12/01/2016 - 06:49

Turning clear winners into losers

12/01/2016 - 06:49


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Kicking goals is sometimes hard in sports, as well as politics.

Sports, politics and business do not share a lot in common but there is one feature that links all three – and that's how a single event can turn a winner into a loser in the blink of an eye.

In sport it could be the match-winning performance of a football champion such as those produced occasionally by Fremantle's Matthew Pavlich, or in another era by the bowling of star cricketer, Shane Warne.

Two political examples are the sudden onset of career-threatening problems for Premier Colin Barnett as the Western Australian economy slips from forward into reverse, and in Europe where an appalling mass attack on women near Cologne cathedral, threatens to alter the future direction of Europe.

In business, the slowdown of China and the devaluation of that country's currency have sent shockwaves around the world, washing up in the share prices of leading Australian mining companies and triggering calls for change.

The sporting situation has always been obvious, dating back to the days of Sir Donald Bradman in cricket and Barry Cable in football.

Politics and business have also had their momentous moments but, unlike sport which can bring great pleasure, the events that rock politics and business are never much fun but can change the way the world works.

In WA, the crash rolling through the mining and oil industries is already producing opinion polls pointing to a possible change of government at the next state election, due by March 2017.

Whether a switch occurs will be known after polling day but it's remarkable how economic problems are producing a sense of impending doom inside the WA Government whereas there was once a confidence that bordered on arrogance.

Tipping elections is a mug's game, a bit like tipping future share prices, but unless there is a significant change of sentiment in the WA resources sector in the next six-to-12 months then a change will occur.

How the WA Government lost control of its budget, and now faces losing an election, will keep students of politics amused for generations, but an early suggestion is that the politicians relied too heavily on the advice of their civil servants, who made two monumental mistakes.

Firstly, they subscribed fully to the stronger-for-longer commodity-price thesis, which is something normally confined to the trading activities of stock market speculators.

Secondly, they took those wildly optimistic forecasts and worked them into the budget, perhaps the most ridiculous action a government could take if only because (a) they were only forecasts, which is the same as saying best guesses, and (b) commodity prices have always been cyclical and are totally unsuitable for the purpose of government budgeting.

In defence, WA Treasury officials might claim the federal government did the same thing in the days of Kevin Rudd, Wayne Swan and Julia Gillard when they were playing with a super tax on mining profits – does anyone remember mining profits?

Or can you remember the mining tax and the politicians who introduced it?

The European situation is far worse than anything in Australia. The region's economy is struggling. Some members of the union are shuffling towards the exits, and now a country which almost destroyed Europe (twice) last century is being pushed towards the political right thanks to a bungled immigration policy.

Until a few weeks ago the German Chancellor Angela Merkel, could do no wrong and was the undisputed leader of Europe.

Today, Mrs Merkel is fighting for her political survival having played a key role in unleashing German activists of a sort not seen since the 1930s.

Australian business, especially its resources companies, are the third example of what happens when the game changes, easy profits blow out the window and management leaders, who have had a cushy ride for 20 years, are suddenly confronted by shareholders who are questioning their competency.

Business, like politics and sport, hates losers.

In sport it is generally an easy step to sack a coach, or turf out talentless players.

In politics and business the process is more brutal and with consequences that go far beyond the people directly affected.

Unless there is a sudden change in the health of the WA economy it will be hard for Mr Barnett to win the next election, assuming he survives disquiet in his own party during 2016.

The same applies to Mrs Merkel in Germany where a seemingly good deed in admitting Syrian refugees has turned extremely sour.

And in Australian business, as share prices sink lower after the worst start to a year in decades, there will be a clamouring for change that could produce a wholesale turnover of chief executives, especially in the mining and oil sectors.


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