Preemptive strike by CBA
Date: Wednesday, November 03, 2010
Author: Henry Thornton
Glenn Stevens declined the invitation to act preemptively against inflation with a 50 point increase in cash rates yesterday.
The Commonwealth Bank has done this job for him, and other banks can also be expected to raise their lending rates by more than the RBA's 25 basis point touch on the brakes.
Other responses were equally predictable; Aussie dollar touches parity with the US dollar (again); retailers warn of a tough Christmas - only 5 % annual growth, perhaps, rather than the preferable (for retailers) 8 %; and record gambling on a horse race in Marvellous Melbourne, the only Australian city where house prices are still rising.
Treasurer Wayne Swan, guzzumped by the opposition's shadow Treasurer, Smokin' Joe Hockey, has begun some bank bashing of his own and says he soon will have his own package of policies to create competition on the financial system. None of Smokin' Joe's nine points have any merit, as the Treasurer said on ABC radio this morning, but he can be expected to use most of them anyway.
This writer cannot get his head around the fact that the RBA happily dropped cash rates in great 100 basis point chunks (after an initial super-cautious 25 basis point cut) during the Global Financial Crisis but cannot bring itself to hike in chunks of even half that size. This shows there is an inflationary bias in even this, the 'miracle economy of the west'.
'CHINA'S central bank, fresh from its first interest-rate increase in nearly three years, says it remains concerned about inflationary risks.
'The central bank also indicated the problem could be amplified by the easy-money policies in the US and other developed countries.
'In its third-quarter monetary policy report published last night, the People's Bank of China said it will "continue to guide monetary conditions gradually back to a normal level" from crisis-response mode as it faces "relatively big" uncertainties over price trends.
'In contrast to the US Federal Reserve, which is widely expected to announce a new program of bond purchases tomorrow to stimulate the economy, China has started to withdraw its stimulus policies. Over the past year, the central bank has reduced the amount of new loans banks can make, and in mid-October it raised benchmark interest rates by a quarter percentage point'.
This is hardly news. John Garnaut reported two weeks ago as follows: 'I don't know what happened at the Party's Plenum over the weekend - there was something for the reformers but seemingly much more for everybody else - but suddenly Zhou Xiaochuan is ratcheting up the rates lever. Is this a turn towards more market-based economic policy making? Can you raise rates in China without raising the currency also, without creating a bigger inflation problem? Does this means the currency is finally going to loosen? I Dunno. But a major turning point, me believes.
Flickers of good news
Date: Friday, October 19, 2012
Author: Henry Thornton
China's gross domestic product growth eased in the third quarter to the slowest pace since the first quarter of 2009, although there were some hopeful signs the economy is stabilising. If accurate, this is the first flicker of good economic news for some time.
"It can be confirmed from the economic data that the economy has hit the bottom, and the rebound is stronger than we expected," said Societe Generale economist Wei Yao.
China's GDP grew by 7.4 % from a year earlier in the third quarter, slower than the second quarter's 7.6 % rise, data from the National Bureau of Statistics showed today. The reading was in line with the median forecast of economists polled earlier and Australian shares and the local currency rallied.
There's more. China's economy will be boosted further as Village Roadshow expands its theme park business into China through a deal with Guangzhou R&F Properties to build a $550 million version of Gold Coast theme park Sea World on Hainan Island. 'We need Chinese people to learn to have fun', said an official on condition of anonymity. 'The strategy is to switch growth to domestic sources, and theme parks are a vital part of that strategy'.
'THE boom time for commodities is over and the drive to improve productivity must begin', Marius Kloppers, chief executive of BHP Billiton, the world's biggest miner, has warned.
It is Henry's hypothesis, sadly hard to validate with standard economic data, that companies only focus on productivity when times are tough. This is likely to have applied with special force to mining companies during the strongest mining boom in history - companies were so busy showelling ore and coal onto boats, there was little time or energy left to increase productivity.
RIO Tinto's vast and highly profitable iron ore operations in Western Australia continue to beat production expectations as they expand amid growing uncertainty about the sustainability of Chinese steel demand growth and iron ore prices.
For the September quarter, the mining giant yesterday reported record quarterly production of 62.9 million tonnes from its mines in WA's Pilbara region, up 8 per cent from the previous quarter and 5 per cent from a year earlier. More here on the mighty Pilbara.
