Nine stories you may have missed…
- Made in Australia: Back to the Future
- Naked political opportunism: Exhibit A
- 30% super tax: who wants an exemption?
- Naked political opportunism: Exhibit B
- Data centres: nuclear powered
- Business: misunderstood
- Eclipse: profit from darkness at noon
- Invade: between the flags
- Crime: Putin’s Heroes
1. Made in Australia: Back to the Future
Yesterday, Albo hopped into his flux-capacitor driven DeLorean and flew Australia back to the 1950s. Where it will convert into an FJ Holden world of tariffs and high costs.
Albo’s uncosted ‘Future Made in Australia policy’ dwarfed last week’s heady announcement of $1 billion of we-the-taxpayers’ money going to the feel-good cause of manufacturing solar panels. This is “No Australian child will ever live in poverty” (they still do) revisited, touched with “We will plant one billion trees” (we didn’t).1
This is madness.
Readers might consider some manufacturing productivity facts, before Wry & Dry lightly adds some pepper…
It logically follows that “directing more capital and labour to manufacturing would detract from labour productivity.”2 Australia’s productivity has been flat since 2016. And with a massive increase in migrant-driven population, Australia’s GDP per capita has been shrinking. Australian’s standards of living are going backwards.
Australia does not have a global competitive advantage in manufacturing (high labour costs, low productivity, small economies of scale), as Wry & Dry noted last week when reviewing the pink batts solar panels policy.
But Australia does have a competitive advantage in rent seekers. There are already marked lines outside parliament house in Canberra where the snouts queue, looking for a trough. The channel for those who previously wanted to see Barnaby Joyce (former minister for infrastructure) is especially well-worn.
All channels will now turn into something like desperate fans queueing for finals’ tickets at the MCG: a bureaucracy of mini-camp sites. Imagine an upmarket version of the so-called Aboriginal Tent Embassy at the Old Parliament House.
But the greatest crime in all of this is the over-arching narrative of Albo’s government and the way it sees the role of government. And that is Big Government3. As Albo said yesterday, this is “a change as big as the industrial revolution is coming — you could call it the ‘government intervention revolution’.”
The escalation of Australia’s global competitive advantage will now be managed by a collective of a handful of politicians and public servants based in Canberra.
Weep.
1 Former Prime Minister Bob Hawke, at election campaign launches.
2 Saul Eslake, independent economist, quoted in The Australian 12 April 2024.
3 Wry & Dry has four pet hates: big government, big business, big unions and big church.
2. Naked political opportunism: Exhibit A
It had all of the ingredients of political opportunity: Woolies and Coles are ripping off farmers and shoppers! Something must be done!
And so the National Party Leader4 leapt into the opportunity pot with highly polished wellies: “Whadda we want?” The Mob5: “Dismantle Coles.” National Party Leader: “When do we want it?” The Mob: “Now.”
The matter had all the Media 101 headline requirements: 1. crisis: cost-of-living; 2. villains: Coles and Woolies; 3. victims: the hapless farmer and distressed shopper; and 4. The National Interest: ordinary Australian families being ripped off.
It was political theatre that did little harm, but ensured that the Leader of the Gnats was seen to be doing something. Wry & Dry isn’t sure when it dawned on him that it was daft to have a policy (a) that his Coalition partner (Uncle Fester Dutton) had already squashed; (b) to which the government (Albo) was never going to support; (c) that caused the Greens’ Leader (bowler’s name?) to turn from hugging trees to hugging him. Or maybe he knew all along.
Albo in the meantime had early recognised there was electoral unhappiness. And did what any election-thinking prime minister would do: commission a quick review, appoint a friendly but sensible reviewer, accept the reviewer’s recommendations (“don’t dismantle anything, threaten massive fines, and here’s the bill”) and let the media do the rest.
And the media did. “PM: Shoppers could pay less and farmers could earn more…” Three cheers! Everyone’s a winner!
Of course, the impossibility of both groups being satisfied was lost on the media. But the Leader of the Gnats’ gesture probably kept the votes of the faithful few in a few rural seats.
And grocery reality will be different. Shoppers won’t pay any less and farmers won’t earn any more.
4 David Littleproud.
5 Various members of the National Farmers Federation.
3. 30% super tax: who wants an exemption?
Many Readers will be familiar with Albo’s proposal to double the tax on large superannuation funds. If the ‘member balance’ is over $3m, the annual gain will be hit with an additional 15% tax.
But what if there is no ‘member balance’? This is the case for what are called ‘defined benefit’ (DB) schemes. These are those where the pension benefit is an indexed annual amount that is determined when a person retires, usually being a factor of their final salary. This is the case with many ex- and some current public servants.
For these people, their superannuation payment doesn’t come from a defined pot, such as an industry or self-managed superannuation fund. It comes from we-the-taxpayer as a pay-as-you-go arrangement.
Many of those with large annual DB pensions will still be subject to the additional 15% tax, notwithstanding that there is no actual member balance. Y’see, there is an actuarial calculation that turns their annual pension into a member balance equivalent. And hence the new tax will apply to DB pensioners.
