during the height of the GFC. The rate decision release makes for some interesting reading as the reasons behind the decision aren’t the ones I was expecting.
The RBA acknowledges that the funding climate has improved dramatically with many of our larger trading partners undergoing periods of expansion. The Eurozone is still in recession although its effect on us is muted, largely thanks to the limited amount of trade with do with them. They also expect investment in the resources sector to reach its peak this year and so part of this rate cut could be a proactive move to encourage people to start investing in other areas before the resources boom starts to tail off. Inflation has remained within their target range being at 2.5% for the past year. However the major factor in cutting rates seems to come from the desire to encourage more spending and moving their savings into more productive asset classes.
It’s true that rate cuts take a while to work their way through the economy and the last year or so of cuts is still having an effect. Primarily this is due to relieving mortgage pressure which doesn’t yield benefits quickly but sustained periods of low rates will eventually lead to more consumer spending (as the RBA notes). This rate cut then appears to be more of a shock tactic rather than a long play, hoping to encourage people to either spend more or entice people into taking out mortgages at rates that will likely not be repeated for quite some time, boosting the credit industry. Additionally rate cuts always put a downward pressure on the Australian dollar which will help boost exports.
The ideas are sound as historically moving the cash rate downward does all the things that they’re expecting this current rate cut to do. However I’m a little sceptical as to whether it will have the desired effect this time around due to the circumstances we find ourselves in. The numerous cuts over the past 18 months, which were largely in reaction to the deteriorating conditions in the Eurozone, haven’t had the large impacts that they did during the GFC. Primarily this is because of how well insulated we are from said crisis but it also appears that Australian’s have lost their appetite for credit. Whilst its easy to lay the blame at the GFC for this I can’t help but feel there’s something else at play here, something which moving the cash rate won’t do much to alleviate.
This whole situation is a result of the weird financial climate we find ourselves in currently. Whilst I might not think the RBA is on the right track with this decision I don’t have any good solutions to the issues at hand because, as far as I can tell, what we have is a crisis of consumer sentiment, not a problem with the funding environment. It’s quite possible that this last dip will be the hair trigger for a major ramp up but I’ll remain sceptical for now as the previous cuts failed to bring that same idea to fruition, even if they were done for different reasons.
I’m no stranger to turn based strategy games but I can’t say that they’re my favourite genre. Whilst I, like many of my generation, grew up on titles like Civilization, Alpha Centauri and even more esoteric titles Warlords I can’t say that I’ve sought any of the more recent instalments that some of those games have. Long time readers will know that I’m much more partial to real time strategy, preferring the intense encounters that last at most an hour or so rather than the calculating, often multiple hour long games that turn based strategies tend towards. Still I’m a sucker for anything space related and when Endless Space came on sale recently I felt compelled to give it the once over.
Endless Space takes place in the distant future of 3000AD where you take control of one of 9 species (or even one of your own should you choose) competing with others in order to colonize the galaxy. Depending on your race your motivation for expansion can range from simply wanting to tend to these worlds and see them flourish to conquering everything that stands in your way, ruling over it with an iron fist. Realistically the story is left up to you to create as the process of expansion, diplomacy and war will build your own unique story within the Endless Space world.
Graphically Endless Space is somewhat simplistic but vibrant enough so that you don’t get bored with it. Most of the planets look pretty much identical except for when they have some kind of anomaly on them and the ships differ between each race but they all have their own distinct style about them. The music was also quite good with the general background tracks having invoking this feeling of wonder as you click through your planets and line up tasks on your quest to conquer the galaxy. Overall it’s not bad, just very simple in comparison to many other space based games that have been available recently.
There’s no campaign to speak of in Endless Space, rather you’re given a whole bunch of options to create a game world which you can play in. You get control over a pretty wide range of parameters including things like galaxy type and size, number of opponents and the speed/difficulty of the game. You also get your choice of race, from a total of 9 options, but if you’re so inclined you can also create your own race with its own set of benefits/disadvantages. This can be quite fun if you want to try out playing in a particular way as the races that are best designed for colonization might not be the best for war (and vice versa).
The galaxy is then procedurally generated meaning that no 2 game worlds will be exactly the same (unless you use the galaxy seed number in order to recreate it). You’re then placed on your home system, typically a system that has a full set of planets, and given a scout ship and a colony ship to explore the universe. Depending on where you got placed this can mean exploring several planets before hitting a blockade of some description (typically a worm hole that you need to research some technology in order to cross) or you could be trapped with only a few measly systems to look at. It’s sometimes worth restarting the game if you find yourself in a not-so-great position as you’ll struggle to overcome that initial disadvantage as I found out several times over.