The price of iron ore has rebounded to the $110 - $120 per tonne band, and Twiggy Forrest, fresh from his wonderful win over ASIC, is dusting off his expansion plans.
WOOLWORTHS chief executive Grant O'Brien says 'the worst may be over for the retail sector' after the company reported a 3.4 % surge in supermarket sales for the first quarter of the financial year.
House prices have edged up, home loans have risen and spring sales so far have exceeded expectations. Interest rate cuts already made, and more expected, have boosted consumer confidence, especially relevant for home buyers.
Nevertheless, during the week research from JP Morgan and Digital Finance Analytics (DFA) is showing large numbers of aspiring Australian homeowners are being locked out of the market, subduing demand and weighing on an already “soggy” property market.
'It will take years for complete recovery' said one real estate guru, who is struggling to make ends meet on a $200,000 salary and bonus package.
The Reserve Bank is struggling to come to terms with the sad state of the Australian labor market. Perhaps one or two RBAers need to face the chill winds of redundancy, only to be brought back on one half of their former packages as contractors. At least they'd have some inhouse knowledge of the fate of ordinary Australians in these difficult times.
Treasury Deputy Secretary, Dr David Gruen, is quoted today as saying his forecasts do not have to change much. He did not say 'Producing the sliver of surplus will be easy', but its what he was thinking.
How to beat the debt trap
Date: Thursday, October 18, 2012
Author: Henry Thornton
A distinguished professor of economics, one of Henry's teachers many years ago, recently asked for my views on the appropriate solution for nations such as Greece and Spain, with debts requiring bailout, but at a cost of prolonged and painful austerity.
At the time I said that providing such an answer was for someone above my current pay grade, an answer that the professor graciously accepted.
By coincidence, later that day I was reading a newslwtter from John Mauldin, a kind of rich person's Henry Thornton.
I sent the following message to the professor: 'The linked article, reposted with permission, provides a good speculative answer to the question you posed about solutions - or at least diagnosis - to our current problems'.
Mauldin draws an analogy between economies like Spain and Greece and a Star Trek spaceship caught in the gravity well of a black hole. This analogy strongly suggests that debt repudiation is the answer to cases of Black Hole debt.
Here is the key paragraph: 'An economic bubble of any type, but especially a debt bubble, can be thought of as an incipient black hole. When the bubble collapses in upon itself, it creates its own black hole with an event horizon beyond which all traditional economic modeling breaks down. Any economic theory that does not attempt to transcend the event horizon associated with excessive debt will be incapable of offering a viable solution to an economic crisis. Even worse, it is likely that any proposed solution will make the crisis more severe'.
Clearly my professor's question is in the air at present. David Uren today reports that 'CLASHES at last week's International Monetary Fund meetings in Tokyo show the institution has lost its authority as it flounders in providing clear direction for managing the most profound economic challenge since the 1930s.
'The fund's influence on the stability of the international monetary system, which it was created to underwrite, is fading.
'The fund has been providing confusing guidance on how countries should manage their fiscal policy and none at all on the management of monetary policy once interest rates approach zero'.The need for consistency in the approach to government policy is one of the themes of my book Great Crises of Capitalism (shameless plug), but my professor deserves a more serious answer to his question than my crack about pay grades.
The good news is that in economics, unlike physics, escape from black holes is possible, and not just by assuming a more powerful engine.
If an economy is indeed trapped in an economic black hole caused by too much debt, the solution is so get rid of the excess debt.
Elimination of excess debt can come through explicit debt repudiation, prolonged and painful austerity or inflation.
With debt mostly owned by foreigeners, inflation is no solution for small countries like Spain and Greece. It is no coincidence, however, that Ben Bernanke is printing money like there is no tomorrow, and this might just save the USA from its debt trap.
Prolonged and painful austerity is not a nice solution and, when most countries practice it at the same time, all of them suffer 'headwinds', otherwise called 'negative trade multipliers'. Greece and Spain are being forced to adopt this approach as the price of having help in working off their debt burdens while staying in the Eurozone.
The least painful solution for such nations is likely to be outright debt repudiation. If this action involves expulsion from the Eurozone, so much the better, as that would also allow currency depreciation to help restore national competitiveness.
There would be pain and austerity in the immediate aftermath of such action, as borrowing from foreigners would be impossible. But experience of other countries - think Latin America in the late twentieth century, or Spain and France throughout history - that have repudiated debt suggests that before long lenders would again provide the wherewithall to live beyound their means.
