After yesterday’s Daily Reckoning looked at Europe, we’d originally decided to go ‘All Aussie Adventures’ today. The TV show by the same name ranks highly on our list of culture shocks upon arriving here in 2004.
Reminiscing on Australia’s past explorers, host Russell Coight explains how ‘150 odd years later, all of those people had passed away. Certainly makes you think.‘
But what of the economy?
Well, Russell should do an episode on the NBN as it snakes its way through the outback. The Age reports how things are progressing:
‘The Coalition’s national broadband network model will prove inadequate for many businesses, is poorly planned and is unlikely to be completed on time, according to NBN Co’s internal analysis for the incoming Abbott government. The draft document also slashes revenue projections important for the project’s commercial viability by up to 30 per cent by 2021.‘
Talk about All Aussie Misadventures! The American government can’t get its health insurance website running and the Australian government can’t get cables laid. The next person who tells us that the government spurs innovation like the internet is going to get laughed at.
It’s especially hilarious that the NBN is turning into a complete shambles just as everyone is touting infrastructure spending. That’s just what we need. Infrastructure spending which doesn’t work, comes in late, is poorly planned and won’t raise the expected revenue. All to increase productivity!
There’s a reason government acts have to be backed by violence, as we mentioned earlier. Nobody in their right mind would agree to have the government run their internet. Politicians might make you wear red underpants on your head to get access, as Senator Conroy once threatened.
With the Aussie government already borrowing like mad, surely more spending on infrastructure would be a bad idea politically? Nope, it’s actually a good one. So good even opposition politicians are signing up. Treasurer Joe Hockey is thinking of teaming up with the Greens to get rid of the Australian debt ceiling completely instead of raising it. Their condition is – you guessed it – more infrastructure spending.
Labor wants the coalition to hit the debt ceiling just before the next election so it can cause a ruckus. With backing from the Greens, Hockey could get his way and abolish it altogether. That would be a real shame. As we see it, this is a fantastic opportunity for the Coalition. Come the next election, when Labor refuses to raise the ceiling without getting a few goodies, Abbott should just say, ‘Ok Labor, no increase in the debt ceiling. We’re going to run a balanced budget. And all the public sector layoffs will be your fault. We’ll take the credit when the resulting economic boom starts.’
Enough politics. Taking a look at actual productive investment (i.e. the private sector), we’re getting mixed signals. An Australian Bureau of Statistics survey suggests corporate investment both for the mining and non-mining sector are looking better than expected. That’s how our economy is divided these days, by the way. One sector is called ‘mining’ and everything else is referred to as ‘non-mining’.
Anyway, according to the survey, the Reserve Bank of Australia can expect manufacturing investment to fall less than expected this year, just 10% instead of 15%. Mining will fall 3%.
The federal Government’s Bureau of Resources and Energy Economics (BREE) data shows a bleak outlook on mining too. Miners are threatening to dump billions of dollars’ worth of projects. The Australian Financial Review succinctly explains why: ‘Prices for key commodities in September 2013 are between 35 per cent and 50 per cent down on peak 2011 levels and iron ore spot prices in 2012 were around 23 per cent below 2011 prices.‘ What an industry. We’re glad somebody is crazy enough to be a miner.
What’s very interesting is that BREE’s forecasts include a bounce back for mining in 2017. What do they know about the next three years that we don’t? We don’t know, but Dan Denning reckons he does.
Bitcoin seems to know something too. It surged to new highs overnight, over $1100. Technology expert Sam Volkering, who has been following Bitcoin’s story, made his position perfectly clear in an email this morning:
From: Sam Volkering
Sent: Thursday, 28 November 2013 10:00 PM
To: Kris Sayce; Dan Denning; James Woodburn; Nick Hubble; Greg Canavan; Callum Newman; Jason Stevenson
Subject: New Currency just like Bitcoin.
I’ve come across the amazing new currency. It’s like Bitcoin but even better. I think my belief in its potential is deep-seeded in my Dutch heritage. Anyway I’m sure no one’s come across it before and I’m sure it’ll really take off. I took a picture of my stash, below.
He’s referring to the Tulip Mania, of course. The investment bubble economists like to site as an example of animal spirits.
In other news, a Mr Jeffrey Tucker has landed in Brisbane and is probably detained by customs as you read this. Find out why here.
for Markets and Money