There’s many different types of worlds in Endless Space ranging in size from tiny to giant and encompassing all the major types that we know (and have theorized) to exist. You’ll only be able to colonize a couple types when you first begin but as you research more technologies you’ll be able to colonize more and more of them. They all have their own advantages/disadvantages so there’s a lot of strategy in colonizing certain ones first and then leaving the others until later. This is because depending on the planet it will have one of the resources (called FIDS: Food, Industry, Dust, Science) that it produces more than others and choosing the right one can be the difference between an effective colony and one that takes dozens of turns to start working.
This is probably my main gripe with Endless Space as whilst the resources are explained a bit in the tutorial menus that pop up it’s pretty easy to forget what does what and end up in a position where you can’t seem to get ahead, no matter how hard you try. Food for example is what dictates how fast your populations increase but there’s no direct way of seeing how it affects it (you can just see total food and when your population will increase and by how much). After reading a couple strategy guides it was clear that there’s a definite progression to how you should focus your resources (it’s food for pop, then industry and then science/dust depending on your play style) but the tutorials don’t really make that particularly clear. The main issue is just how many different things there are to do in Endless Space and the tutorials come so thick and fast at you initially that its hard to take it in.
Ship design is one aspect that I felt unnecessary at first as I was able to get away with the default ship designs without too much hassle but its actually one of the more satisfying aspects of Endless Space. One of the research trees is dedicated to improving your ships (whilst another, which is for colonization, has the ship hulls in it) with various weapons, shields and augmentations to make them more effective in combat. Reading some strategies online suggests that the best thing to do is to make ships specialize in a particular role as this is more effective, especially when you’re behind in technology, but I found that my FACE OWNER (pictured above) was pretty capable of eliminating most targets without too much hassle. This is probably because I had a major technological advantage at this point so your mileage will certainly vary in this regard.
The combat you engage with said ships isn’t particularly great either taking the form of you simply clicking the “auto” button and waiting for the result or flipping over into manual in order to increase your chances of winning. To be honest since you get an upfront meter of how likely you are to succeed there’s not much incentive to engage when you’re not at an advantage. If you do decide to go manual there’s a few things you can do to tip it in your favour, like using abilities or playing cards (much like Master of Orion I’m told) but you’re never going to be able to pull off a major victory unless you’re less than about 20% different from your opponent.
You can avoid conflict almost completely if you instead choose the diplomatic path and ply your opponents with gifts and open borders. I found this path to be pretty one sided as I was never able to figure out how to make deals with them that were favourable for me and not them which is something the AI does constantly. I can remember after one engagement I was offered peace but only if I offered them additional things as well even though I had military and production superiority. Of course the next course of action was to deny it and simply blockade them until it improved, which it did, but I would’ve much preferred to simply tip the deal in my favour rather than having to dedicate way too many resources to forcing a better deal out of them.
Again I think this is because Endless Space is pretty comprehensive in the game mechanics it employs and whilst the tutorial gives you some insight into how they work it’s not the best guide. Thankfully there’s quite a few sites dedicated to strategies and explaining the mechanics a bit better and after reading a few guides I was satisfied that I understood the game better and was able play for hundreds of turns without getting steamrolled by an AI. This is when the game came into its own as the last 4 hours or so I spent with Endless Space were really enthralling, mostly because of the narrative I built up in my head.
I was attempting to play as a colonizer, a peace race of Amoebas who would spend their time running from system to system building up a peaceful empire and leaving my opponents to their own devices. It didn’t take long for one of them to take a dislike to me, probably because I accidentally sent a ship to one of their systems, and I spent much of the initial game keeping them at bay whilst tending to a peace agreement with the other. For a long time all was good and my once fierce opponent decided to not pursue me any more, leaving me to my peaceful empire building. However my expansionary prowess did not go unnoticed and I soon found myself at full scale war.
My race had not many ships but the industry I had built up was phenomenal and it was time to put it to use. My scientists were retasked to weapons research almost instantly outstripping my rivals in terms of fire power. My biggest industry systems were put on ship production duty being able to pump out a massive warship every turn that was capable of decimating entire enemy fleets without taking a scratch. My border systems were reinforced ensuring that no one would be able to invade them without giving me ample time to react. The result was a devastating show of force and after one system was invaded the enemy begged for peace and I gave it to them.
However the other empire had become nervous about my new found presence and began breaking deals with me. They became suspicious of my activities and not too long later declared open war. They won many battles against me, using their superior fleet size to their advantage, but yet again my empire dedicated itself fully to war and not too long later I pushed them out of my boundaries. I then began a full fledged invasion of their territory, laying waste to fleet after fleet and capture half a dozen systems before they crawled to me with an offer of peace. I declined and continued my rampage, furious that the people I had done nothing to antagonize would declare war against me. In the end I accepted their peace offering of 2 systems and eventually won by constructing the required wonder.
