Henry Thornton Home Page
"Ultra-loose monetary policy seeps into every crack in the economy, corrupting asset prices and encouraging bad lending." William White, OECD.
PD Jonson
Articles Articles
Comments Comment
Email Me Email

Louis Hissink
Articles Articles
Comments Comment
Email Me Email

Gary Scarrabelotti
Articles Articles
Comments Comment
Email Me Email

Nick Raffan
Articles Articles
Comments Comment
Email Me Email

Henry Thornton
Articles Articles
Comments Comment
Email Me Email

Reader Submissions
Articles Articles
Comments Comment
Email Me Email
Henry Thornton - Contributors: A discussion of economic, social and political issues Blogs
IMF throws in the towel
Date: Wednesday, September 21, 2011
Author: Henry Thornton

The IMF Chief Economist Olivier Blanchard has thrown in the towel and downgraded the lumbering international agency's economic forecasts.

Though Blanchard still expects 4 % growth for the world, hardly shabby, his forecasts for developed countries have been edged down from 'barely acceptable' to 'bloody miserable'. (These are technical economic terms that sound far more impressive in French, ze language of love.)

As warned yesterday, expect a backflip from Madam Legarde on the question of whether developed nations should tighten their belts or send out for more pizza.

Australia's Treasurer has been made 'Finance Minister of the year', an accolade that must peeve Ms Wong. Henry recalls once being told that 9 out of ten winners of Btitain's 'entrepreneur of the year' award ended up broke withing 2, or was it three, years.

Flushed by the award, will Treasurer Swan now blame the slippage into developed nation misery as an excuse to abandon the 'return to surplus by 2013' promise.  Like 'no carbon tax' and 'we will never send asylum seekers to countries who have not signed the UN protocol and dealing with refugees' this budgetary election commitment will prove to be just as firm.

In the gloaming

Amongst the fading light, the Rugby World Cup was meant to kindle light and hope, that is until Australia was choked into an all-but-impossible position by an inspired Ireland.

TP Maher reports here, and if he stays off the turps will continue to do so as the tournement unfolds.

[Ed: We must apologise and withdraw.  TP Mahar would never dring turpentine.  We acknowledge that he is a lifetime single malt quaffer.]

Fast fix or slow?
Date: Tuesday, June 16, 2015
Author: Henry Thornton

'THE struggle has been long and arduous. But gazing across the battered economies of the rich world it is time to declare that the fight against financial chaos and deflation is won. In 2015, the IMF says, for the first time since 2007 every advanced economy will expand. Rich-world growth should exceed 2% for the first time since 2010 and America’s central bank is likely to raise its rock-bottom interest rates'.

Of course, the future is shrouded by the standard fog of uncertainty.  How will the Greek crisis end? Will there be further terror attacks on the capitalist heartland? Will China's slowdown get even worse?  Is the American recovery in trouble?  When the Fed finally begins raising cash rates, will asset prices crash? One can easily enough find reasons to be cautious, if not downright pessimistic. 'It is only a matter of time before the next recession strikes. The rich world is not ready', warns the venerable mag.

The Economist, from whose sources the opening quotes are borrowed, this week provides a typically polished overview. In brief:
* 'The good news comes mainly from America, which leads the rich-world pack. Its unexpected contraction in the first quarter looks like a blip, owing a lot to factors like the weather (see article). The most recent data, including surging vehicle sales and another round of robust employment figures, show that the pace of growth is rebounding. 
* 'In other parts of the rich world things are also looking up. In the euro zone unemployment is falling and prices are rising again. Britain’s recovery has lost a bit of puff, but strong employment growth suggests that expansion will continue. Japan roared ahead in the first quarter, growing by 3.9% at an annualised rate. A recovery so broad-based and persistent is no fluke'.
* 'Emerging economies, which accounted for the bulk of growth in the post-crisis years, have seen better days. The economies of both Brazil and Russia are expected to shrink this year. Poor trade data suggest that Chinese growth may be slowing faster than the government wishes'.

