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Australia is Heading for Economic Disaster

The Australian economy is heading southward and this does not mean we are moving closer to Antarctica. Our financial health is still in primary products. The price and demand for iron ore and coal still drives the economy. At the moment the foot is really off the accelerator and we are idling downhill. We will eventually reach the bottom. Then the country will have big problems.

Tax revenue is already falling due to lower demand by China. US demand for Chinese good remains sluggish. As the world economy falls it impacts strongly on Australia. We have not made the move away from agriculture and manufacturing. This is mainly because our resource bowl has kept wages high. Manufacturing countries always have a wage differential advantage. In time, wages will rise in China as they have in Japan. Then companies will probably move to Southeast Asia.

The hope that Australia will have a increase in IT start-ups to offset the fall in resource exports is not well founded. Products in the Internet sphere have short lives, a few years at most. IT moves on the initiative of individuals. It never will be a mass employer. We need to forget this pie in the sky and concentrate on something else.

It will cost to improve employment. Government will have to subsidize companies to keep jobs here. Politicians make the same incorrect assumption over and over again - the free market will solve all economic problems. The free market has never done much without human input. International trade exists due to comparative advantage. If a country does not have this in a sector, other sectors that do must pay.

A start would be tax breaks for enterprises who bring home their support services from India and the Philippines. To allow mining employment to fall without stimulation elsewhere is economic suicide. The country will fall into a very deep hole down the track. Opening more shopping centres is not the way go. This is not increasing the capital base. It is dividing up the market between too many sellers.

✴ Economics by Ty Buchanan ✴

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Australian Blog ★ Adventure Australia
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Polymer Notes are a Loss

The invention of the polymer banknote was a disaster for Australia. Costs involved in continually replacing them is enormous. Let's face it paper and cloth are quite substantial materials. They can stand up to a lot of wear and tear. The main problem with polymer is that once folded it cannot be straightened out - a permanent crease prevents stacking of notes by banks and neat storage in consumers' wallets.

All ATMs give brand new notes. It is impossible to do otherwise because they need to be tightly stacked. You would be wasting your time just trying to put used fifty dollar bills into an ATM. Replenishing ATMs is a major cost in the modern age. Government should be looking to save costs here.

Considering the saving from fewer forgeries is a pitiful A$50 million, the extra cost is not worth it. Anyway, if people get a forgery they always pass it on, as giving it to a bank results in nothing in return. Government should take the loss for forgeries. Then people would hand them in.

The issue of durability is still a big government lie. As noted above they do not last longer: they become unusable after first use and fold. It is amazing how government blindly accepts a new idea for the sake of it when it is a big expensive white elephant.

Science by Ty Buchanan

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The Computer Market Has Changed for PCs, Phones and Tablets

IBM is leaving the hardware computer market. Maturity in the market has meant demand for PCs has levelled off. Businesses still need them, but the ordinary consumer already has an old version gathering dust.

When a person needs to search the Internet he/she uses his, now large, mobile phone or tablet. It should be noted that the tablet market has tapered off as well. Just about anyone who wants one already has it. Cheap clones on sale in supermarkets has reduced profit margins significantly. Even the giant mobile phone maker Samsung has announced that it has had a bad year.

Apple is losing out to Android and its days of premium pricing are coming to an end. Unless it comes out with useful new ideas its sales will fall. It definitely needs to look into the crystal ball. Unfortunately, a crystal ball cannot be found.

Giants of recent decades have been bought out by rivals and shut down. Making what was in demand in the past is a losers game. Let's face it - some of the ideas taken on by Google are utterly stupid. Drones to deliver pizzas is an example. How can drones be allowed to fly about in populated places. Google will have injuries and law suits from everywhere.

Cloud computing may help IBM in the short term. If they want to stay relevant they will need something else. There are too many free cloud offerings out there for server profits to stay high. It is not feasible for all companies to be in the large data market.

Apple has to have a rethink and Microsoft has to wean users off Windows 7. Unless Threshold, Microsoft's version 9, offers something new and special users will remain stuck to the old system and profits will fall. Apple gives its operating system away for free. How much longer can Microsoft charge for their's?

Technology by Ty Buchanan

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Australian Prime Minister Totally Wrong Saying Australia Was "Empty"

There isn't much doubt that we have the most "out of touch" prime minister in Australian history. He goes oversees and visits world leaders and says absolutely stupid things. It makes you wonder if he lives in the same world as everyone else.

He blatantly believes that he didn't lie about what he would do if he won office. He has gone full circle and made cuts to areas he said he would not change. He takes voters for granted thinking they are as stupid as he is.

Again, he has made a statement that the majority of Australians know to be untrue. He said Australia was unsettled when Europeans arrived. Color blindness seems to be one of his flaws.

