Rudd/Swan Budget 2008 – RIP!

Rudd/Swan Budget 2008 – RIP!

Before we jump to conclusions – RIP. Reactive, Inactive? Preferably being Proactive?

The three most powerful words in the universal business community today were sadly missed in Budget 2008. The strongest financial industry leaders today are very much proactive. Those following suit adopt the secondary position of reactive. As for third place, (and no dividend paid) that would be the inactive. These are those once dominant participants who’s successes today remain as a somewhat distant memories, based on their respective expired business models.

For me, it was an inactive budget which offered absolutely no incentive for businesses.

Which is ironic, as small business which is actually the backbone of this nation. It remains much closer to the action than big business as it feeds the financial oxygen into the big business coffers, and responds accordingly based solely on its very own economies of scale.

Politicians in the modern era act months and months after the event, based on data (for consumers) that is no longer relevant. It’s much like issuing a warning of a tsunami that took place a week before.

A leading question. Why do newly elected governments remain in economic denial and when elected, start the economic game of blame? Better still, it’s like a newly elected CEO of a publicly listed company that automatically blames his predecessor for ongoing bad news to shareholders.

The Government inherited a $20 billion + surplus with 34 year, record low unemployment (compare this to when the Coalition government was elected with debts amounting to $96 billion) yet today, constituents are threatened with an inflation scare campaign. What remains to be seen is actually just whom is actually more scared, the constituents or the elected government? I think the latter.

The underlying survival criteria of “RIP” in its simplicity, is nothing more than the adaptation of the sound business models that the market leaders initiate. Followers then adopt a “same – same” mentality, with third place falling off the radar and spiralling into cyberspace with “no last known address recorded.”

So just how was inflation market accelerants such as rental properties and fuel addressed in the budget? Very well ignored, as it would not look good on the Rudd/Swan resume should the budget surplus next year be lower than those previously recorded by the Coalition.

In the March quarter rents rose at nearly three times the rate of inflation and much faster than wages. An inactive response given that building approvals continue to decline. Why? Because property developers have been taxed out by the elected governments of the day and here is the greatest clue.

Brick production March Quarter 2008 – 323 million

Brick production March Quarter 2007 – 359 million

Brick production March Quarter 2005 – 383 million

Brick production March Quarter 2003 – 409 million

Hardly a “swan – song” for declining productivity yet, for some strange reason not addressed in the Fudget oops, I meant Budget. The building outlook in NSW is at a record low. Yes, and rental prices will continue to escalate for the simple reason that the elected government have not offered one iota of incentive to this fast declining industry.

It’s fine to tax the rich however at the end of the day they are actually the key ingredient to employment. When employment falls so do property prices and one should not forget that employment benefits increase exponentially – which is far from the case today, for the elected government. A case of “financial conservatives” displaying “P” plates, given the economy is travelling much faster than 60 kph.

On that note let’s take a peek at Mosman property results for March quarter 2008.

March Quarter Houses 2007 – Mosman
Sales – 85
Median Price – $2,315,000
Average Price – $2,785,067

March Quarter Houses 2008 – Mosman
Sales – 31 (and growing)
Median Price – $2,300,000
Average Price – $2,825,023

March Quarter Apartments 2007 – Mosman
Sales – 139
Median Price – $560,000
Average Price – $791,081

March Quarter Apartments 2008 – Mosman
Sales – 74
Median Price – $474, 500
Average Price – $624,840

Source: Australian Property Monitors

No doubt we will all be watching inflation figures for the June quarter. It’s a shame that budget did not “dare to be different”. Oh well, the trainer wheels come off soon and that will be riveting.

If one looks at the big picture, over the last 10 years the combined 6.5 billion world population has failed on the last 8 occasions to meet the demand for basic food! So don’t just worry about bricks.

It’s ironic, that with small business you are just another number. The numbers have it at the moment and we are not talking about ratifying Kyoto, think tanks in Canberra or apologies to the “stolen generation”… It’s Time to manage the Australian economy and be proactive not inactive – watching inflation is not the answer. Cheers ^__^

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