The big problem is that there is not much room to move should economies enter recession any time soon.  Fiscal policy was used to the max during the global financial crisis. Cash interest rates are almost everywhere close to zero, and will be raised, the US Fed assures us only 'gradually' in the immediate future. 'The logical answer is to get back to normal as fast as possible. The sooner interest rates rise, the sooner central banks will regain the room to cut rates again when trouble comes along. The faster debts are cut, the easier it will be for governments to borrow to ward off disaster. Logical, but wrong'.

Monetary policy can remain easy while regulators use so-called 'macroprudential policy'. Trouble, such policies have hardly been tried, or have been tried and failed. Nevertheless, 'Regulators have the ability to let the air out of asset prices by tightening rules on leverage and liquidity. An economy at full employment and with a healthy level of inflation will be better positioned to withstand a bout of financial instability than one that is flirting with deflation'.

And, despite debt to GDP ratios that are uncomfortably high, governments can do more. 'There has still been shamefully little growth-boosting investment in infrastructure. ... Growth is better than austerity as a policy for bringing debts under control. Governments should instead direct their energies towards overdue reforms to product and labour markets. Open product markets encourage enterprise. The freedom to hire workers under flexible contracts is the best way to keep people out of unemployment. Both reforms make an economy better able to cope with the next [adverse] shock'.

So there you have it, dear readers. Continued near zero cash rates, but macroprudential policy to contain asset prices. Fiscal reform to reduce budget deficits, but more spending on infrastructure. Plus 'Overdue reforms to product and labor markets'.

Two cheers for the Economist. The unanswered question is whether fast return to fiscal and monetary policy normality would produce a faster return to overall economic normality. (So far as this writer is aware this is an issue barely touched by the economics profession.) The unambiguous two cheers are for product and labor market reforms, two issues that are hard for any government. It usually requires a serious economic crisis to get such reforms.  Yet it is best to fix a roof while the sun is shining, and surely this approach applies to economic reform also.

Despite this point, here is an example of 'Dreamtime economics', a fast fix plan for Australia.  The Economist's gradual reform approach will undoubtedly keep voters happier than an attempted fast fix. What a pity there is no convincing research, or actual example, of an economy pursuing a fast fix.  But wait! Does anyone know what happened in Iceland after the PM advised people things were dire, and they had better take up fishing again?

Courtesy The Economist

Saturday Sanity Break, 13 June 2015
Date: Monday, June 15, 2015
Author: Henry Thornton

'Get a job that pays well' said Treasurer Joe Hockey. This has been widely lampooned as stating the obvious.  A cruel prescription for the many battlers who cannot find any job, let alone one that pays well.  The Australian has been featuring people who went to live in Tamworth, or in a suburb distant from the CBD in one of our boomtime cities. And on the issue of stating the obvious, Henry has also been accused of that particular sin.  His answer is 'I do sometimes do state the obvious, which is necessary as most people don't'.

Curiously, smokin' Joe's advice is the same as that offered by Henry all those years ago, in early 2000.  Here are Henry's 'Six rules for building wealth'. Here is the link to the whole discussion, which grandparents have sometimes passed on to their grandchildren.

1. Earn well. Obviously the more you earn the more you can salt away. It pays to think hard at an early age about the importance of money in one's life, as it will be frustrating to end up as a highly respected Professor of Classical Greek (for example) if you really wanted to be able to take your annual vacation somewhere in the asteroid belt.

I choose the example of Classical Greek because it seems unlikely that such an occupation will allow lucrative consultancy opportunities. But in most academic jobs nowadays it is possible to earn well beyond the basic academic salary in a variety of ways. The recent stock market float of Melbourne IT is one startling example.