Endless Space is a game that rewards you the longer you play it, taking you from humble beginnings on a single planet to a galactic civilization that is a mighty force to be reckoned with. There’s a steep learning curve, one that could be a lot less steep with some more work on the tutorials, but once you’re over that hump its incredibly satisfying. The narrative I built in my head of a peaceful race that is not to be trifled with was a great one and it was without a lick of dialogue or a single cutscene. If turn based strategy is your thing or you enjoy games that reward methodical, calculating play then Endless Space is right up your alley. Just be sure to set aside your weekend for it – you’re going to need it.
Endless Space is available on PC and OSX right now for $29.99. Game was played on PC with around 10.5 hours of total play time with only a single win at 220ish turns.
BitCoins are a hybrid of two currency models, namely the current world standard of fiat currency (I.E. BitCoins only have value because other people will accept them in exchange for goods and services) and the traditional gold standard due to the availability being limited. Combined with the other properties such as transaction anonymity (within reason), no central system regulating transactions and worldwide reach BitCoins have all the features it needs to be a great vehicle for the transfer of wealth. Long time readers will know that there are some issues that plague the BitCoin ecosystem, mostly due to its relatively low transaction volume and misclassification as an investment vehicle by some, but these are things that can be solved with time and more investments.
One thing that always gets to me though is any time that BitCoins start to trend upward nearly every news outlet looking for a story will herald it as a second coming of BitCoin after the devastation wrought by the speculative bubble last year. I’ve made the case several times over that an increase in price is no indication of health within the BitCoin economy and in fact any sharp uptick in price is actually quite hurtful as it signals that BitCoins are better left unspent as it makes no sense to spend them when simply waiting will give you a discount. This hoarding mentality is what led to the speculative bubble last year as supply dried up and prices went through the roof. It didn’t last long however and the price came crashing back down to reality (and then some).
I don’t discount that all growth within the BitCoin economy is a bad thing however, just the volatility. Indeed there was a good period of 6 months this year when BitCoin’s price was relatively stable and that’s what it needs to be in order for commerce to take the currency seriously. Taking this idea further there has to be a price equilibrium where the exchange rate is truly representative of all the wealth contained with BitCoins and this is the point where the market should aim towards. Figuring out that particular price isn’t easy though and I can only really give a semi-education guess as an answer.
The longest time that BitCoin spent in relative stability was around the $5 mark from around May this year. Since then there have been another 1.2 million BitCoins added into circulation, an approximate 13% increase. In a completely stable exchange this would have put a downward pressure on the exchange rate which would have decreased the real value by a similar percentage. To keep the value “ideal” then, I.E. the real purchasing power the same, the exchange rate should go up by that rate instead giving us a new price of $5.65.
Of course this completely ignores the amount of potential wealth that could be contained within the BitCoin economy. A country’s currency is usually a reflection of the health of its underlying economy and BitCoin is no exception to this but we don’t have other metrics like GDP in which to get a good idea for how much wealth is backing it. Transactions volumes, exchange rates and total coins in circulation are only rough metrics and we’ve seen in the past how these things aren’t great indicators for the health of BitCoin.
Realistically the best exchange rate for BitCoins will be the one that it ultimately settles on once transaction volumes ramp up again and the investor market segment starts to become more and more irrelevant. Whether this is above or below the current rate is really anyone’s guess however we should still abstain from saying that the rising price of a BitCoin is a sign of market health as it’s simply not. Whilst the price rise is no where near as rapid as it was last year it’s still light years ahead of any other currency on the planet and as history has shown that kind of growth just isn’t sustainable. The next 6 months will be very telling for the BitCoin economy as we’ll see if this growth levels out into a new stable equilibrium or if it’s just the beginning of another speculative bubble.
It may come as a surprise to you to find out that Australia is a predominately service base industry. Whilst it’s hard to argue that we’ve enjoyed the benefits of the current mining boom Australia’s GDP is still predominately derived from our service industry, to the tune of 69% (pg. 134). Still the current prosperity and insulation from global economic crises that Australia has received from the growing mining sector won’t last forever and now is the time for us to start looking towards the future so we can ensure future economic prosperity. I strongly believe that we’ve already undertaken the first steps towards achieving this with the implementation of the National Broadband Network.
Australia as it stands today suffers from an incredible amount of skill drain to other countries. Well over half of the Australian residents who leave Australia for over a year or permanently were skilled workers and whilst the trend has gone down in recent times (thanks wholly to Australia’s isolation from the global economic turmoil) that hasn’t stemmed the flow of talent leaving our shores. For the high technology sectors at least there is the potential to recreate the hot bed of innovation that led to the creation of Silicon Valley on the back of the NBN. This would not only stem the brain drain overseas but would produce large and sustainable gains to the Australian economy.
Right now the public view of the NBN varies wildly. Businesses by and large have no idea what benefits it can bring them, public opinion is mixed (although Senator Conroy says differently) and even the federal government seems at a loss to what it could mean for Australia’s future, doling out cash to local governments in the hope they’ll be able to sell it for them. To combat this the government should instead provide incentives and seed capital to high-tech start ups who are looking to leverage Australia’s upcoming ubiquitous high speed Internet infrastructure, in essence building an Australian Silicon Valley.
