In a speech to
Australia’s Business Economists in Sydney yesterday, the secretary to the
Treasury, Dr Ken Henry, presented an upbeat view on China, the resources side on
the global economy and Australia’s longer term prospects, which was a relief
considering the recent sharp falls in metals and oil
prices. As reported in The
Fin, in a calming tone, he
pacified the concern of the masses by saying, “It is easy to get carried away
with overnight movements and that is one reason why markets do have a habit of

Reporting on Dr
Henry’s speech, John Garnaut of The SMHpresents an interesting view that we’re all, as the Pet
Shop Boys would say, going west. “The Treasury
secretary, Ken Henry, said yesterday that property prices would fall and
Sydney professionals would shift to Perth as the country
continued its adjustment to ‘extraordinarily high’ resources

According to
Garnaut, the most striking change is the decrease in the relative importance of
manufacturing, having fallen to 13% of the economy as compared with 15% 10 years ago and 18% 20 years ago.

Henry (Thornton,
not Ken) has been slightly alarmed by reports on Henry (Ken, not Thornton) on TV last
night. The comments have alarmed Henry’s (Thornton, not Ken) mates in the high
tech sector as they seem to rule out creating value at the high tech end of the
economy. Treasury of course has a long standing aversion to any sort of
“industry policy” and prefers to let anarchy reign.

The next
instalment of our ever popular Raff Report is
published today, and like Henry (Ken, not Thornton) it is critical of the enthusiasm of the

“Blood in the
street, holy cow the press are going to have a field day with gloom and doom
stories for commodities and resource equities. Red inks every where but is it
all justified? In the case of base metals, a pullback was certain but as always
timing uncertain. As far as equities are concerned some small issuers had run
ahead of themselves with respect to value, but in the case of the biggest
miners, the sky-high metal prices were never priced into forward earnings by the
market anyway.

“The Raff Report
has not cited any papers forecasting the collapse in world trade any time soon.
Anyone that has looked at the data will have noted a good visual correlation
between WTO data and the CRB Index, and this is only to be expected. In fact,
world trade seems more likely to rise at a pace rather than collapse. Oh well,
panic made a few bucks for the brokers.”

Henry Thornton.