It is also increasingly possible to change direction more than once in a career Twenty years as a poorly paid (but influential) public servant can be followed by time as a highly paid corporate executive. Business executives sometimes become venture capitalists, or start an innovative business as the principal shareholder. [Now experts say it is necessary to change jobs and areas of expertise, perhaps six times in a lifetime. Henry has made 4 such changes.]

Some people do it the other way round - first accumulating wealth in commercial activities and then spending their autumn years as an influential academic or politician. President Reagan is one prominent example.

[I must confess that, given the current dire state of Australia's labor market, this advice can, like Joe Hockey's, can sound excessively cheerful. All I can do is to aplogise and urge parents to do all they can to instill the desirability of a well paid job into their children's characters, and help them in their search.]

Other rules are as follows:
2. Save strongly. Given income, the biggest single potential influence on wealth is what economists call the propensity to save. ...
3. Avoid the twin temptations of fear and greed. ...
4. Invest wisely. This is a difficult subject, since investment wisdom is obvious mostly in hindsight. ...
5. Get good advice. ... [Not from a dud Financial Planner.]
6. Have fun. Earn a lot, save a lot, spread your risks and don't try to be too clever at picking individual investments or changes in market sentiment. The rules so far may seem rather old-fashioned, even boring The saving grace is that there is one final rule that makes the others bearable - have fun. ...

The housing debate.

Treasury Secretary John Fraser has said Sydney and 'parts of Melbourne' are experiencing a housing bubble. RBA chief, Glenn Stevens has said Sydney house prices are 'crazy'.  Both these eminent economists are presumably 'clowns, fools and wreckers'. But whatever the merits of the case, it is refrehing to see these worthies speaking their minds for a change.  Another fine economist, Australia's Mike Porter once said 'the answer to a leak is a flood'. The traditional levee of official secrecy has been breached.  Let's read the RBA board papers with our breakfast, let's hear more often what the Head of Treasury really thinks.

Alan Kohler in today's Oz lays out the case with the sort of graphs undoubtedly used in presnetations to the RBA board.  Is it a bubble or merely high prices requiring government policy to boost supply of housing?  This is the sort of question pondered in the better science fiction books, but Mr Kohler makes a point that is solidly based in economic history.  We'd better hope it is a bubble, because the bubble will burst and high prices will be fixed.

Here is the link, dear readers, but you'll need the fish'n'chips version where the graphs are easier to read.

Dennis Shanahan provides some political analysis, but though Henry is a lifetime subscriber to the Oz, the link to Shanahan is unreadable because of an offensive ad by Origen Energy.  Outrageos, we've already paid for the privilage of reading Mr Shanahan online, but then we cannot.

The citizen issue

Des Moore has weighed in with a blockbuster that deserves careful reading.  It is posted here with Mr Moore's gracious permission.

Here is the link. 


Fiona visits Sicily's mafia in an unlikely romantic comedy The Mafia Kills only in Summer


Steve Smith has made merry against the hapless Windies, whose captain compounded their troubles by only allowing his Wes Hall-like quick a few overs when he had the Australian batters on toast.  After his unbeaten 130 in the first innings, it was sad to hear Mr Smith was dismissed for 199 runs in the second dig.  But all is not lost for the Windies.  As well as that tearaway, they seem to have found a man with a mystery ball, like Australia's Shane Warne.

Onward to the pestiferous Poms (PP), team Australia. The PP groundsmen are doctoring the pitches as we write, dear readers, so keeping the Ashes will be no mere stroll in the park. We shall of course be polishing the cliches for reporting on the titanic tussle to come.

Richmond beat Freo in the west.  Since Richmond only just beat the Blues in the opening match of the year, the Blues appear to have little to fear when they face top of the table Freo. 'Que?' I hear you say. 'Footy is not transitive'.  Amen to that piece of folk wisdom.

The Aussie shielas fought the mighty American futballers and held them to a one all draw in the first half.  Sadly, our shielas faded in the second half and must saddle up (another useful cliche) against Nigeria, whose players are descended fron Zulu warriors, and who in the futball world outrank shielas descended from convicts and other sweepings of London's grimy eighteenth century streets.