Channel Nine can provide advice in this matter, and one feels sure that David Gyngell would be willing to provide advice on negotiating techniques.
RBA minutes - RBA economists still in denial
Date: Wednesday, October 17, 2012
Author: Henry Thornton
The good people at the NAB reported yesterday on the latest RBA board minutes as follows: 'The final few paragraphs of the Minutes again highlighted that “there was an increased likelihood of growth over the coming year being somewhat weaker than earlier forecast”. (ie. the RBA will revise down its growth forecasts in the November Monetary Policy Statement). The further fiscal tightening expected in the Government’s Mid-Year Economic and Fiscal Outlook (due in November) adds to that case.
'The RBA did not want to send a message in today’s Minutes that another cut is imminent, but their increased concern for the domestic outlook is unlikely to fade with just one rate cut. Since the October Meeting, the unemployment rate has risen, our NAB survey has reported negative Business Conditions and the AUD remains high. A 25 bps cut on Melbourne Cup Day is a good bet, with the risk of more next year if the outlook continues to deteriorate'.
It is also consistent with the various signs of a deteriorating labor market, most obviously the jump in the 'official' rate of unemployment from 5.1 % in august to 5.4 % in September.
But the 10 % 'real' rate of unemployment reported by Roy Morgan Research, put in context in the graph below, is far more telling.
The latest figures show Henry's True Unemployment & Underemployment measure at 19.1% in September 2012 - over 2 million Australians.
We dare to suggest that the RBA's economists are still in denial about the true state of Australia's labor market.
The blight of Inequality
Date: Tuesday, October 16, 2012
Author: Henry Thornton
Inequality is a serious threat to the capitalist system. The industrial revolution in the western nations saw rapid overall growth and a great stretching in the gap between rich and poor. During the twentieth century, policy response to war, depression and agitation from workers everywhere produced policies that reduced inequality, including higher welfare spending and punative taxation of income at 'progressive' rates.
But, from the 1980s, deregulation, privatisation and globalisation of markets produced another 'golden age' for capitalism as overall incomes grew faster and incomes of the rich grew even faster that the average. (This golden age has been tarnished by financial instability culminating in the Global Financial Crisis and its recessionary aftermath. This financial instability enriched already wealthy financiers whose wealth was protected by government bailouts, while the workers suffered disproportionately from the recession. How this plays out is still in the melting pot.)
In a statistical twist, faster growth of developing nations in the twentieth century, especially since the 1980s, was sufficient to make global incomes more equal, as developing nation average incomes grew faster than average incomes in developed nations.
We know these facts, but the latest edition of The Economist reminded us of them, and does its best to propose remedies that it labels 'True Progressivism'.
'Modern politics needs to undergo a similar reinvention [to that produced by both Roosevelts in America, Lloyd-George in the UK and reformers elsewhere] — to come up with ways of mitigating inequality without hurting economic growth. That dilemma is already at the centre of political debate, but it mostly produces heat, not light'.
'At the core [of current indecisive debate], there is a failure of ideas. The right is still not convinced that inequality matters. The left’s default position is to raise income-tax rates for the wealthy and to increase spending still further—unwise when sluggish economies need to attract entrepreneurs and when governments, already far bigger than Roosevelt or Lloyd George could have imagined, are overburdened with promises of future largesse'.
There should, the venerable mag says, be three priorities.
1. 'The priority should be a Rooseveltian attack on monopolies and vested interests, be they state-owned enterprises in China or big banks on Wall Street. The emerging world, in particular, needs to introduce greater transparency in government contracts and effective anti-trust law'.
2. 'Next, target government spending on the poor and the young. In the emerging world too much cash goes to universal fuel subsidies that disproportionately favour the wealthy (in Asia) and unaffordable pensions that favour the relatively affluent (in Latin America). But the biggest target for reform is the welfare states of the rich world. Given their ageing societies, governments cannot hope to spend less on the elderly, but they can reduce the pace of increase—for instance, by raising retirement ages more dramatically and means-testing the goodies on offer'.
2A. 'Some of the cash could go into education. The first Progressive era led to the introduction of publicly financed secondary schools; this time round the target should be pre-school education, as well as more retraining for the jobless'.