Suggesting that British investment made Australia what it is today is applying modern theory to times when economic theory was in its infancy. There was little understanding of investment in those days. Anyway, Britain's investment was really more people, unwanted in their homeland. The only real investment was in the police force that did cost a great deal.

Admittedly, white people brought industrious ideas with them and they were responsible for growth in the economy by hard work and toil. Australia is a harsh land and back breaking effort was required to survive. They just applied European ideas to a land that had the Aboriginal culture which was not economically based. Given time, Aboriginals would have caught up if they had continued to have the land to themselves.

Economics by Ty Buchanan

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Be Consistent Mr Abbott

The age of entitlement is over for Australia - unless of course you vote for the Coalition. This is the the message of the A$324 million drought package comes across to Australians living in cities. The motor industry got not support, neither did SPC. Eighty per cent of Queensland is suffering drought. It is a serious crisis. However, a government must be seen to be consistent.

Taking the hammer to trade unions is to be expected from a conservative government. The Liberal-National Government is not in the center politically in Australia. It is definitely conservative: plainly an anachronism that we have to live with. The National Party would bring back tariffs if they had the power, but they will remain Liberal Party lap dogs forever.

Of course, other countries put up barriers against agricultural imports, so Australia should do the same. However, how can a government say one thing and act in a contrary manner. It cannot be taken seriously. A turn here, a flip there - What will we get next?

The government is putting disability pensioners on the dole while giving businessmen, namely farmers, unemployment benefits. This is very odd behavior. Put everyone on welfare and be done with it. If Tony Abbott follow the aggressive cuts carried out by the Queensland premier none of us will have jobs.

None are so blind as those who will not see. The "free" market will not provide the essentials that people require to live decent lives. They won't build roads, distribute water or provide adequate communication technology to everyone. Conservatives still believe that the market reigns supreme. It is their religion. Reality is that the free market is grossly distorted in the world, with monopolies and oligopolies running roughshod over smaller businesses.

Politics by Ty Buchanan

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Politicans Made Australia Wealthy - They Certainly Did Not!

Australia is a lucky country. Its citizens have become much wealthier over the past 30 years. We have to thank the politicians for this. What? We most certainly do not owe it to politicians. Australia is richer because China has become richer and Australia is the main source of the minerals China needs to make all the exports which have been leaving that country in increasing amounts, by the year.

The Labor Government had the money from tax collections horded by the Howard Government to bail Australia out of the impending recession. We don't have to thank Howard for this. The money should have been spent on hospitals and schools. The Coalition Government held the economy back even though it was doing very well. And Labor should not take all the credit for Australia not going into recession. The money was there and it spent it. The Coalition somehow lost the plot of governing. It most definitely should not have kept on blaming the states for the hospital crisis. The Coalition spat the dummy and refused to reform the medical system.

Labor tried to reform the medical system. So it hit the Coalition over the head with missed opportunities when the Coalition lost power. A new revamped medical system would have been well set up by now if change had taken place when it should have. The Coalition government is now abandoning Labor's hard fought revamping of health care

People worry over the debt the Labor Government has run up. Remember the colossal amount of money the Coalition Government got from boom times. When the recession is over, which won't be long now, that debt will be paid off quite quickly. The Coalition looks lost in the wilderness at the moment. Members of both Coalition parties know Labor will have all good news for many years to come. The Coalition knows that Labor will be looked upon as a positive government in history as spending cuts must be done - now. This will push the economy into a short recession while the rest of the world booms. You can be sure that when Labor wins again they will start spending again. This is what happens in Britain and the rest of the ex-colonies.

Economics by Ty Buchanan

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Internet Puts Pressure on Jobs for Older Workers

The Internet is putting more people out of work and this is only the beginning. As more advanced algorithms are being developed established jobs are under threat. It will not only be lawyers and professional photographers employed by newspapers who get the chop. Unless you are in work that involves human problem solving like plumbers, mechanics and vehicle body repairers your job will face "extinction".

Most of the burden will fall on older workers. Retail, for example, only wants teenagers who can be paid a pittance while "training". Open discrimination occurs against people over 45. They are simply not wanted. This barrier age has fallen in recent years. Computerized job selection processes cuts them off at the beginning. Their resumes are not even looked at. If they go personally to apply for a position they face insulting comments and bad jokes.

Employers are no longer afraid of telling them directly that they are too old. Many have simply given up on seriously looking for work and they just do the minimum to justify payments from Centrelink.

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Economics

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Banks Under Threat From the Internet

The Internet has disrupted the security of ordinary money. The economic system controlled by the banks for centuries is now under threat. Bitcoin is an example of new money. Its mere presence in feared by the banks. Money, or at least its value, depends on people having faith that it can easily be exchanged for different goods.

In Germany before WWII security in money was severely challenged. There was rampant inflation, so much so that people had to push barrow loads of cash to a shop to get a loaf of bread.

