Global Strength Supports Australia

Relentless historic new highs in the US stock market are at last spilling over into the Australian stock market. And this will be good news for general investment confidence domestically.

It is true that politically Australia is a moribund nation. With little creativity, foresight or courage at the political level. Sad, but true. Some say I am too critical, but for many years now, on both sides of politics, we have seen only the ‘voter pleasers’ taking the reins. No individual with real grit, who would take on the public debate and win people over to at first unpopular economic reforms through sound argument, has been chosen by either party for many years.

It is as if all of Canberra has fallen under the spell of the slick marketing focus group pusher types. The candy wrappers, just without the chef to make the candy.

As a result, Australia falls further and further behind the rest of the world in productivity, competitiveness, and even in quality of life for the real nation. The one that lives outside the best suburbs of Melbourne and Sydney.

Unfortunately, there is no upsurge in hope in this matter. For as far as the eye can see, both sides of politics are filled with vote pleasers dressed in candy wrappers.

Fortunately, the regional and global economies, all better-managed economies than our own, will continue to surge powerfully forward. This is what will continue to drive Australian assets, including property, agriculture and mining to ever higher levels. Much of the wealth being enjoyed by the elite of today is a result of China and other neighbours insatiable appetitive for our fortunate natural riches. Rather than our own efforts toward any form of ‘world best practice’ in policy.

Thankfully, it is true that it is the private sector that has indeed stepped up and is moving forward, particularly in mining, agriculture, education, and tourism. There are even small start-up innovators recognising skill sets that can add value and be marketed to all of Asia in other ways.

It is for the combined reasons of private sector innovation and robust foreign demand for commodities, that Australia will in aggregate terms continue to prosper significantly.

Too many, however, will still fall through the cracks.

This week saw the cessation of motor vehicle construction in Australia. A big historic event. Yet no one seems to be talking about the real reason for this, which could have been turned around and an immediate solution found to the demise of Australian manufacturing in general. That is a globally uncompetitive tax structure. Simply dropping the company tax rate to 20%, would be enough for manufacturing generally to stay competitive in our region. Instantly, the motor vehicle industry and all the skills associated with it would have been saved and remained in the country.

It is not rocket science that the world is a far more competitive place today.

Why do our politicians and our senior bureaucrats, equally at fault, have their heads in the sand? Well, the first group just do what focus groups tell them to. (If you want to influence policy, join a focus group perhaps?) The second, love their revenue from the private sector. It feeds them. Hence no reduced revenue solutions are ever offered by the public service.

There is a very good reason for saying all this. Many in the investment community, want to short Australia because of our own failings. I wanted to acknowledge these points, so that I may then, emphatically, make the following point.

Australia will do well, despite itself.

That is, as has been the case for many years, the rest of the world, particularly China/Asia will rescue and lift us. All the while, those in Canberra, all of them, attempt to take any credit they can for what is not of their doing. Nevertheless, for us, this means that while recognising the dire nature of Australian politics, we still enthusiastically suggest Australian stocks and property prices will continue to rise.

The world is doing extremely well, and about to do even better, and Australia remains a vital and very attractive part of this broad-based global prosperity path.

Clifford Bennett