And we learn from the sporting pages that an Aussie lad from Australia's hot and dry interior has siezed his chance in the NBL finals to show what a gritty aussie battler can achieve. Chip Le Grand reports: 'Dellavedova plays basketball like a red heeler. His uncompromising approach hasn’t endeared him to all basketball fans but, in Dellyborough, they’ll tell you it is the way he has played since he was a kid running around for the Maryborough Blazers U12s.

'Brady Neill, who played alongside Dellavedova in Maryborough and Bendigo teams, says he lost count of the times he had to pick his undersized point guard off the floor — just as Cleveland star James LeBron has done so often in this best-of-seven series, which is now locked at 2-2. “People used to complain that he was too phys­ical,’’ says Neill, who coaches the Blazers U16 boys team. “Because he was one of the better ones they would try to target him a fair bit.” '

More here.  

Image of the week

Courtesy The Oz

Long weekend Sanity Break, 6-8 June 2015
Date: Saturday, June 06, 2015
Author: Henry Thornton

The contradictions of the Australian economy continue to confuse us all. Slow wages growth and low retail sales are effects of uncertainty and fear that jobs will be lost. But with national income falling, household saving is falling from the post-GFC high even to maintain low levels of household spending.  Meanwhile falling mining investment and feeble non-mining investment adds to the gloom. A massive $3.9 billion current account deficit (CAD) sparks memories of the trigger for the 'Banana Republic' crisis of 1986.

Those of us who are concerned by these facts are labelled 'clowns, fools and wreckers'. It would be interesting to help Glenn Stevens drink a bottle of Grange and ask him if the glass was half full or completely empty when he'd finished. Or to get his private thoughts about where we are and what is needed to put Australia back on the road to prosperity in a post-GFC, post-China boom world. Henry's 'Dreamtime Economics' provides some ideas.

Calls for a broader and higher GST are increasing, most surprisingly from David Marr on last week's 'Insiders'. It will be interesting to see what the White Paper on tax reform says. About as much as the information paper on what to do about citizens who fight against Australians. If they are overseas, cancel their passports. If in Australia, send them to Port Arthur. Henry is with government backbenchers on this one.

Vale Joan Kirner and Alan Bond.  Both notable Australians in very different fields of endeavour, but we are poorer for their passing.

Kulture 1

Fiona Prior lets the light-meister James Turrell play havoc with her optic nerves and imagination.

image: courtesy of the artist James Turrell

Kulture 2

Gary Scarrabelotti offers some sage political advice Tony Abbott, with its core a feature of an important culture group in this great South land.


Wonderful to see Mark Murphy and his Blues finally put up a good show against a quality team. Murphy himself starred along with most of the team.  Very sad to see Juddie carried off with what looks like it could be a career-ending knee injury. And we cheered Richmond last night as the walloped Freo in Perth. Is there light at the end of the tunnel for two old-fashioned teams of battlers in suburban Melbourne?

On the wider global scene of futball, FIFA President for life, Sep Blatter, has resigned, or plans to resign as the American plod close in. One hopes FIFA finds a honest bloke or woman to clean the stables. Lots of anger at the handball that favoured France in a World Cup.  What about the dodgy penalty kick that kept Australia out of the finals of another World Cup?

The rampaging Aussie cricket team belted the Windies in three days, helped by a century on debut by Adam Voges. How such an accomplished player was overlooked for so long is just one of the mysteries of sport at the top level, Let's hope Mr Voges gets a fair suck of the sausage selection in future. The Pestiferous Poms have had a better preparation playing New Zealand and this may make the coming Ashes series worth watching.

“Ewwwww! No! No! No! We ... are staunchly opposed to armpit hair (on women), nose hair, ear hair and toe hair.”

More here for fans of actress Jemima Kirkes.