Doing this requires co-ordination with entrepreneurial communities, venture capitalists and the willing hand of the government. They could easily make investment in these kinds of companies more desirable by extending tax breaks that are currently enjoyed by other asset classes to investment in NBN based high-tech start ups. This would also make Australian based startups incredibly attractive for overseas investors, pumping even more money into the Australian economy. As the sector grows there would also be an increasing amount of ancillary jobs available, ones that accompany any form of corporation.
Australia would then become a very desirable location for both established and aspiring businesses looking to expand into the Asia-Pacific region. It also works in the reverse, giving Asia-Pacific businesses (and nations) a more local launch pad into the western business world. Establishing Australia as a high tech hub between our strong local ties and western allies abroad would provide a massive economic boost to Australia, one to rival that of the current mining boom.
Of course it’s not like this hasn’t been tried before in Australia, indeed many have tried to recreate the success of the valley with little results. Indeed I believe this is due to a lack of co-operation between the key players, namely the government, entrepreneurs and investors. The NBN represents a great opportunity for the government to leverage the industry not only to ensure Australia’s future economic prosperity but also to establish Australia as a leader in technology. I believe that the government should be the ones to take the first steps towards fostering such an environment in Australia as once the industry knows they have the support they’ll be far more willing to invest their time in creating it.
Not leveraging the NBN in such a way would leave the NBN as a simple infrastructure service, woefully underutilised given the capabilities that it could unlock. Make no mistake the NBN puts Australia almost at the top in terms of ubiquitous, high speed Internet access and that makes a lot of services that are currently infeasible to develop attractive targets for investigation. Indeed since the same level of broadband access is almost guaranteed throughout the country it is highly likely that benefits will stretch far past the borders of the CBD, even as far as regional centres.
As someone who’s group up on and made his career in technology it’s my fervent hope that the Australian government recognizes the potential the NBN has and uses that for the betterment of Australia. As a nation we’re well positioned to leverage our investment in infrastructure to provide economic benefits that will far exceed its initial cost. Creating a Silicon Valley of the Asia-Pacific region would elevate Australia’s tech industry to rival those throughout the rest of the world and would have massive benefits far beyond Australia’s borders.
I resisted getting into politics in any way for most of my adult life. For the most part I thought it was just a popularity contest that I had no intention of getting involved with, nor trying to form an opinion on more it than once every 3 years. Fortunately I can count amongst my friends a highly skilled academicwho’s area of study is politics and his constant pontificating about the subject eventually pushed me into figuring the whole thing out, lest I be unable to communicate with him (and subsequently be utterly bored). Today I pride myself on taking an engineer’s approach to the world of politics, figuring out the variables and breaking it down into manageable chunks upon which I can base my ultimate decision. It’s no secret I tend towards the liberal ideals with perhaps a touch of the libertarian in me, much like most of my generation.
This year though presented quite a conudrum as neither of the two major parties nor any of the others could logically get my full support. Labor continues to push policies that I can not agree with (Internet filtering and other nanny-state type policies) and the Liberals candidate for Prime Minister is nothing more than a rabid attack dog who couldn’t write a decent policy to save his life. The popular choice amongst my peers would then be the Greens party who, whilst giving their preferences to Labor, don’t support Internet filtering and have favourable policies in many other areas. Unfortunately for someone like me who sees the benefit in developing nuclear power in a similar fashion to countries like France the Greens can’t be an alternative as they outright oppose any kind of nuclear development. Other favourites include the newly formed Australian Sex Party who take similar positions to the Greens on many matters but unfortunately lack clear direction on many other key matters. The same can be said for many of the other minor parties as well, as whilst they have solid positions on their key issues I can’t really vote for them unless their stance on many critical issues is formalized.
After some research (which was sped up nicely by this spreadsheet) I came to the ultimate conclusion that no party fully supports my political vision. I can understand that this is usually the case with any political party as you can’t satisfy everyone but in the past I was able to easily reconcile my differences with the major parties as the issues were usually small. This last term has seen my support for the party I once supported wane without a strong competitor that rose up instead. In the end it looks to be the Greens who will get my vote as whilst I disagree with some of their policies I can reconcile that with the fact that many of my ideas won’t take off in Australia for decades to come, so I might as well go for the people who support the largest majority of my ideas.
Election time always sees discussions over the dinner table with my family about who we’re going to vote for and my weekly dinner with the parents was no different. My father was always a staunch Labor supporter whilst my mother flits between different parties depending on the political climate of the time. This year was quite a different discussion than the ones I was used to as whilst my father said he would be supporting Labor (but wasn’t quite happy about it) my mother wanted to send a message to the Labor government that she wouldn’t tolerate their actions, and so would be voting Liberal. Since they are in one of the most critical seats of Australia, Eden-Monaro, I took it upon myself to see why she felt that way and the results surprised me.
