Henry Thornton

he (John Howard) or won’t he (resign soon, say by Christmas) is the question on a lot of political
lips. Steve Waugh needed a bit of a nudge but
went gracefully, and I bet the PM would like to emulate Australia’s
great cricket captain.

A punter tells Henry that at CentreBet
one can get $4 for Howard going this year – presumably Piers Akerman will clean
up on this.

Only time will tell but there are plenty
of signs that the best of our 15-year boom may be getting near its end, witness the dramatic drop in metal
prices overnight. (Due, it is alleged, to profit taking by rapacious hedge
funds. Henry’s favourite hedge fund dodged several bullets in recent days but
has taken a bit of pain with its residual resource stocks. Its big question is
whether, or at least when, to re-enter some of the pro-growth

Not that this is the end of the
resources boom – far from it. Global growth is set to continue for another year
or so unless there is a nasty surprise. Oil, Iran, bird flu, Chinese current
account surplus, US “twin deficits” are all the usual suspects but nothing looms
currently as a high probability boomtime-ending event. In late breaking news,
the Brazilian iron ore miner CVRD has agreed a price hike of 19% with a German
steel maker, leaving China and Japan to follow the market or not, as they
prefer. And BHP has sold a Peruvian copper mine to Xstrata at what is
presumably a high price.

One of the most thoughtful articles on
the current situation is by Anatole
of The Times, reproduced in
The Oz:

“Once investors
accept the slowdown story [which Kaletsky sees in the economic data], commodity
prices will collapse, inflation stabilise and the Fed will be free to consider a
policy of stimulating US demand. But this will be
impossible as long as the world puts its faith in ebullient stock markets and
metal prices, rather than a sober message from economic statistics.

“In the end, reality will prevail over
expectations. But first investors and businesses should prepare to ride a
psychological roller-coaster from over-optimism to pessimism and then back

The enduring
of Australia’s budget, and the budget-making process, is that it has failed to lock in
further reform, specifically building skills and cutting income taxes more
systematically than the ad hoc processes we have

Treasury’s Dr Ken Henry is speaking (and
answering questions) in Sydney today. Henry may go along, or at least
talk to someone who does, so we can see what brand of sunshine is being sold
this week.

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