We wish our loyal readers a safe and happy Queen's Birthday weekend.  Long may she rein as it is hard to see such affection for King Charlie, even if we still get a holiday.

Image of the week

Still searching - please send your favourite weekend cartoon.

Dreamtime economics
Date: Wednesday, June 03, 2015
Author: Henry Thornton

What a muddle.  House prices in Bubble territory (in Sydney and 'parts' of Melbourne) and new 'Macroprudential' policies so far failing to stem the tide. Market participants calling for 'more guidance' on RBA's intentions. Business investment heads for the cellar, in mining no surprise but dismal outlook for non-mining investment is creating an enormous disappointment for professional forecasters.

Business (including Henry, please note) say the core problem is lack of competitiveness, but Treasury and RBA continue to use outmoded overly simple 'Keynesian' analysis. (Keynes himself, of course, would not have been so naive.) 

Respected journalists say low wage growth and strong employment growth is 'suprising', but both are signs of household fears of recession and loss of precious jobs.  With household debt at 150 % of household income, Treasurer advises households to 'borrow and spend'. Household spending behaviour is just another sensible response to concern over loss of jobs.

Budget deficit is out of control, with little realistic chance of stemming growth of Australia's international debt. Extrapolation says this is a dire problem, but leadership has flipped from 'emergency' to generally endorsed 'dullness'.  Dollar needs to be lower, practically everyone agrees, but it keeps recovering, especially whenever RBA declines to say more rate cuts are on the agenda. Market participants are ungruntled, deservedly so in Henry's view.

It is a serious clusterf..k, dear readers. What can de done about it?

Here is a set of policies that would rapidly restore competitiveness and produce a highly prosperous Australia.

* Cabinet agrees to take a 20 % cut in its members' salaries until the economy is restored to blooming health.  PM and Treasurer urge parliament and the public service to adopt a similar approach and for business leaders to follow cabinet's example. Anyone who adopts this approach gets an AO in the next honour's list.
* The government and opposition agree to list budget savings in order of preference, government gets odd numbers picks (1,3,5 etc) and opposition even numbered picks. Treasury keeps score, producing figures on costs and benefits of each policy as objectively as possible, including its best guess of net effect of each pair of budget picks on the net budget trajectory. (If odd and even picks contradict each other, ask the parliamentary budget office to mediate.) Senate endorses these cuts so Australia has a rolled gold return to a healthy budget.
* The RBA devises and implements a variable tax on capital inflow to prevent, or at least inhibit, the sharp rise in capital inflow and the exchange rate likely to be produced by the first two policies.
* Government and opposition sit down and begin to negotiate a set of improvements to structural policies (including taxation policy) to increase efficiency and competitiveness of Australian industry.  If they cannot agree, try the system of alternative efficiency raising picks.  (Ask the Productivity Commission to publish its judgments on costs and benefit of each pick and mediate if agreement is not achieved.)

I can already hear the cry of 'You're dreaming Henry!'  No doubt I am, but the alternative is years of slow growth, even if outright recession is avoided. Also years of mean, nitpicking cuts to programs, bracket creep in taxation and general unhappiness.

Some effective version of this no doubt outrageous approach would produce a quick and sustained return to strong prosperity.  Or perhaps Australians prefer a future of mean, nitpicking mediocrity?


People who are concerned about Australia's economic future are 'clowns, fools and wreckers', says Treasurer Joe Hockey.

Time will tell, Treasurer, but I recall Treasurer Keating snarling at the 'clown' who warned him of the economy off the rails in 1986. Indeed, Mr K said something similar just before his famous 'Banana Republic' backflip.

With Mr Keating the backflip trigger was a record current account deficit (CAD).  Did you notice the $3.9 billion CAD Treasurer Hockey?

Saturday Sanity Break, 30 May 2015
Date: Saturday, May 30, 2015
Author: Henry Thornton

'Just how bad is the investment outlook in the latest official survey of business capital expenditure? It's very bad, and the sort of number you do see in a recession'.