3. 'Last, reform taxes: not to punish the rich but to raise money more efficiently and progressively. In poorer economies, where tax avoidance is rife, the focus should be on lower rates and better enforcement. In rich ones the main gains should come from eliminating deductions that particularly benefit the wealthy (such as America’s mortgage-interest deduction); narrowing the gap between tax rates on wages and capital income; and relying more on efficient taxes that are paid disproportionately by the rich, such as some property taxes'.
3A. Henry would seek to add 'tax spending rather than income' to this list, especially for the rich nations to increase their saving and reduce the near-mindless consumerism that is a blight on rich nation society, especially when the unequal distribution of income (and therefore spending) is so conspicuous.
3B. Henry and the Economist are in agreement that stifling growth is no answer, as higher incomes provide the means to reduce inequality. 'It is also true' The Economist adds, 'that some measure of inequality is good for an economy. It sharpens incentives to work hard and take risks; it rewards the talented innovators who drive economic progress. Free-traders have always accepted that the more global a market, the greater the rewards will be for the winners. But as our special report this week argues, inequality has reached a stage where it can be inefficient and bad for growth'.
Various nations and regions are experimenting, but there is still a long way to go.
The Economist concludes: 'The right’s instinct is too often to make government smaller, rather than better. The supposedly egalitarian left’s failure is more fundamental. Across the rich world, welfare states are running out of money, growth is slowing and inequality is rising — and yet the left’s only answer is higher tax rates on wealth-creators. Messrs Obama, Miliband and Hollande need to come up with something that promises both fairness and progress. Otherwise, everyone will pay'.
Henry wishes it to be known (writing with an appropriate sense of irony) that he has not been asked to be gov'nor of the grand old lady of Threadneedle Street, nor would he accept this job if it were offered.
Little chance of the selecters looking downunder anyway - it would be like offering the captaincy of the English cricket team to Shane Warne.
Saturday Sanity Break, 13 October 2012
Date: Saturday, October 13, 2012
Author: Henry Thornton
The true state of Australia's labor market is a theme that will be familiar to regular readers of this blog. In late September, John Black in the AFR presented a wonderful expose. The bottom line is simple: 'Next time a politician tells you the economy is going well ..., spare a thought for the poor buggers trying to get a job in regions like Gold Coast North.
'Some of those politicians will get a close look at the realities of the job market themselves before long'.
The week the game changed
Date: Friday, October 12, 2012
Author: Henry Thornton
Interest rates should be cut we argued on October 3, preferably one 50 point cut or two 25 basis point cuts.
Declining international growth and low inflation were two reasons. The global economy is slowing, a point admitted this week by the International Monetary Fund (IMF).
Global inflation is low. Despite massive monetary stimulus everywhere, this is not yet working. It will, eventually, and bring a burst of inflation. For now, however, the buzz work is 'deflation' - low or even negative inflation.
After citing research showing weakening jobs market over the past year, we added: 'The picture in the three months to August is even worse. Since May, the unemployment rate has fallen by 0.2 % and the so-called participation rate has fallen by 0.6 % meaning people are quitting the workforce at an even faster rate. This analysis is consistent with the anecdotes, as the recent job losses (those in the past 3 months) are in areas such as agriculture, mining, utilities, media, real estate, consulting, education, arts and recreation. Areas where jobs have declined over the past 12 months include construction, retail, finance, public administration and other services'.
The RBA is seems has finally cottoned on to the problem, as its summary of the reasons for a 25 basis point cut included the following: 'Labour market data have shown moderate employment growth and the rate of unemployment has thus far remained low. The Bank's assessment, though, is that the labour market has generally softened somewhat in recent months'.
This is pretty reluctant agreement, but since then fresh data has supported Henry's far more worrying assesment.
On Monday 10 October we saw another report that Australia's employment market is weakening, as job ads fell for the sixth straight month in September.
The monthly ANZ Job Ads survey showed the number of job advertisement fell 2.8 per cent in September.
The total number of job advertisements has now fallen for six months and is now almost 11 per cent below levels seen a year ago.
Even internet advertising (down 2.8 per cent in September) is down 10 per cent on a year ago, while newspaper ads (down 3.6 per cent for the month), have fallen nearly 20 per cent since May.
