Does freight give me an advantage so can I sell it at home? Who in their right minds would be a producer of anything in Australia? Leave aside the raw materials, where nature has made this country a major player in oligopolies able to influence prices, and the game is getting just too hard. Variable exchange rates — with fluctuations largely the result of the dominance in our economy of those lucky oligopolists — have surely just made it impossible to make anything with any certainty of profitability.
When the Aussie dollar goes from 60 cents to the $US to over 90 cents while the Chinese yuan stays remarkably stable you can forget all about a level playing field. Another year or two of this and there will not be a product except unprocessed mineral ores, that are not available anywhere else, that is not cheaper to import rather than make here. Believe me, this free market has become a truly frightening thing.
Now don’t misunderstand me. For the major part of my 45 years in Canberra I have been writing against the cost to ordinary Australians of the push by vested interests towards protectionism by which they mean that the country owes them a living whatever their level of efficiency. There was a period when I was denounced as a Japanese spy for daring to help prepare cases for the Japanese External Trade Relations Organisation to present to the old Tariff Board arguing for lower tariff protection.
But supposedly free markets, especially financial markets, have entirely changed the game. Nowadays as the mining industry booms and the exchange rate strengthens the rest of the economy — apart from the financial leaches — suffers. Much more of this and we really will end up just as the world’s quarry with most people on a form of welfare paid for out of profits on the mining industry.
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The cause of my pessimism. My brother David is responsible for these pessimistic thoughts with a piece on his Glug wine website about the current state of that Australian industry. Now wine is, or at least should be, one of the great Australian success stories for nature’s gift of ample sunshine combined with plentiful land and sound technology enables the production of fruit dominated styles that consumers around the world find pleasant. But today the strengthening currency is pricing Australian wine out of export markets.
Against the Argentine peso we have appreciated 56% in the last year, against the Chilean peso 18%, the Euro by 25% and the US dollar and the yuan by around 32%. It will not be long before the Chinese are sending their cabernet for Australians to drink rather than it being the other way around.
A new industry for me. I still feel guilty about not burying Chunky in a proper grave after he jumped out of a window as we approached his favourite restaurant in Angaston only to be run over over by the car behind and killed. My guilt increased as I read this story overnight on page one of The Chicago Tribune: ‘Pet cemetery offers final resting place for beloved animals’ — Hinsdale Animal Cemetery lets humans memorialize their furry (and scaly) companions.
Perhaps this is the kind of industry where I should be investing in these troubled exchange rate dominated times.
Taking a punt on growth. Germany’s new coalition government will be sworn in tomorrow after reaching some broad agreements on strategy that include Euro24 billion in tax reductions — Euros 9 billion more than Chancellor Angela Merkel promised during her election campaign. It all has the ring of the early Ronald Reagan supply side economics ring about it with the gamble very much based on the tax concessions promoting sufficient growth to increase tax revenues to the point where compensating expenditure cuts are not necessary down the track. It is daring stuff at a time when the country is only just emerging from recession and the government debt is already at record levels in the wake of the financial crisis.