Consumers driving economy’s bulls

THE impressively credentialled bronze bull, which stands just around the corner from the New York Stock Exchange, must be finding it increasingly hard to remain virile, with all that flaccid corporate news emanating from inside.

I gave the gleaming flanks of the animal an encouraging slap recently on my way to visit the little known Museum of American Financial History in downtown Manhattan. Among the exhibits is a Western Union stock ticker, and the actual tape it carried in November 1929, bringing news of the great market collapse. Just four days before the crash, a columnist on the Daily News called Trader urged his readers to buy: “because current prices are a bargain, and will probably not be obtainable again as long as America continues its present prosperity”. Those awful words now hang on the wall of the museum, largely unheeded by busy brokers scurrying by.

On a trip covering almost the length and breadth of the US, I was able to see the way two economies are running in the country.

The manufacturing heartland is in deep recession, displaying weakness in every sector save for oil and gas. The airlines are bleeding, with business travel at the lowest levels since the Gulf War a decade ago.

Profit margins are declining at the worst rate since the recession of the 1980s. Companies do not have the pricing power to pass on rising costs to customers. The bloated US dollar is killing manufacturers. The head of International Paper Co, John Dillon, who represents the 150-strong Business Round Table of CEOs, warns that the strong dollar policy means cheap foreign imports are stealing market share at home and beating up US exporters around the globe.

US Treasury Secretary Paul O’Neill has been unable to persuade the Bush administration to at least try to talk the dollar down. Investors are being fed a steady diet of downgrades in company earnings.

But many Americans evidently have money to burn. The consumer is carrying the US economy on its back.

Interest rates are at a seven-year low – bringing shrinking mortgage repayments – and unemployment is still only 4.4 per cent. There is a building boom in luxury new housing in South Carolina, and the overall housing market is strong.

Despite the soaring cost of power, the GDP of California (at $US1.33 trillion) recently outstripped France to become the fifth largest economy in the world. The Los Angeles Basin alone produces goods and services worth $US602 billion – more than Mexico, India and Australia. Every third vehicle on the road seems to be a BMW sports car or a Saab.

New York is the greatest city in the world for work and play. But it is becoming ruinously expensive.

A beer will set you back $US5 plus tip, and supper for four goes over $US200 before a cork is popped – which makes the eyes water when you double the tariff in crumpled Australian dollars.

Apartment rents are astronomical, if you can find anything at all. In one extreme case, three occupants of a midtown Manhattan flat were murdered and their dismembered bodies thrown in the East River. Police say the perpetrators took up residence.

I am very pleased to be back in Perth.

Objections to Singtel bid seem a bit rich

SEVEN Network chairman Kerry Stokes is extremely hot under the collar over the Singtel takeover bid for Optus. He hates the idea of a foreign government controlling a fair slice of our telecommunications industry, particularly one like Singapore’s. The TV mogul says the city republic authorities have been known to eavesdrop on phone calls and “interrogate” computers. He is joining quite a lobby group seeking to repel our near neighbors by wrapping themselves in the flag and citing security risks.

It is true that the various arms of the Singapore Government reach into virtually every domestic commercial enterprise, and the activities of its citizens are prescribed more than we would wish to be, but it is far from the quasi-police state being suggested.

Singapore plays by the business rules and has one of the best records of corporate governance in Asia – admittedly not against very hot competition.

Its policy of attracting foreign workers, particularly in the IT and financial industries, is smarter than ours. The government rolls out the red carpet for qualified expatriates, many of them Australians, and spends a fortune advertising for more.

Its economic policies are pro-active and promote free trade.

Moreover, if Singtel does squeeze past the FIRB and snares Optus, it is most unlikely to destroy the balance sheet – in contrast to recent debacles courtesy of our own telecommunications fizz kids.

It is also a bit rich to whine that the Singapore Government tightly controls Singtel while Canberra continues to stand on Telstra’s wind-pipe.

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