Today we learn that the 'official' rate of unemployment has risen to 5.4 per cent. This is the net result of a small fall in jobs and a larger rise in the so-called 'participation rate'. Treasurer Swan will no doubt find a reason to cheer - perhaps 'Our drive for a budget surplus is working'.
Naturally we do not accept the simple 'official' (ABS) assesment, although not because it is too gloomy. Roy Morgan Research figures have the real rate of unemployment at 10 per cent, with a further 7.4 percent underemployed, i.e. working but would prefer working more hours each week.
Alan 'Graph of the day' Kohler made two powerful points on the ABC news last night. Employment as a percentage of population has been falling for well over a year, and is now again close to its 2008 lows. Also, part time employment has kept rising, but full-time employment, which plunged in 2008, has not recovered. So much for the 'miracle' economy's labor market.
This was the week the game changed. While the PM was spitting invective at the opposition leader, Labor's speaker was resigning in tears and legal action was proceeding against a former President of the ALP, preceptions about the economy were shifting under the government's feet, and the nation's feet.
Things will get worse before they get better.
The latest figures show Henry's True Unemployment & Underemployment measure at 19.1% in September 2012 - over 2 million Australians.
The coming China bust
Date: Wednesday, October 10, 2012
Author: Henry Thornton
China's economic growth is a modern miracle, but is the China bubble about to burst, or at least deflate to provide a good long rest?
Massive infrastructure investment has created enormous movement of farmers (500 million and counting) to new jobs in industrial cities.
Growth at double digit rates for three decades has set new development records.
But there are some important generic weaknesses of China's position and prospects from now.
China's one child policy was wildly successful at slowing the rate of population growth. But do the math - one child per couple means each generation less than replaces itself, and the overall population falls.
With only one, occasionally two, children per couple, there is a premium on boy children, and this further imbalances the population mix. Too many men mean even less children in the next generation, as the excess men will not find women to marry. This further reduces population growth.
Perhaps worse, the average age of the population rises strongly, and there are more and more old people to be supported by less and less young people.
A visiting guru said recently that 'China will be the first country to become old before it is rich'. He further asserted that the leaders of China have 'absolutely no clues' on how to handle this.
Demographics aside, there is a design fault in capitalism Chinese style. The Chinese leaders have been focussed on jobs, not profit.
Naturally, the State Owned Enterprises (SOEs) that make up the bulk of Chinese industry also have been focussed on creating jobs rather than profits.
Most have played follow the leaders and been doing things to create, or maintain, jobs, many making a loss in the process.
China's banks have funded the resulting losses, and now are holding massive, undeclared bad debts.
The International Monetary Fund (IMF) has said China's banking system is 'fragile and vulnerable'.
Bankrupt is an uglier work, but perhaps more accurate.
China faces a difficult transition to consumer led growth. But most of the SOE's are focussed on major engineering projects. There will be plenty of latent consumerism to be satisfied when this is encouraged, but turning steel mills into producers of cheap but attractive consumer durables will not be easy.
China for millenia was the world's leading nation, in between bouts of civil war, repression and invasion. It was also an innovative nation, but recent progress has been based on copying the work of others. No criticism should be implied by this - America copied Britain, Japan copied America, and now it is China's turn to play catch up.
Will China's new leaders provide the political freedom that is the climate in which innovation flourishes in the free world? Will leaders tolerate failure, so that entrepreneurs can arise from the ashes of failure to finally succeed? Will education in China become less pressured so that young people can dream dreams while drinking too much alcohol or ingesting prohibited substances? How many young Chinese decide to return to China after studying in the west?
China is, or should be, very concerned at its overdependance on US bonds as investments and an artificially cheap currency promoting exports. How to get off this treadmill is far from obvious. Conspiracy theorists assert that China is secretly accumulating gold so that it can back the yuan with gold and declare the birth of a new global currency, far more solid than the depreciating US dollar.
Presumably, taking a bath on its US bonds would be painful, but not so painful as a global trashing of US assets would be to the capitalists of the west.
Several of these currents are running hard at present. The conspiracy theorists see 2013 as a year in which China's accumulated weaknesses bring on a 'hard landing', meaning growth of 5 % or less.
This would be horrific for markets in the west, which have been wobbling since the reality of Chinese growth less than 10 % was realised, and cheering each bout of fresh money printing as it further debases the currencies of the west.