But, the lobby group for public servants on DB schemes is up in arms. Unlike members in a normal superannuation fund (who can withdraw the excess balance above $3m and reinvest in personal names or, say, a trust – subject to a careful CGT scenario analysis), DB scheme members cannot reduce their notional excess over $3m.
And so they wish to be exempt from the tax. The reasoning being that because they cannot avoid the tax they shouldn’t be subject to it. This is Yes, Minister at its best.
Brilliant.
The corollary is, of course, everybody should be exempt from any tax that they cannot avoid.
4. Naked political opportunism: Exhibit B
There is nothing politicians relish more than the opportunity to capture votes without spending any money.
And Albo, in conjunction with Senator Wong, has shamelessly done this. On Tuesday night, the Foreign Affairs Minister addressed a security conference at Australian National University. And said that, “A two-state solution is the only hope to break the endless cycle of violence.” She went on to say the government may soon consider recognising a Palestinian state.
Senator Wong is a smart woman. She knows that the likelihood of a two-state solution is as likely as the proverbial thylacine6 appearing on her front lawn. If nothing else, she knows that neither Israel nor Palestinians want a two-state solution.
None of the various wannabe-governing-Palestine have ever said they would recognise the State of Israel. And both the ultra-orthodox Jews and Israeli West Bank settlers (of which there are over 700,000) would not accept recognition of Palestine. So there goes any chance of a two-state solution.
She also knows that a state of the two separate Palestinian geographies (Gaza and West Bank), each of which is ungovernable but claimed by two competing and very corrupt ‘tribes’ (Hamas and the Palestinian Authority), each of which consists of innumerable fighting factions, is a nonsense. Recognition now would be creating a failed state.
So why did she say what she did?
Simply, to stay in government. The reality is that Labor is two seats away from minority government, is at risk of losing three western Sydney seats with large Muslim populations (Blaxland, Werriwa and Watson) to either the Greens or pro-Palestinian high-profile independents.
The inescapable fact is that Labor depends on the Muslim vote, and it doesn’t rely on the Jewish vote. The Coalition gets neither.
Senator Wong’s strategy was electorally smart, but high risk. It now risks inflaming anti-semitism and an explosion of anti-Israel violence.
Albo was complicit in all of this. He unnecessarily conflated the unfortunate death of an Australian aid worker with the broader reasons for the Gaza war. The phone call of complaint to the Israeli prime minister was impulsive and naive. He clearly doesn’t have the stomach for a consistent policy and squirmed at the first hard test of his character.
Sadly, Uncle Fester Dutton has not been a bystander. It’s about time that he started to speak like an alternative prime minister, and stopped being a carping opposition leader.
6 Tasmanian tiger
5. Data centres: nuclear powered
Readers might undertake a survey and ask people, when speaking of computers, where is ‘The cloud?’ Wry & Dry will wager a bottle of Perrier-Jouët Belle Époque that more than 50% will say that its computer storage stuff located somewhere in the sky.
Err, close, but no cigar. ‘In the cloud’ simply means in a data centre. And not in the sky. Data centres can be located anywhere, but ideally close to where there is a massive supply of electricity. Data centres consume massive amounts of electricity. This was emphasised this week by the announcement that Amazon Web Services had purchased a data centre that is nuclear powered. That is, the electricity that it consumes comes from a nuclear power plant next door (the Susquehanna power plant, in Pennsylvania).
When fully developed, the Amazon data centre will consume almost one gigawatt of electricity. The adjacent nuclear power plant can toss out 2.5 gigawatts. To put some context around this, Victoria’s brown-coal fired Loy Yang B power station provides about 1.1 gigawatts of power.
Australia’s 181 data centres have a combined electricity consumption of about two gigawatts7. It is forecast that Australia will double the amount of data centres in the next 5-7 years. That means building the equivalent of a Loy Yang B; just for data centre needs. That doesn’t include increased electricity usage from EV and households that are forced use electricity rather than gas for heating and cooking.
From where is all of this electricity to come?
7 Source: ResetData, the Australian and New Zealand distributor for Submer, a Barcelona-based technology company that developed the innovative immersion cooling technology.
6. Business: misunderstood
Since Barton was prime minister, Australian company directors have always felt that the federal government didn’t understand business. This was regardless of which party was in government, with probably the exceptional period of Keating and then Costello as Treasurers.
When Albo got elected there was a brief honeymoon (aren’t they all) when business had some confidence that Canberra was not only listening, but also actually understanding business. But since then, the wheels have fallen off.
Of course, just because Albo doesn’t understand business doesn’t mean that Uncle Fester Dutton does.
Perhaps the AICD (which undertakes the survey) should put the question to the Greens. It’s not a question of direction, just magnitude.
7. Eclipse: profit from darkness at noon
It is in the nature of Americans to turn every possible event into a profit-making venture. Or create events to make money. Consider such worthy television programmes the subject of which is, for example, tractor-pulling. Really.