Many of the issues were those you’d find in the popular media. She wasn’t happy with Julia Gillard’s rise to power, felt that the border protection policies were lax and overall didn’t trust the government to bring Australia back into the black over the coming years. I agreed with her on several key points, I wasn’t terribly happy with the way Gillard came into power either, but the fiscal management one caught me off guard. Since my mother had lived through the Labor government previous to this one I thought she would’ve understood why Labor had to spend money during their times in government, but honestly who really does remember what happened 20 years ago?
I can tell you I certainly don’t remember much. The last time Labor was in power I was still in primary school, blissfully unaware of all the goings on. Still my perverse interest in all things financially disastrous had taught me quite a lot about the economic climate of the time, and the similarities to the current government were startling. I asked her “Do you remember what was happening in the early 90s that just happened recently?”. She couldn’t answer and I don’t think many Australians would be able to either.
The answer is: global economic crisis.
Most Australians will remember Paul Keating’s famous line of the “recession we had to have” which was in fact caused by a wider economic crisis that can be traced back to Black Monday in 1987. Whilst everything appeared to recover during the early nighties it was unfortunately shorted lived and many countries, including Australia, plunged into recession because of it. Since the great depression all governments have recognised the ideals of Keynesian economic theory which dictates that during times of recession the government should step in and spending in order to stimulate the economy. Traditionally this is done with deficit spending, I.E. borrowing money, which many people see as being detrimental. However as history has shown not going into debt to avoid a recession will make said recession last that much longer. Indeed we saw the swift action by our government that saw Australia to be the only developed country to avoid a recession, a phenomenal feat especially when the rest of the world couldn’t manage it.
The past 2 Labor governments have presided over an Australia that was ravaged by global economic tides and the notion that all a Labor government does is spend the surplus that the Liberals build up is complete bullshit. Everyone seems to forget that the last Liberal government saw such economic growth and surpluses because it was never hit by a global financial truck that required them to spend their way out of it. Indeed even the Liberal party forgot that Labor delivered a budget surplus in its first year only to have it dashed by the global financial crisis the year after. To say that a Labor government is fiscally irresponsible because they always run a deficit shows a complete disregard for the facts and is nothing more than political spin. My mother also brought out the old chestnut of interest rates being higher under a Labor government, conveniently forgetting the last 3 years.
The fact is that if you’re worried about a Labor government staying in power because you don’t trust them to run the economy think again. They proven that they are completely capable of handling an economy through the toughest times where the Liberals have only shown how they fair when the seas are calm. Additionally if you’re worried about your interest rates I’d point you to the last 6 years of the Liberal government which saw a steady rise of interest rates that only came down under Labor. Really though the interest rates have absolutely nothing whatsoever to do with the government of the day, so please ignore any pontificating you hear when its related to any political party.
Hopefully you’ve learned something from this post and I urge you to spread this knowledge amongst everyone you know. The misinformation around this subject is abnormally high and the media outlets have no interest in setting the records straight. Whilst such information won’t swing the election one way or another it may do the public some good to question what they’re being told and hopefully seek out the truth for themselves.
Ah budget time, it’s always an interesting time of year as you get to see what the government has planned for the coming year and the rhetoric spin machines go into overdrive as both sides of parliament start duking it out over every talking point they can find. For me it usually entails a couple hours of good analysis of the changes so I can see if there’s any new measures that I’m able to exploit or if my particular industry might see some changes to encourage or discourage growth. Still it’s no secret that the whole thing is a rather dry affair (I skipped out on a friend’s invitation to have budget drinks at a local pub, even alcohol can’t make the delivery interesting) and I’ll forgive you if you tune out now, but if you read on I promise to make it worth your while 🙂
Rather than link you to a veritable tsunami of articles that analyze the various ins and outs of the budget I’ll just give you a link directly to a quick overview to the whole thing direct from the horse’s mouth. On the surface there’s really nothing amazing about it, no crazy reforms or highly controversial schemes that haven’t already been duked out in front of the public over the past few weeks. Most criticisms I’ve heard of the budget thus far focus on the government’s ability to follow through on the plans, citing past broken promises (ignoring the fact that it wasn’t Labor which caused them to fall through) and making accusations that it all hinges on things that haven’t yet passed parliament. Most of these accusations can be traced right back to Liberal party rhetoric and frankly, whilst they may have raised a couple points that need discussion, I’m starting to get tired of all their talk (more on that later).