New money is everywhere: PayPal has taken the banking world by storm. These bank-like services are being offered by Google, Apple and eBay. To get Followers on Twitter, many sites are offering seeds. Though the websites deny trading for followers, this is exactly what it is.

Google's Wallet is really a bank service. Smartphones can be swiped in store terminals to buy goods. The problem is most money does not really exist it is just recorded in books as they used to say. Now it is data stored on computers. The money supply is no longer controlled by central banks.

The question is - Will banks go the same way as traditional shopping centers and newspapers? It is possible!

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Conservation

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No-Car Future Is the Only Sustainable Option

The National Sustainability Council presented its long awaited report called the Sustainable Australia 2013: Conversations with the Future. This is the first of a series of biennial papers to advise the government about the state of the economy vis-a-vis the environment.

Full of optimism, the newly founded council said the future looked bright if we changed to building sustainable communities. However, the type of community needed is far more radical than envisaged by the council. Despite Australia having many of the most livable cities in the world we need to start planning immediately for the kind of balanced society of the future.

Oil will not be around forever and coal is too polluting to be used at such high rates. This means individuals driving around in five seater cars will not be possible. Electricity use is skyrocketing with Internet cloud servers and hungry mobiles gobbling up tonnes of coal and oil in power stations. Future cities will have to be designed with houses laid out in a manner that allows public transport to easily be used to get to work. Little is said about this now, but it will be in the future.

Somehow workers will have to be able to get from side roads to main roads where buses or vehicles on rails can travel. This will involve many more stops than at present and it will take longer to get to places of employment. We could see the return of bicycles or low-powered slow speed electric vehicles.

A place without car ownership will be an odd place to people of the current era. Nonetheless, it will have to happen eventually. Modern cities are car dependent. If an economic crisis stops the flow of oil these cities will die.

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History

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High Wage Rate a Problem for Australia

The overseas economic crisis is changing the perception of wage rates in Australia. Over recent months the Aussie dollar has fallen in value. It helps exporters. The retail sector has also been calling for the dollar to be intentionally weakened. This is odd considering Australian consumers are heavily "addicted' to imports, so prices will probably rise in the shops.

There will be an election in September. Any color of government will have to cut back on spending. This will mean higher unemployment. Therefore, despite inflation steadily rising there will be downward pressure on wages. There is already a glut of people seeking employment in the vegetable and fruit picking industry.

When you go shopping a distinct feel of recession is in the air. With many buying online, the shops are almost devoid of shoppers. The lowest income earners have just been given a 2.6 per cent pay rise. This was done to redistribute income. Higher unemployment will prevent future artificial tinkering with the economy.

Australian wages are already too high when compared internationally. We have the highest rates of any developed country. The minimum wage is more than twice that of the US. Within Australia things have been much worse. The minimum wage today is 44 per cent of average full-time earnings. This compares to 50 per cent a decade ago. However, it is still very high.

It has been claimed that letting wages fall and redistributing wealth via welfare payments is a better idea. This of course depends on whether government can collect enough in taxes to have the money to do this. Even this though has been "damned" by some saying welfare reduces the drive to find work.

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History

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Government Spending Has to Be Reduced

Many people in developed countries rely on welfare to live their lives. The welfare state has been accepted as the only way for government to go - until now. Britain where the welfare state began is making major cutbacks in government payments.

Even in the US, where government support is perceived as low by non-US citizens, middle class welfare is rife. The term middle class is a widely misused term. Everyone knows it means the rich. It seems everyone has the their hands in the government feed trough.

In Australia the baby bonus was introduced by a right wing Howard government. It is ironic that it has been virtually abolished by a left wing government. It was available to all, rich and poor. No means testing was ever done.

The problem is political parties keep giving in order to be elected. This happens until a major deficit occurs and cutbacks are forced onto prevailing government.

If redistribution of income was not done the rich would get richer and the poor would be used as "serf" labor. Unfortunately, political parties "look after their own" when they are elected to government. Right wing governments do have a heart and do redistribute mainly to the poor. However, middle class welfare tends to creep up over time.

It is now accepted by the average voter in developed countries that the time has come for significant cuts in government spending. People do "squeal" when spending is cut specifically to them. There are immediate consequences when recipients no longer receive benefits. The Salvation Army has had a major increase in single mothers wanting food assistance. This is due to single mothers being forced onto the dole by recent government changes.

A direct problem to hard government cutbacks, when public servants are dismissed, is an increase in unemployment. Of course, this means a higher demand for unemployment benefit support. There is always the danger of pushing the economy into recession. If this is the consequence of spending cuts voters soon change their tune and blame a government. Rationally, continuous priming of an economy by more spending must ultimately end. The piper must eventually be paid.

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Economics