But there’s nothing like a natural event to draw the crowds. Consider this week’s total solar eclipse in parts of the US. Americans booked out 92% of available Airbnb and Vrbo in the path of the eclipse. This compares to the usual Monday/ Tuesday rate of about 30%. The Economist somehow put together the data into the below chart.
Acknowledgement: The Economist 10 April 2024
Aside from the fact that there are not many Airbnbs in Nevada, the chart shows an extraordinary passion of Americans to participate in or watch events.
Recall the number who watch the Superbowl8 just to see the half time ads.
8 The Superbowl is the acme of a sport termed American football. It’s a game of four 15-minute periods but lasts for, on average, 3 hours twenty minutes. Who says Americans have short attention spans?
8. Invade: between the flags
Last week a fishing boat with some 15 Chinese nationals, who were clearly not fishing, landed in a remote part of north-western Australia.
Albo did what any prime minister wanting to be re-elected would do: hire a plane and ship them off to Nauru. It was somewhat silly for opposition Home Affairs spokesperson to suggest that the government “had lost control of the nation’s borders.”
Consider: Australia is a big country, with the world’s seventh largest coastline9 and the fourth least-dense population density.10
The reality is, therefore, that no Australian government has ever had control of Australia’s borders.
9 Behind Canada (some 10 times Australia’s coastline), Norway (5 times), Indonesia (twice), Russia, Philippines and Japan.
10 With 3 people er square kilometre, ahead of Namibia (3), Western Sahara (2) and Mongolia(2).
9. Crime: Putin’s Heroes
It was an interesting policy: offering criminals a pardon if they volunteered to fight in Ukraine for the notorious Wagner Group. Those that survived would return to the Motherland as free men. Wagner Group ‘recruited’ over 50,000 criminals arising from a 6-month contract.
What could possibly go wrong?
Well, lots. It seems that old habits die hard, as it were. Of the criminals who were pardoned in 2023, at least 190 of them have had criminal cases recorded. That number includes at least 20 cases of murder or attempted murder, as well as rape, robbery and drug related offences.
Last year, Tsar Vlad played down the issue of pardoned convicts committing new crimes. “This is inevitable,” he said. “But the negative consequences are minimal.” 11
As Tsar Vlad’s hero, Stalin, once said, “One person dying is a tragedy. A million people dying is a statistic.”
11 Source: New York Times, 6 April 2024.
Snippets from all over
1. California gang caught with $300,000 of … Lego
In raids at four houses across southern California, police recovered Lego bricks worth roughly $300,000. These were not, however, bricks of the white stuff — they were limited-edition Lego sets, allegedly stolen for sale on a thriving black market. (The Times)
Wry & Dry comments: Lego larceny is the new black.
Fitch, a ratings agency, downgraded its long-term outlook on China’s sovereign credit to negative. (The Economist)
Wry & Dry comments: Moody’s, another ratings agency, also cut China’s outlook to negative in December.
3. The Trumpster grapples with abortion
Donald Trump said that abortion laws should be determined by individual states, following months of speculation about his position on the issue. (New York Times)
Wry & Dry comments: And on Tuesday, the Arizona Supreme Court said it would not interfere with the authority of the state legislature to write abortion policy, letting the state revert to an 1864 law that bans abortion unless the mother’s life is in danger.
In 1864 the State of Arizona didn’t exist (it didn’t until 1912), the legislation was a ‘Code of Laws’ of the Arizona Territory. The Code was written by a judge and legislated without debate by the legislature of 27 men. That was its first act of the government.
The context is that the second thing the legislature did was to give a member of the House of Representatives a divorce from his wife. It then established a county road. And then gave a local army surgeon a divorce from his wife.
4. Slovakia votes anti-Ukraine
Slovakia voted in a pro-Russia populist president. Peter Pellegrin is an ally of the country’s similarly minded prime minister, Robert Fico. Neither are keen on backing Ukraine in its war. That could cause a headache for fellow members of both the EU and NATO. (The Economist)
Wry & Dry comments: the fear is that the duo will push Slovakia the way as Orban has done in Hungary i.e. pro-Tsar Vlad.
5. Food inflation drops to pre-war (i.e. Ukraine) level
Food inflation across rich nations has dropped to its lowest level since before Russia’s full-scale invasion of Ukraine, with a slowdown in price growth easing pressure on millions of households hit by the two-year surge in food costs. (Financial Times)
Wry & Dry comments: The annual change in consumer food prices across 38 industrialised countries eased to 5.3% in February, well below a peak of 16.2% in November 2022 – OECD.
Data
- USA: Unemployment in March fell to 3.8%. Interest-rate cut delay?
- USA: Inflation in year to March rose to 3.5%. Interest rate cut delay?
- China: Inflation in the year to March fell to 0.1%.
And, to soothe your troubled mind…
“We are going to hold them 100 per cent accountable to this process.”
- Tony Maher, CEO of the National Farmers’ Federation, speaking about the proposed mandatory supermarket code of conduct.
Well, it’s a good thing that they will be 100% accountable. Accountability of 90% just wouldn’t, well, be accountable.
Disclaimer
The comments in Wry & Dry do not necessarily reflect those of First Samuel, its Directors or Associates.
Cheers!