One of the biggest things to come out of this budget is the so called Resource Super Profits Tax. In essence it’s the Australian governments attempt to get a bigger slice of the current resource boom that Australia is experience on the back of the heavy demand stemming mostly from China. Initially I was appalled at the idea as it felt a lot like a grab at a profitable industry just to boost the coffers to put the budget back in surplus sooner (which honestly doesn’t matter as much as the Liberals will have you believe). I mean what would happen if we had an IT boom in Australia? Would we then be subject to a super profit tax because we suddenly became desirable for hosting services (which is quite possible if the NBN goes ahead)? Diving deeper however it appears that this idea actually came direct from the mining giants themselves, hoping to seek a simpler system rather than the complicated arrangement they currently have. My sentiments echo that of Martin’s post I just linked; the belly aching we’re seeing from mining companies lobbyists is a disagreement over price more than it is them actually being hurt by this new tax.
An interesting development is the government’s idea of implementing a pre-fill or standard deduction option to the current tax return system. Basically this allows about 25% of all Australians to be able to claim a standard flat fee from the government (to the tune of $500, increasing to $1000 in 2013) without having to go through the hassle of filling out a full tax return. It’s a good idea, one of the few that the government is implementing from the Henry Review, and is very similar to many systems that are implemented in other countries. The main saving comes from the estimated 8.5 hours that every tax paying Australian spends doing their taxes every year, totalling a whopping 100 million hours spent collectively (not including the back end processing that the ATO has to do as well). For someone like me who has a rather complicated tax arrangement it’s really of no benefit but for those 6 million+ Australians it will help I’m really glad to see a measure like this go through, although I’m sure accountants Australia wide are none too happy with it.
Two major areas of funding are infrastructure and renewable energy. Whilst the infrastructure spending is mostly just a continuation of the spending that has been going on for a couple years the resources allocated to renewable energy and a skilled workforce are welcome changes. For renewables (full disclosure: my dad is the teacher of renewable energy at the Belconnen TAFE and I share his passion for it) there’s really nothing to lose in researching such technology. Whilst most are still in their infancy we’re on the cusp of having some real significant breakthroughs and Australia is well positioned to take advantage of them. Really with our vast amounts of unarable land and swaths of coastline we’re an idea place for wind and solar (both photovoltaic and thermal) and with such strong opposition to other clean forms of energy (read:nuclear, despite us having about 40% of the world’s uranium in our soil) renewables are the way to go, and I’m going to keenly watch all developments in this space.
There are some benefits that also speak to me personally, like the reduction in company tax rate and instant asset write off for small businesses. As someone who’s just about to lash out into the cruel world of being a technology start up any benefit I can get my hands on will be gladly taken and made use of. All the bits of technology I require to get my projects underway neatly fit under that $5000 limit for instant deduction, hopefully softening the blow somewhat to my own personal finances whilst I attempt to get my business off the ground. Whilst these changes are the ones that hinge on the super tax going through I’d still bet on it being passed, albeit in a different form to what it is now.
Now that I’ve gotten that all out of the way I’d like to take some time to launch a load flame laden bloggery right at the Liberal party. For the past 5 months the Labor government has been under constant attack from the Liberal party who have been taking every shot they possibly can whilst failing to deliver anything substantial of their own. To be honest I had expected as much as after the leadership spill saw Howard’s attack dog Tony Abbott take the opposition leader’s crown. Whilst I can appreciate that criticism of any policy is required to make sure it is robust I’ve heard little to no arguments that can be rightly substantiated with hard facts. That usually wouldn’t be a problem but it seems that the constant barrage of vitriol from the Liberal party is starting to have a dramatic effect on the Labor government’s approval rating with the populace at large, and that’s worrying for a couple reasons.
It’s no secret that I’m liberal (little l there folks) with a slight bent for libertarian went it suits me, so you should probably take this all with a little bit of conservative salt. The current rhetoric from the Liberal party is hinging on old ideals that Labor can’t be trusted with money (they always spend it~¹) and that the Liberals are the best to handle the economy (they always run a surplus and interest rates are always lower~). However if you do even a small amount of research you’ll see that traditionally the Labor government has been in power when the world economy at large is suffering. Keynesian economics advocates government deficit spending in time of a recession and it has been proven time and time again that this either softens the blow or stop a recession from happening entirely. Liberal rhetoric would have you believe that if the government did nothing we would’ve been fine regardless which shows a reckless disregard for the facts and decades of research into the matter. The interest rate line is dragged out time and time again, but isn’t it strange that the last year has seen interest rates lower than that of the previous governments entire time in office? That would be the line I’d tow if I wasn’t so blind to the fact that interest rates are subject to external pressures that are not under any Australian government’s control. The sooner this myth and the fear that comes with it dies the better.
Then there’s the idea that the Liberal government would do better than Labor at the helm of this country. Right now nothing could be further from the truth as whilst the party has managed to stabilize itself for the past 5 months it has spent most of that time being cynical whilst doing little other work. You’ve got an ultra-conservative at the helm, one climate change denier (he is a NOT SKEPTIC) in the front bench (with one recently leaving) and none that seem to harbor any respect for fact and rational thought, although I fully admit this could be far more due to party politics and such issues being dealt with behind closed doors. Currently it seems that the public perception is that they’re not sure about the Rudd government but they have yet to seriously consider the alternative: an Abbott government. Pressing a few not-so-politically inclined friends on the matter shows that they’d rather not have the latter, but hadn’t considered opposing Rudd meant getting Abbott as PM.