The penny drops slowly for even great organs of news and opinion like the AFR.  Phillip Baker's article in the online version of the fin is headed 'Recession looks likely'. Gor blimey comrades, you heard this message here in August 2013 - 'The recession we did not need to have'.

Mr Baker's article continues: 'As Betashares chief economist David Bassanese [an economist in a betting shop!] said, that might not come to pass, but the weakness in business investment next financial year implied by the latest survey is of the magnitude that is usually associated with a recession.

'The risk now for investors is if some of the business confidence numbers down the track start to turn south in a big way and back up these latest disappointing investment intentions.

'There is no sign at all of the "animal spirits" the Reserve Bank is so keen to see.

'Instead, rather than businesses getting on the front foot and looking to be more confident now the political landscape has settled somewhat, the survey implies they are becoming more gun-shy.

'Spending intentions in the next financial year have fallen more than 20 per cent, while this year is also lower than what economists thought. And just to make sure the whole survey was a truly horrible set of numbers, previous reports were also revised down'.  More here.

The great man himself, Ben Bernanke, has been here preaching on how he saved the western world from depression, why governments should provide stimulus now and how good it is that 'macroprudential' policies are being provided by the financial system regulatory organs such as APRA in Australia.

This is the man who followed Greenspan in saying asset bubbles could not be diagnosed or moderated by policy.

Better late than never, perhaps. Ben 'Bubbles' Bernanke is another great man stumbling reluctantly to the truth.

Kulture 1

'The battle over the banking industry's reputation intensified on Friday, as two of Australia's top regulators took a simultaneous swipe at the culture at the heart of the nation's largest financial institutions.

"When culture is rotten, it often is ordinary Australians who lose their money. Markets might recover, but often people do not," Australian Securities and Investments Commission chairman Greg Medcraft said at the Stockbrokers Association of Australia's annual conference on Friday, in a speech calling on financial institutions to clean up cultural problems.

'The regulator is worried that a crisis of confidence among many members of the public, in the wake of a slew of governance scandals in some of Australia's largest banks over the past year, could weaken the integrity of financial markets. Commonwealth Bank of Australia, ANZ Banking Group, National Australia Bank, Macquarie Group, and UBS are among those that have dealt with the fallout from scandals over the past 12 months'.

Read on here.

Kulture 2

Fiona Prior sees Wild Tales, a film of unbridled revenge. Watch it if you dare!


The wiley old reptile who has presided over much rumoured and confirmed (by arrests) corruption in futball has been reelected. 'Soccer' as we know it here is booming, but we shall not give it real support unless and until the sport is cleansed. A new president and a new board, whose members are mainly honest women and men, would be a sign that corruption will be dealt with. 'Splatter the blatter' could be the rallying cry.

With Mick the Merciless gone, the Blues tried as hard as humanly possible to be competitive against the Swans last night and went down fighting. Buddy was awesome but got such clean and accurate ball that not even the game's best fullback could have held him back. Several Blues fought especially well - Rowe (acting cap'n), Armfield, Bell, Buckley, Carrazzo, Everitt, Henderson (but only workmanlike), Wood, but the real story was that everyone had, as they say, a redhot go.

Some big games to come today, and we celler dweller supporters can only watch and gape at the top sides' strength and skill.

One of the dailies featured several pages on the sheilas at play, and for a while Henry was tempted to suggest that a sheila infusion was just what the Blues need. But, sadly, last night's game was a timely warning.  It should however be recorded that one of the great coachs once told Henry that he knew a sheila who was good enough to play in the AFL at the highest level. More here by Blues hero, Ted Hopkins.

Soon there will be test cricket to divert us from the Blues' diabolical loss of form.  Up and at 'em, lads, the old enemy deserve a good thrashing, and nothing else will do.  Mitch, hope you're back to your scary best.