It would be doubly horrific for Australia, riding as we are on iron ore, gas and coal ships, and with those ships stopped to a trickle, perhaps totally while China's current excess stocks are (slowly) consumed. Can one imagine the PM issuing the equivalent of Iceland's advice to learn to go fishing again?
What does it mean for investment strategy? Reduce exposure to mining stocks, Australian stocks generally, and buy gold and suitable gold mining companies. Agricultural enterprises present a sound opportunity for the Asian century that will arise from the ashes of the coming hard landing. Above all, invest only in companies with a clear global edge. If you are brave, short US bonds and the Aussie dollar when you perceive the first signs of the coming geopolitical earthquake.
Also, China suffers tough choice on growth, say two WSJ writers, 19 October, 2012.
'BEIJING—China's latest evidence of sputtering growth underlines a dilemma for its incoming leaders: They can shore up the economy by doubling down on an exhausted growth model, or take a risky political bet on reforms that could worsen the slowdown in the short term.
'The challenge—an unusual one for a Communist government—is to put more money in the pockets of its consumers by tackling the burgeoning inequality in income, which has contributed to pushing China's growth off kilter'. More here.
Health & Medical Research `Revamp`
Date: Tuesday, October 09, 2012
Author: Henry Thornton
The highly anticipated Strategic Review of Health and Medical Research in Australia recommends a significant revamp of current systems to achieve the goal of 'better health through research'. The Committee, Chaired by Simon McKeon, AO, received more than 300 submissions and recommends that the National Health and Medical Research Council (NH&MRC) take an expanded leadership role across all aspects of medical research.
Currently, NH&MRC is responsible for about half of Australia's annual public health research spending of $1.5bn. The Review recommends that this figure grow substantially over the next decade, but initially it be consolidated within the NH&MRC with the Council (possibly renamed) taking responsibility for research translation, tracking, reporting and monitoring of outcomes. At the moment, the NH&MRC does some work across the spectrum but concentrates on creating new knowledge - the Review recommends the Council grow substantially in more providing effective research translation and improving health services research, especially in the areas of minimising waste and adverse events.
Comments from Tony Peacock, CRC Association Chief, are generally positive.
'Many researchers will welcome recommendations for longer-term research contracts and streamlined competitive grant processes. The vast bulk of submissions to the Review lobbied for the balance of research towards translational research. To a large extent, the McKeon Committee has responded positively to this message.
'Not many of those making submissions dealt with the process of revamping medical research. The Committee has gone with a bigger NH&MRC given the mandate to lead and get on with the job. They note in the consultation paper that they considered alternatives.
'Presuming the Government accepts the recommendations, we will see a decade of major cultural change in the medical research scene in Australia. Done well, the outcomes could be very positive. Useful similarities can be made with the major changes made in the Primary Industries and Energy R&D Act 1999 when the Hawke Government reformed the rural R&D councils to become Corporations, lead by end users.
'At that time, we saw a massive cultural shift in how research was done in rural Australia. Instead of receiving an annual call for research and picking the top 10 or 15%, the Rural R&D Corporations had to articulate five-year plans, giving guidance on where they wanted to go. Researchers no longer put ideas up on a blank page, but had directions sketched out. These days, probably less than 25% of R&D in rural Australia is done by an open call. Almost no one argues to bring the old system back (I say "almost" because I'm sure Emeritus Professor David Lindsay of UWA could still prepare a fine argument).
'The Productivity Commission recently recommended a "super" Rural RDC to look after the cross sectorial issues in agriculture. Industry rejected the idea pretty quickly, as did Government after toying with the idea.
'A revamped, bigger, NH&MRC will have a very difficult task finding the balance between discovery, translation and services research and in priority setting. The demands from stakeholders will be enormous (at least one patient group has already commented it feels left out of the consultation paper). To achieve the task, the revamped NH&MRC will need the ability to delegate, to act nimbly and get on with the job. It may need to be corporatised as were the rural RDCs in order to have the wherewithal to take the lead. Leadership and governance will be the key to success'.
New age rip-offs
Date: Monday, October 08, 2012
Author: Henry Thornton
The modern corporation has learned, thanks to modern technology, to transfer major administrative burdens to their customers.
But it can be more devious, and more damaging to customers, than this. Here is a modest example.
Henry has been engaged in a running battle with his electricity supplier for several months now.