The budgets are always a big talking point for both parties and even more so in an election year. The Rudd government has delivered a sensible budget that aims to continue the economic growth that it managed to sustain throughout a global recession and keep Australia being the economic power that it has become. The rhetoric from the Liberal government should be analyzed and then discarded for the rubbish that it is and hopefully the Australian public sees that the current government is doing the right thing by us all and the alternative is a much darker Australia for us all.
¹FYI a tilde at the end of a sentence on the Internet typically indicates a sarcastic, flirty or playful remark.
Despite my tag-line explicitly mentioning finance I haven’t really been harping on the subject much recently. I’ve always managed to find something else far more interesting than boring everyone to death with dollar figures or the latest news on how the Global Financial Crisis is unravelling itself. More importantly however the big ticket financial issues haven’t really caused any waves and as such I really haven’t had anything to say on the matter. Yesterday however a juicy little nugget in the form of recent GDP growth has given me a little something to talk about:
The economy grew 2.7 percent from a year earlier, the report showed. Economists forecast a 2.4 percent expansion.
Signs that Australia’s economy outperformed other nations made its dollar the best performer among the most-traded currencies in the past year. The currency has climbed 42 percent versus its U.S. counterpart since March 2009 and this week hit a 25-year high against Britain’s pound.
Faster-than-anticipated growth was a key reason policy makers increased the overnight cash rate target to 4 percent yesterday from 3.75 percent and prompted Governor Stevens to say rates should be closer to “average,” which he last week signaled may be 75 basis points higher than they are now.
It was just under a year ago when I did my first analysis of how Australia was reacting to the GFC and I did a followup a few months later. Back then I made the point that Australia was well placed to whether the fallout from the USA’s failings and we would for the most part be unaffected. Here we are many months along the track and my predictions have come true, despite the air of skepticism that abounded in the media and amongst my peers. I can’t say that I blame them though as the media was pushing the story that everyone wanted to hear and the everyman would have to actively seek out the opposing viewpoints, something which most of them don’t have the time or resources to do.
The follow on effect of economic growth is of course higher interest rates. Whilst I appreciated them at the time (and managed to lock in a home loan at an absolutely ridiculous rate for the next 2 years) I feel there might be a mini housing crisis on the horizon when the interest rates ramp up and flood of first time home owners start to feel the pinch. The First Home Owner’s Grant boost definitely kept the low to mid range of the property market from feeling any effects of the GFC however it may have come at the cost of long term price stability in the future. I’m really just speculating here as if interest rates stay away from their 2008~2009 highs then most of them will be fine. However I know many who took advantage of the boost to crack into the property market without thinking about the long term consequences, especially when concerning higher interest rates. Time will tell if this mini-disaster comes to pass (it will be short, as the glut of cheap homes will be snapped up by investors) but I’ll be watching the low to mid range market carefully over the next few years.
Another factor to take into consideration is the current unemployment rate, which has shown an interesting turn recently:
I made the observation back in September that the unemployment rate was steady to that month, which was a good sign. However in the same breath I also cautioned about another metric, underemployment, that showed there was still some work to be done. Recent figures show that in fact things are improving with the underemployment rate dropping 0.4% to 13.5% a small but marked improvement. The article I just linked echoes the feelings I was trying to get across many months ago but also fails to recognise that underemployment and unemployment will track each other quite closely, with minimal lag between changes. The stability of the previous 2 quarters plus the trend down in the quarter just past shows that not only are we creating more jobs but we’re also able to ramp people back up that had to cut back their hours for economic reasons. Both these metrics are trending in the direction that you’d expect when the economy is on the way up, which for all intents and purposes it is.
Additionally the mass media has been generally free of any major doom and gloom stories regarding the economy. The last interest rate hike went past without even a second glance from the major news outlets when just under a year ago it would’ve spurred days worth of debate. It seems that we’re far more interested in Rudd’s latest health care plan than whether or not our houses are going to be worthless and our mortgages untenable, which means the consumer sentiment is improving.
After spending the past year telling everyone that it wasn’t going to be as bad as the news made it out to be it’s good to finally get some vindication on the matter. This year will see Australia drive itself forward and will hopefully let the Rudd government start to really get their teeth into some real initiatives, rather than fighting an economic fire. With an election not far off it’s going to be interesting to see not only how the post GFC Rudd handles himself, but also Australia at large.
