Alan Kohler is one of Australia’s most experienced commentators and journalists. Alan is the founder of Eureka Report, Australia’s most successful investment newsletter, and Business Spectator, a 24-hour free business news and commentary website. He also hosts Inside Business, a half-hour Sunday programme on the ABC, is the finance presenter on the ABC News - and producer of the nightly graph (or two).
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Comments on this article
Comments PolicyTariffs, anyone? Tariff increases and extensions are an obvious tool to improve the position of manufacturing , and deflate the Big Mining bubble. Put a 25% tariff on fruit and vegetable imports (Japanese torture for the Australian dollar, February 19).
Tariffs are no more a "distortion" of a market economy than the suppression of workers rights in FTA (Free Trade Agreement) countries (applauded by the IPA), the socialisation of costs, mercantilist manipulation (such as with NW Shelf gas and MITI), contracts obtained by bribery, or the ignoring of externalities. Similarly, America's depreciation of its currency by printing money is - perhaps as was intended - turning FTAs into a weapon for the destruction of our domestic industry to the benefit of the US.
As the National Institute of Economic and Industry Research put it, "the debate about reducing industry assistance in general and tariffs in particular has had the unfortunate consequence of focusing policy makers attention solely on cost competitiveness and allocative efficiency at the expense of sophisticated policies that help build manufacturing industry in general and strategic industries in particular."
So preventing exploitation of duopoly power (as with the supermarkets), retaining at least a basic strategic industry structure, withdrawing from all - ha, ha, oh dear - "free" trade agreements, and providing R&D, finance and strategic planning to industries (such as agriculture or car parts) are equally important.
There is a strong case to bring back meaningful tariffs, and use the "Free"-Trade Agreements for toilet paper. Tariffs designed to operate inversely to the long-term exchange rate trend would act as an automatic stabiliser as well as raising tax from trades that on the whole will be the least essential.
Get ready for global currency war to become worse. Check for results of G20 meeting in Moscow this week. So far drop to black hole helped ausi stock market as guys borrowed yens and bought stocks (Japanese torture for the Australian dollar, February 11). But, many big countries not happy with Japanese gvmnt. Retaliations coming. In the end, stock market profit only become real after stocks sold.
Stephen, why don't we tax incoming capital? (Japanese torture for the Australian dollar, February 11.)
That way the sovereign speculators, will have to pay for our high dollar. Lets not forget that it is they who are keeping it high (FOREX) trading, bonds, cash and carry trade.
Lets not talk about open markets. That is just naive.
Stephen, you are right that a trade-weighted index does make more sense when it comes to evaluating the strength of a currency but... (Japanese torture for the Australian dollar, February 11):
-The return to surplus is not delayed by only a year since Wayne Swann & Co. have already locked in a deficit for the FY 2013-2014 through dodgy expenditure deferrals.
-Australias net debt is climbing at its fastest rate of the last 5 and has already exploded well beyond 25%GDP, with little hope of curbing spending in the years ahead.
-Were the coalition to win in September, the cuts to the size and budget of the Federal Government promised would likely see an increase in investor confidence and capital expenditure on the back of superior economic management skills. This would suggest further support to the Australian currency.
Options do exist currently to help fight the high Australian dollar, one of which would involve preferential tax treatment of foreign investment proceeds and revenue, for both Australian companies and individuals (through the conduit of superannuation). This would preserve the independence of the Reserve Bank of Australia and save it from having to engage into a ruinous and ultimately doomed local version of quantitative easing.
I think it is obvious the Government has various tools at its disposal to control the A$ but all the flow on effects need to carefully considered (Japanese torture for the Australian dollar, February 11) . For example if we start putting tarrif on imports what do those countries do to our exports in retaliation. The bottom line for me is I don't believe the Labour government has the nous to handle this situation properly as whatever they stick their nose into they usually create a worse situation and waste lots more of our money.
I have some problems trying to figure out where Xavier gets His statistics on debt (Japanese torture for the Australian dollar) particularly when you say 10% which is almost certainly closer to the mark for Net Debt. Gross debt when Howard left office was 14.2% of GDP if memory serves me correctly and at last read was 22% OECD published figures. Maybe its the same place he studied the fundamentals of fiscal management!