GFC – who’s to blame

On March 29 Radio National’s Background Briefing program had a very interesting program on how “they’re beginning to say that narcissists with Harvard MBAs killed Wall Street”.

Something happened to management culture decades ago and now being a Master of Business Administration, especially from Harvard, is rather on the nose. MBA, it’s being said, can also stand for ‘Mediocre but Arrogant’, or ‘Management by Accident’

The show had interviews with professors from the major business schools who have been warning of the problems of managers who only have MBA’s and no “domain knowledge” of the companies that they manage. Continue reading

Advertisements

Hold Up the Banks to Account

Thank you to my bank. Which bank?

The big banks are refusing to bow to pressure from politicians urging them to pass on the Reserve Bank’s 25-basis-point rate cut.

The central bank has dropped the official interest rate to 3 per cent, its lowest level in 49 years, but so far only the Commonwealth Bank has passed on some of the cut.

The CBA was the first of the big four to announce its reaction; it is passing on 10 basis points of the RBA cut.
Banks resist rates cut pressure

Obviously the Reserve Bank lowered interests rates by 0.25% today to help the banks with their profits. Was the Rudd government’s bank guarantee meant to help customers or shareholders? I’d sleep better if there was real competition between the banks and some choice for customers. Greed is still the name of the game.

They even have the cheek to take more than half. It’s time the government insisted on real quid pro quo for their underwriting of the banks.

Kevin Rennie

Turnbull echoes discredited US Republicans

It is interesting that the discredited US Republicans and Australia Liberals are singing from the same sheet music. Obama and Rudd’s stimulus packages are too large and should use tax cuts as their main weapon.

As John Amato argues at the Huffington Post:

Obama was elected to bring change to the economy, not to debate the merits of tax cuts all over again. We had that discussion for 18 months and Obama won. Tax cuts lost. Why is the media ignoring that fact?
Why aren’t there hundreds of economists on my TV explaining the stimulus package?

Too large. Should be replaced by tax cuts. This mantra echoes in Australian conservative rhetoric:

Defying the widespread support for the package from economists and business groups, Coalition MPs met early yesterday and backed Mr Turnbull’s argument that, despite the political risk, the package was too big and risked passing massive debts to future taxpayers.

Instead, he proposed a smaller package of up to $20billion based on bringing forward tax cuts already planned for July this year and next year.
Battle lines drawn on $42bn plan

It seems that John Howard was not the last to take his lead from Republican politicians.

Kevin Rennie

Buggered, Apparently.

You’ve got to laugh when even lauded predictors of future economic conditions Access Economics dispenses with the usual financial rigmarole and simply states that the Australian economy is “buggered”.

All along we’ve been told how Australia will avoid a recession (or just have a brief and mild one) due to China’s demand for our resources.  Well it sounds like the party’s definitely over.

Treasure Wayne Swan has conceded that “China and other emerging economies, now caught up in this crisis, are expected to slow much more sharply than previously anticipated.”

Access Economics director Chris Richardson said Mr Swan would already have more updated, unpublished Treasury forecasts that exposed the extent of the problems facing his budget.

“The Government knows how ugly things are. None of this is a surprise to them,” he said.

Access Economics said the federal budget was “buggered” because of its heavy reliance on company taxes and royalties – both of which would be hit hard by the collapse in commodity prices.

The national fiscal deficit could blow out to $29.4 billion in 2011-12. Such a shortfall could cripple the Government’s capacity to deliver promised tax cuts, maintain programs, cushion the cost of its emissions trading scheme and fund infrastructure spending plans.

Access Economics warns that the Government and Opposition could “freeze in the headlights” as a result, choosing to shore up existing handouts to the middle class and to the car industry rather than making the politically difficult decision to cut them in favour of more worthy uses, such as building infrastructure.

Following on from the Access Economics dire outlook, Alan Kohler had this to say (thanks to TB Queensland for the link):

“Access is forecasting economic growth of 0.8 per cent for 2008/09, including a recession during 2009 (but not necessarily two successive quarters of negative growth). It then expects 2.4 per cent growth in 2009/10 and 2.7 per cent in 2010/11.”

“This is pure guesswork. Forecasting a recession for 2009 is not a guess because the recession has already begun; after this year absolutely anything is possible.”

“The Government’s position is even sillier. Treasury is currently sitting on a MYEFO forecast for nominal GDP in 2008/09 of 7.75 per cent. That’s right – your eyes don’t deceive you: 7.75 per cent!”

“The forecast for 2009/10 is 3 per cent; for 2010/11 it’s 4.25 per cent and 2011/12 it’s (pick a number) 4.25 per cent. The fine print explains that the figures for 2008/09 and 2009/10 are “forecasts” while those for the other two years are “projections”.

“Whatever. They’re all wrong” says Kohler. 

Interesting in that Kohler concedes, as many of us here at Blogocrats have been saying for some time:

“Access Economics’ latest Business Outlook commentary today is mostly an exhibit of how little notice we should take of forecasts, even those from good economists.”

The ABC’s of money, Singapoor and the banks.

ABC Learning has been in the news lately – with the federal government having to input over $22 million into the company to keep the daycare centres open, after the company went into receivership. 

From the reports, it seems that a lot of the money that went into keeping the company afloat and indeed what underpinned the expansion was federal money in the first place. This ABC News report says that the company was receiving “$1 million a day in child care rebates”. So – Eddy Groves was reliant on our taxpayers money to grow his company.

Continue reading

Ken Henry postscript

When denying the “suspicions” of the opposition about the budget forecasts, Treasury Secretary Ken Henry made two attacks on their current tactics. Firstly, their undermining of the public service was “unhelpful”. In Yes Minister terms that equates to the strongest criticism.

His second point, though not directly mentioning his Liberal Party critics, touched on the irresponsibility of white-anting financial institutions such as the Treasury and the Reserve Bank at a time of financial crisis.

Fundamentally, what is driving weaker economic outcomes globally at the moment is fractured confidence. So anything that can be done to help restore confidence in real growth in the strength of the economy right at the moment, is valuable.

We can talk ourselves into worse outcomes; of course we can. People do; it wouldn’t be the first time. But we don’t have to…
Henry slams Opposition’s manipulation claims

The key people talking down our financial institutions in Australia are the Federal Opposition. Malcolm Turnbull must know the implications of this.

Kevin Rennie
Labor View from Bayside

It’s the end of the World as we know it and I feel fine.

 
With much doom and gloom being channelled in the media, I thought it would be interesting to canvass our blogocrats to find out whether it’s actually making any difference to your day-to-day spending.

For example, in recent weeks two economists have predicted that one million Australians will be unemployed by the end of next year, and that the country will slide into an albeit brief recession by the 2nd or 3rd quarter of 2009.

Housing values are also tipped to drop, despite the Australian government’s increase to the first home buyers grant.

Continue reading