Way back in the days when the Internet was only a trickle into Australia I remember the information available being sparse and unreliable. Many teachers would not accept any information from a website as part of research for a school assignment and rightly so, there was little if anyway to verify that information. The exercise was then left to us to read through countless books in order to back up any statement or opinion we might but forward. Today however the Internet is bristling with information and authoritative sources are popping up all over the place. The interesting about this is that due to the sheer volume of information that’s available you can be almost guaranteed to find some article or news piece that agrees with what you say, which has lead me into a very confounding train of thought.
I’ll take something that I know well just as an example: the economy. Now I’ve made my stance known about this in the past and the data seems to be on my side. For the most part Australia is narrowly avoiding a recession due to our banks being well capitalized and a government not afraid of going into debt to spur the economy on. However I could easily argue the opposite, and in fact a lot of people are. Just to show you how crazy the situation is take for instance these two articles. Both written at the same time but both decreeing completely different viewpoints. These aren’t the only examples either, and it is quite easy to make your point using what appears to be authoritative sources. This then begs the question, is there really a correct answer for this?
The truth is often in the middle of two dissenting viewpoints, especially when it comes to issue that can’t have a definitive answer such as the economy. However due to the volume of information it becomes easy for one side to write off the others since they appear to have so much support for their side of the argument. This unfortunately leads phenomena best described as wikiality, or truth by majority vote. In the end it probably won’t matter that you have the majority of data on your side because if you’re in the minority, when debating using the information available on the Internet, you will eventually be “proven” wrong. It is an unfortunate consequence of this information overload.
There has been a lot of work done over the past decade to create authoritative information sources however with the advent of easy access to the Internet and its publishing capabilities they are soon lost in the noise. I often try to link onto articles from these sources in order to promote them but I can’t say that I’m innocent in this regard either. All too often I link to Wikipedia hoping that people will scroll to the bottom to read actual articles from proper sources but I know that’s not usually the case. Overall Wikipedia is a good source, however the mentality of wikiality makes some articles unusable, and it can be hard to tell them apart.
To be honest though we’re better off with having too much information than not enough. There is enough information out there for anyone to be able to make up their own mind on pretty much any issue that comes up. It is regrettable that the noise is so high but that is the price we pay for the ultimate freedom of allowing anyone instant access to both read and publish limitless information.
Arrrrrgggghhhh the cognitive dissonance! 😉
With the ABS releasing its National Accounts figures yesterday a strange thing occurred, we avoided a recession. In a seemingly unprecedented move the Australian economy rose above negative territory and showed a small positive growth of 0.4%. The results of this news was almost instantaneous with the share market closing slightly higher overall. Whilst I’m cautious about this signalling the end of the bad economic times for Australia (and I’m glad Rudd doesn’t think that either) it does show that as a country we are well placed to ride out this crisis with the least amount of impact to our daily lives. There are a few key points to take away from the ABS’ figures however.
Firstly we need to take a look at what the contributions to the GDP figure where¹:
What we can see here is growth in Agriculture, Mining, Energy, Construction and Retail. What’s not doing so well is Manufacturing, Wholesales, Transport and Property and Business services. Whilst the strong growth in agriculture is a good sign the rest of the industries that showed growth only had small increases. Undoubtedly the retail figures are backed in part by Rudd’s stimulus package which also drove up imports. There was also some additional growth (about 0.5% from the previous quarter) in terms of exports, which could be put down to how cheap our dollar was until recently. The most worrying parts of these figures are the manufacturing and property and business services, as they represent a good chunk of where Australia’s future problems lie.
When the manufacturing numbers are down it usually means that there’s been a downturn in demand and this has been seen for the past few quarters. Whilst we can easily point the finger at the GFC for this one it signals that there is a decreased demand for production within Australia. Further to this we’ve seen an increase in the amount of imports over this last quarter showing that less is being sourced from within our country. Due to the dollar rising this could soon change however I believe the damage might have already been done, as many manufacturing plants have already begun to thin their workforces. Trying to take advantage of the strong local dollar will prove difficult for such companies as they will no longer have the capacity to increase production.
The property and business services is a little less worrying as there has been quite a lot of wealth knocked out of the top end of the market which will drag the entire sector down. Business are also cutting back on expansion plans and additional services so this is not particularly surprising either. However this figure still represents a downturn in this sector, but I believe that it is far better placed to recover than manufacturing is.
So overall I believe Australia’s resource backed economy is serving it well through this recession. We’re still feeling much of the pain from the GFC but at least there’s some signs that once confidence comes back to the markets Australia as a whole will be well placed to take advantage of it. The key issue for the Rudd government now is how to keep unemployment low through the next year or two so that we don’t lose our strong resource and manufacturing workforces, something which will cost a lot more to replace in the future.
¹Australian Bureau of Statistics, 2009, Australian National Accounts: National Income, Expenditure and Product, Mar 2009 cat no 5206.0 , viewed 04 June 2009, http://www.abs.gov.au/AUSSTATS/[email protected]/productsbyCatalogue/35F488B5F9F7D242CA256DF000814610?OpenDocument