Government Bailouts, as easy as ABC…

Childcare giant ABC Learning Centres cannot guarantee all its centres will remain open in the long term despite pledging there will be no immediate closures. Despite reassurances it is “business as usual” for the chain’s 1100 childcare centres – at least while an initial review is being conducted – concerned parents said they fear being left in limbo.

It seems like a shallow promise. The company has been placed in the hands of receivers and owes creditors hundreds of millions of dollars. The childcare chain owes the big four banks an estimated $762 million. The big banks will be hit hard if the ABC goes under. The Commonwealth Bank said its debt exposure to ABC was around $240 million. ANZ said ABC owed it $182 million, Westpac is owed about $200 million, and NAB has confirmed a $140 million debt exposure.

Add to this, the number of “mum & dad” investors whose shares must now be worthless.

Deputy PM Julia Gillard, has refused to rule in, or rule out a government bailout of the ABC.

Asked whether it was inevitable the Government would have to pump money into the debt-laden company, Ms Gillard said the Federal Government already supported the sector through the child care benefit, which cost $1.9 billion a year, and the $800 million childcare tax rebate.

“We’re working with the banks, who are the creditors, and with the receiver,” she said. “We understand people have got all of their family arrangements, and all of their work arrangements, on the foundation stone of having child care.

An acceptable quality and availablility of childcare has become a modern day necessity in Australia. Many working parents wouldn’t be able to cope without it. However with approx 50%+ of Australian households not consisting of any children, is it the role of government to bail out a private enterprise with taxpayers dollars simply because it has collapsed due to poor management?

UPDATE: Deputy PM Julia Gillard has announced a cash injection of $22m of taxpayers funds to maintain ABC Learnings operations until the end of December.

UPDATE: The receivers McGrathNicol have refused to say whether all 1075 Australian centres would stay open next year. The extent of the financial problems come as a shock to investors and analysts, as the company had previously reassured them its Australian centres were on track and generating cash. Deputy PM Julia Gillard, says as many as 40 per cent of the ABC Learning centres are making a loss.

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Never Mind the Frolykz, here’s Weekend Wonderland!

Welcome to weekend wonderland, the place for discussion about all things convivial.

What an historic week it’s been. The world breathed a collective sigh of relief with the election of the world’s first African American president. However the initial excitement quickly subsided with markets in the US continuing to slump further despite news of the Obama win. There is no doubt that Obama will have his work cut out for him.

Despite opening higher earlier this week, the Australian stock exchange is back below 4000 points. ABC Learning has gone into administration (and an uncertain future) while WA man about town Brian Burke has been charged with corruption.

In NZ, PM Helen Clark is set to get the boot tomorrow as voters aim to lift the country out of recession.

Miglo has apparantly successfully assembled a new barbeque while PyroMINiac Min’s husband is yet to notice that the kitchen curtains are missing.

Also, our friend Tim Dunlop is closing the Road To Surfdom site, and has published a final post which is worth reading. Naturally if Tim finds himself with ‘withdrawal symptoms’ he will be welcomed here with open arms.

This weekend, I’m performing “relationship duties” by taking the other ‘arf to see Beauty and the Beast at the Theatre. Personally I’d prefer a good horror movie…

The things we do…

This week’s music is for sans blog…

2008: History repeats …disturbance of orderly life and convenience‏

Rather than offering any blinding insights I thought is best to put forward a historical perspective on what we are experiencing.

Apart from the obvious time gap between the 1929 crash and what is happening right here and now, I think there are some obvious flaws not only in our financial systems but also within the state our collective economic and financial intelligence when it comes to learning from previous folly.

John Kenneth Galbraith’s analysis of the 1929 Crash and subsequent depression share some common features with what we are experiencing now and all because we failed to learn the lessons of past folly.

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