Standing up to the competition

AS the key ingredient to capitalism, there are good reasons why the role of competition should be vigorously debated.

The Federal Government has rightly used monetary incentives as a potent carrot to drag the States, with myriad legislation and multiple vested interests, into a new era of reform.

Unfortunately, as time moves on, the easiest reforms have already been tackled and the tougher issues are left to deal with.

They may be tougher because the industry concerned has a better argument for anti-competitive measures, such as protecting the public, or that industry’s members are better equipped to voice their opinion in the lobbies of parliaments.

Whatever the reason, competition policy has probably reached that point.

State and Federal governments must be careful here because change for change’s sake is not a good thing.

With a backlash from the bush and elsewhere over reforms already carried out having a political effect, politicians are looking carefully at what gains are to be made from cracking open new industries to more competition.

And even the zealots might find it hard to argue that structural changes brought about by competition always benefit the community.

Sometimes reform sweeps away old bad practices and introduces new ones, in the form of monopolistic behaviour or unethical practices.

But competition is important.

It is the best way to breed the best. And industries worried about change must also be prepared to act in the best interests of the community, promoting change, albeit at a slower pace, even if it costs some players.

Avoiding competition costs everyone in the long run.

The season to over-react

THE results season is upon us and we are seeing some real pain caused by the near recession we have recently passed through.

Some of the business world’s most ridiculous business models have been exposed for all to see.

Those who have tried to use good cash businesses to build new ones have been caught out by getting their timing wrong.

And a few stayers have emerged from the pack, enjoying the limelight that avoided them while the charlatans were on centre stage.

This a good point to note that, while June 30 is as good a time as any to take a snapshot of a business, that is all it is – the financial shape of a company at one particular date.

Former Hartley Poynton analyst David Franklyn, whose profile is featured on page 22, reckons that markets always over-react at both ends of the scale.

Even Wesfarmers executives will admit their top-shelf performance puts the company’s shares at the high end of valuations.

There is no doubt that, as the market turns some of the current horror stories will come good and some strongly performing defensive stocks will be dumped.

And the market, having relearned a whole lot of lessons from the past, will go on repeating the same mistakes.