I'M no economist but I really do have to question the wisdom of the federal government's $10 billion injection into the economy.
I'M no economist but I really do have to question the wisdom of the federal government's $10 billion injection into the economy.
I have found it quite confronting to see the television images of retail representatives, the prime minister and federal treasurer telling the disadvantaged and low-income earners to go out and spend up.
The theory might look good and the short-term political capital is a bonus for Kevin Rudd, but it is an obscene message to tell those who have the least to go out and spend like there's no tomorrow.
Bingeing is never good.
We are all paying the price for the world's latest binges - a banking binge, which fuelled property and consumer goods binges and led to a commodities binge.
Binges lead to hangovers and, no matter what the true believers think, you simply can't cure those.
My fear is that the $10 billion may be needed at a later date and could have been better used by being spent on much-needed projects, things of lasting value, not last-ditch attempt to save retailers from a lousy Christmas.
Yes, I understand that giving money to poor means it will go into the economy quickly and be dispersed widely. Nevertheless, it's a shock to me that people who, in many cases can't manage their finances, are being told to go and spend other people's money.
If Australia escapes from the worst of the global meltdown I doubt it will have been due to this policy.
In the late 1990s, Australia shrugged off the shock of the Asian financial crisis with an ease that surprised us all. It was strong fiscal policy and efforts to keep debt down that had positioned Australia well.
Similarly, our nation is well placed to come out the other side of the current crisis.
Australia ought to have kept its $10 billion in powder dry to see what opportunities arose as the world's financial problems ebb and the system returns to normal.
POOR ENERGY OUTCOME
THE shelving of the Reindeer offshore gas field development and the Devil Creek onshore gas plant is a big setback for the state in many ways.
Firstly, the project was one of those that appeared far enough down the track that it was expected to proceed and keep investment trickling into the state.
Secondly, it was to be the major fuel source for the $5 billion Cape Preston iron ore development, which also has been seen as one of the unstoppable projects left in WA.
Thirdly, it was meant to have substantially boosted gas supplies in the WA domestic market, reducing the reliance on the current North West Shelf and Varanus Island production hubs, and providing potential competition to those suppliers.
We'll have to wait and see whether or not the decision by Santos and Apache Energy is tragic or not, but it's another reason to look back at the record of the previous Labor government on project approvals.
I'm not suggesting that this project was delayed, I'm simply not aware of the details. However, it shows the impact of things not going ahead.
Each project has its own economics. Largely, those are based on the capital cost of getting started and then the real cost of operations.
While some operating projects will fail because costs are higher than expected or prices are lower, the truth is that there is much more flexibility once a mine or gas production plant is actually in production.
The biggest obstacle, as we are discovering, is getting a project under way.
Where projects are under way, and adequately financed, they tend to have the momentum to get through these crises.
We'll rue the day any project - such as Inpex - did not proceed because of government delays.
That is especially the case with gas production because it is so desperately needed here.
As the Chinese are swiftly learning, by encouraging development of raw materials the supply side of the equation is shifted to that of the customer.
In the case of the domestic economy, energy prices are more likely to be favourable if there are more producers supplying a variety of markets.
Losing Devil Creek means that there will be less domestic gas available in the near term and therefore less competition among suppliers - and less negotiating power for customers.
GIVING BACK
AT least there's some good news around.
Having focused on philanthropy for the past week or more it is quite refreshing to find people who understand that you simply can't take all that wealth with you.
As would be expected in WA, many are self-made business people like Stan Perron.
While many in the sector complain that Perth lacks intergenerational wealth, the so-called dynasties that we see over east and in much longer established economies such as the US and Europe, it is possible we'll never see many of these.
Firstly, the modern state is such that fiefdoms and the need to direct your children's progress do not rely on amassing and controlling a fortune.
In modern Australia, anyone can make do on their own.
There is also a clear school of thought that you may actually do few favours in leaving wealth to your children in such a society. If the Hilton sisters are any guide, that view might be an accurate one.
As such, we may see more of the rich lock their wealth away from anything other than a small stipend, with the rest of the fortune earning a return for charitable causes.
The only way intergenerational philanthropy can work in these circumstances is for children to be involved in managing that wealth redistribution - or use their lucky start in life to make their own fortunes and give that away.
