The more things change...

16/10/2007 - 22:00

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The more things change...

Business, if opinion polls are a guide, reckons a Rudd win at the November 24 election will be bad for the economy.

Rubbish.

Just as there was no truth in John Howard claiming credit for the booming Australian economy over the past five years, so is there no point in imagining that Kevin Rudd will destroy (or want to destroy, which is a more accurate portrayal) the economy if/when he wins.

There are three reasons why Briefcase argues that not much will change in Australia on November 25.

China, China, and China.

The resources boom is what’s creating jobs and wealth throughout all levels of Australian society, from men and women at the coal face, to metal-bashing factories in the outer suburbs of Melbourne, to family farms – when it rains.

After the election, nothing will have changed except, possibly, the faces on the government side of the parliamentary benches.

 For either side of politics to believe that it can manipulate a global event as big as ‘the great Chinese industrial revolution of the 21st century’ is fatuous in the extreme.

We are a price-taker, pure and simple. We take the best price on offer for our goods and services sold primarily to Asian customers, and we do our best to keep costs down.

If there is a weakness in Mr Rudd’s pitch for the right (an onerous responsibility) to run the country it is that final point, costs.

Despite his protests, there is little doubt that unions will see a Rudd win as an opportunity to make life tough for business. But, unless Briefcase is sadly mistaken, Mr Rudd has already seen that coming, and flagged a no-nonsense reaction to union thuggery.

He will be tested on whether he can hold that line within his first six months in office, and he knows it.

After the workplace relations issue, and there seems little doubt that the hardline right-wingers on the conservative side of politics have over-stepped the mark for most Australians (including Briefcase), you couldn’t pass a cigarette paper between Labor and Liberal on most key issues.

If anything, and this might cause a few people to blink, a Rudd-led government might actually be good for WA, even at the expense of wall-to-wall Labor administrations.

Mr Rudd, if true to his word, will tell WA Premier Alan Carpenter that he has to toe the party line on uranium. This will mean that, at last, WA can claim its rightful position as one of the world’s great sources of energy (with uranium joining natural gas on our list of world-class exports).

Whatever critics might think of Mr Rudd, including his appalling habit of talking down to everyone because he’s the smartest man in the room, he has (from a WA perspective) one enormous credit – he comes from a mining state.

That state might happen to be Queensland, but at least the man knows the importance of mining to an economy, and he is most unlikely to upset the sector that creates the most wealth.

Right, now that Briefcase has had its say, it’s time to turn off all TV, radio and internet news, switch on the CD player, and let the ballyhoo of the chattering classes waft away on the sea breeze.

•••

Speaking of the media, Briefcase brings news of a looming war.

Not in the Middle East, but on a computer screen near you. The brewing Web 2.0 war is in the world of business journalism, and it’s already forcing writers and commentators to take sides before the first shots are fired.

On one side of the increasingly bitter divide is the world of old business media, led by The Australian Financial Review and other parts of the Fairfax media group.

On the other side is the digital world, occupied by products such as Alan Kohler’s Eureka Report, and the daily email service of WA Business News.

Some time in the next few weeks (or possibly days) Mr Kohler and his partners will press the go button on their latest adventure called Business Spectator, an on-line, free, news and commentary service which will feature some of Australia’s best business journalists.

Apart from Mr Kohler there will be Bob Gottliebsen (ex BRW), and Steve Bartholomeusz (ex Melbourne’s The Age) – hence the catchy nickname already applied to their joint efforts as the KGB (Kohler, Gottie and Bartho).

The theory behind Business Spectator is that people want their business news on the day it happens, not tomorrow. Given the speed at which markets move these days, and the importance of fast reaction, this is an understandable.

Readers also want events explained by skilled commentators, not novices.

Rupert Murdoch, a fully paid-up member of the Web 2.0 club, is another player in this emerging world of instant business news, analysis, and comment. He is tinkering with the idea of turning The Wall Street Journal website into a free model, dropping the current fee, which earns The Wall Street Journal about $50 million a year.

The fact that Mr Murdoch is possibly prepared to forgo $50 million in order to build a business underlines the size of the stakes in the battle for the eyeballs of business news consumers.

Established paper products such as the AFR are in panic mode because they are weighed down by the legacy of their cost structure, especially the cost of paper, printing presses, and distribution channels.

In order to compete, they must strip costs out, or acknowledge that the game can only be fought on digital turf. A classic case of if you can’t beat them, you must join them.

•••

Web 2.0 is not the only business shifting into a second phase. In the resources world there is evidence that uranium is also positioning itself for a second wave of investment enthusiasm – what might even be called U2 (if that name wasn’t already taken).

For jaundiced followers of the once red-hot uranium sector, which has been sliding since the uranium price peaked at $US135 a pound earlier this year, there is hope of a repeat performance perhaps sometime in the new year.

The reason Briefcase says this with a reasonable degree of confidence is that the uranium market is upside down. That means the spot, or short-term price of uranium, is currently below the long-term price.

This is not the natural order of things – and will reverse, over time.

•••

In numbers, what’s happened is that the spot price which produced that gee-whiz $US135/lb number has faded to around $US75/lb, a 44 per cent fall which has taken with it much of the confidence of uranium speculators.

But, while the spot market gets the headlines the ‘real’ uranium market is made up of long-term contractual arrangements where prices are not publicly discussed. What Briefcase has learned is that the latest long-term prices are around $US90/lb, a number that substantially underpins every imaginable uranium development.

•••

“An administration, like a machine, does not create. It carries on.” Antoine de Saint-Exupery (French aviator and author)

STANDING BY BUSINESS. TRUSTED BY BUSINESS.

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