Earlier in the year, warned by his killer border collie dog Jack (who wags his tail at intruders while barking at them), Henry found a tradesman wandering around his garden. When challenged, the tradesman said he was here to install a 'Smart meter'.
'Don't want one', asserted Henry. 'Yer don't have a choice' counter-asserted the tradie, 'it's the law'.
Rather than insist on a telephone call to the family lawyer, Henry called off the dog and got on with his life, not before a rueful thought that this would cost money.
The next bill, perhaps two, were normal. Also as normal, the bills were paid on time and without argument.
Then came a letter saying there were (unspecified) 'errors' in Henry's recent bills, and there would be an adjustment to be made.
Attempts to learn more were frustrated by the maze that is the energy supplier's phone system, as Henry was short of time and could not hang about waiting endlessly for a human voice to replace the recorded messages directing one to push 1 if ..., push 2 if ..., etc. You know the drill.
When on a slow day at energy central, Henry got through the cheery nymphette (who, rarely, in these days of offshoring simple tasks, spoke standard aussie English) he was told since he was not the registered 'owner' of the xxx-Energy service, she could not help.
'I've been paying your bills for 15 years' said Henry, to no avail. 'You've gotta be registered before I can release information to you' said the nymphette. 'I can understand that might be the case if I was trying to extract money from you, improvised Henry, 'but I'm trying to give you money by paying my bill'.
All this was to no avail, so now Henry had to persuade Mrs Thornton to navigate the maze of robotic instructions to ask what the problem was. After several weeks she got round to this. 'They say we haven't paid for offpeak power since 1999', she reported, 'and they are entitled to recover the amounts for the past nine months'.
Henry's problem was that he had no way of verifying the additional amount that xxx-Energy said his household owed. Now new bills came every other week, with ever increasing amounts unexplained, and Henry began sending emails requesting a reconciliation of the account. In one such email, Henry explained (1) he had paid a 'reasonable' amount (ie an amount similar to last year's bill for that period; and (2) he would be overseas for three weeks and xxx-Energy should on no account cut off the electricity during this period.
The second item on this list must have caught their attention, as within a week of the departure of Henry and Mrs T, a telephone call to the offspring on dog-minding and house-sitting duty threatened to cut off the electricity.
To cut a long story short, (hear, hear! I hear you cry), once Henry was home again he answered the phone to find a recorded message threatening him with a visit of a debt collector. More emails flowed, including an offer by Henry to visit the office of xxx-Energy so that a properly qualified senior person could take him through the pile of bills to reconcile them so that Henry could pay with a clear understanding of what he owed and why.
On Friday, Henry finally got a call from a sensible human at xxx-Energy. During a long conversation, she several times expressed sympathy at Henry's plight and promised to send detailed descriptions of the items on each bill, clearly identifying the back-dated off-peak charges. Henry is sincerely hoping these items meet his expectation so he can pay up and get on with his life.
But this matter raises several questions.
1. How many frail pensioners or excessively busy two-worker households are out there suffering similar puzzlement at a sudden, unexplained 'back charge' for electricity, or gas, or water?
2. Why should a supplier of such essentials of life be allowed to arbitrarily make such a claim on a customer who has paid every bill for (say) 15 years without complaint and on time, and effectively refuse to explain the cause or reconcile the numbers?
3. How would you feel if Gerry Harvey sent a bill claiming that the 58 inch flat screen TV you bought last year had been underpriced and would you please send another $1,000? Or else.
4. How can a customer verify for himself the reason for a sudden jump in utility charges, if the company does not and will not?
5. How widespread are such devious tactics in the age of modern administration, which thrusts the onus on the customer to sort out problems, not the purveyor of goods or services?
A casual discussion with a fellow bill payer over coffee provided two similar stories. One concerned a telephone company that withdew money from the customer's bank account due to a (mistaken) belief that he had not paid his phone bill. When this was sorted out, the company said it accepted they should not have acted as they had but refused to apologise in writing. My informant has been too busy to quiz his bank on why it felt able to release his money to a telephone company.
A seconed story involved a water supply company. This unsavory lot claimed to charge a smallish amount for 'normal' useage and a substantially higher amount for 'excess' useage, both charges raised by a 'mere' 7.5 %. What this lot did not point out was that the definition of 'normal' had been significantly reduced, meaning the customer's effective charge actually rose by 37 %.
Bloody hell, comrades. Is all this Tony Abbott's fault too?