John Linton
......and so we reap the 'rewards' of Keating's legacy when he proclaimed the requirements for financial market deregulation as his own (rather than simply the doctrinal 'model' of the IMF's bright young things retyped and issued without change) and proceeded to remove all previous government controls on the Australian economy. It would be unfair to ascribe all the blame to the pig farmer, Howard and Costello never demurred and Costello even went a little further in at least two key elements in his almost 12 years as Treasurer.
It all went so well after Keating's recession (and ignoring the blip referred to as the dotcom boom and bust) - until now. I see the Australian dollar fell below 70 cents last night and has only limped back over 70 cents this morning. Looking out of the window I see the ASX has shed 133 points in the first hour and a half of trading:
http://business.smh.com.au/business/stocks-extend-slide-on-global-rout-20081007-4v7k.html
http://www.timesonline.co.uk/tol/news/
and my read through the financial press of three continents earlier today indicated that both the US and UK were already in a quickly deepening recession and the rest of the major European countries would be in the same state once they released the September quarter figures. Perhaps the first European country affected by these financial 'events' has already "collapsed":
http://business.timesonline.co.uk/tol/business/industry_sectors/banking_and_finance/article4894904.ece
Whine Swan and CK know even less about finance and Australia's economy than the clock collector and are quite useless in this, or any other, financial scenario so nothing can be expected from the 'government' - oh, apart from their increasingly inane comments that "Australia's banks are well protected..." and other such stupidities (have they heard of SunCorp?). Talk about a total waste of space.
Three quarters of Australian companies recently surveyed stated that they would either not hire new personnel over the coming quarter or would be reducing personnel and two thirds of those same surveyed companies said they would be raising prices between now and Christmas.
So despite what CK and Whine Swan say - it's not "alright". In fact it's very far from "alright". The Australian dollar's continuing decline from the $US0.96 exchange rate at the time I was overseas in July/August to today's sub 70 cent rate means that all sorts of aspects of Exetel's business have become more expensive over the past three months and are giving every indication of becoming more expensive. Some of the more obvious examples of products and services denominated in $US are:
Cisco routers and switches have increased in price by 25% over the past three months and look set to increase further
International minutes have increased by between 20% and 30% depending on destination
IP bandwidth 'spot pricing' has stopped falling and has both increased and become less available
Less important costs such as couriers, utilities and 'low cost' hardware have all increased significantly.
At the same time 'terms of trade' (which haven't affected us - at least not yet) have significantly tightened as some of our providers are even more directly affected by $US exposures than we are.
We notice a continuing deterioration in both the number of our customers who default on payments and then the length of time it takes them to remedy those defaults.
All of this is happening allegedly BEFORE we have a problem - "....Australia remains unaffected by over sea's events." I wonder what things will be like if we ever do have the recession Whine and CK are saying will never happen here?
It seems to me, and I freely admit I have very little/no knowledge or understanding of what might or might not happen in Australia (let alone in any other country), that it is a time for significant caution and 'exposure reduction'. How far caution should be extended is going to be the key piece(s) of judgment required today and then every day until it becomes clear what actually is going to happen.
I see little alternative to increasing our prices for most of our services and reducing the rate of new sign ups to reduce our current growth to around half of the current levels. It seems a great pity having devoted so much time and effort to constructing and get started on carrying out an ambitious growth plan for the current financial year and beyond but if the current "events" can send a country and its whole population broke it would be extremely arrogant to think a small, not far from start up, communications company is somehow 'protected' - even if I believed 10% of the cr** spoken by CK and Whine.
I'm beginning to think that these times have become too 'interesting" for me.
Stop Press 2.00 pm:
http://business.smh.com.au/business/rba-shock-rates-cut-by-1-20081007-4vi1.html
Contrary to what Whine and CK have been mouthing I see the RBA has said that "financial markets had taken a "significant turn for the worse.'' I guess they should know.