Image of the week

Courtesy Macca, Herald Sun

Tax avoidance - simply borrow money
Date: Friday, May 29, 2015
Author: Henry Thornton

The Economist has delivered a telling attack on debt - which it calls 'The Great Distortion; Tax Free Debt'. With household debt a worrying 150 % of income, and households being urged to borrow and spend, it seems Australia is a prime candidate for tax reform.

The Economist goes on: 'A vast distortion in the world economy is wholly man-made. It is the subsidy that governments give to debt. Half the rich world’s governments allow their citizens to deduct the interest payments on mortgages from their taxable income; almost all countries allow firms to write off payments on their borrowing against taxable earnings. It sounds prosaic, but the cost—and the harm—is immense'.

'In 2007, before the financial crisis led to the slashing of interest rates, the annual value of the forgone tax revenues in Europe was around 3% of GDP—or $510 billion—and in America almost 5% of GDP—or $725 billion.

'This hardly begins to capture the full damage, which is aggravated by the behaviour the tax breaks encourage. People borrow more to buy property than they otherwise would, raising house prices and encouraging over-investment in real estate instead of in assets that create wealth. The tax benefits are largely reaped by the rich, worsening inequality. Corporate financial decisions are motivated by maximising the tax relief on debt instead of the needs of the underlying business'.

The facts are scary.

* 'Economies biased towards debt are more prone to crises, because debt imposes a rigid obligation to repay on vulnerable borrowers, whereas equity is expressly designed to spread losses onto investors. Firms without significant equity buffers are more likely to go broke, banks more likely to topple (see Free Exchange). The dotcom crash in 2000-02 caused losses to shareholdersworth $4 trillion and a mild recession. Leveraged global banks notched up losses of $2 trillion in 2007-10 and the world economy imploded.
* 'A [more] neutral tax system would also lead to more efficient choices by savers and lenders. Today 60% of bank lending in rich countries is for mortgages. Without a tax break, people would borrow less to buy houses and banks would lend less against property. Investment in new ideas and businesses that enhance productivity would become relatively more attractive, in turn boosting economic growth.
* 'Removing the advantages that debt enjoys would also lead to a fairer system. Relief on mortgage payments is a subsidy that flows to people who need it least: studies show that the richest 20% of American households by income gain the most'.

Policy reform will be hard, but what to do seems obvious.  The venerable mag suggests the following: 'The best approach is gradually to phase out tax breaks for debt at the same time as lowering the corporate-tax rate. That would make the policy revenue-neutral, and would also defuse the risk to governments who want to push ahead but fear losing a war waged on tax competition.

'Acting in concert or alone, countries should act soon. When interest rates are low, as now, the sweeteners for debt are smaller and thus easier to remove. When rates rise—as, inevitably, they will—the subsidy will become more valuable. This is the moment to tackle the great debt distortion. There may never be a better chance'.

There is a further, and longer, article in the same edition of The Economist, titled 'The senseless subsidy'.  It begins as follows: 'Despite the fact that the world is mired in debt, governments make borrowing costs tax-deductable, cheapening debt and encouraging borrowers to pile on more'.

One hopes policymakers everywhere have read these two articles.  If you are a policymaker or can influence policymakers, please draw a relevant person's attention to the May 16-22 2015 edition of The Economist.

Australia`s Innovative Manufacturing
Date: Tuesday, May 26, 2015
Author: Henry Thornton

MEDIA RELEASE Melbourne – 26 May 2015

New Industry-led centre to help transform Australian manufacturing

An ambitious venture to transform Australian industry has been announced today by the Hon Ian Macfarlane MP, Minister for Industry and Science. The venture is a new Cooperative Research Centre (CRC) designed to accelerate Australia’s transition into high value, knowledge-based manufacturing. The new Innovative Manufacturing CRC (IMCRC) brings together a powerful coalition of businesses and researchers. It will have its head office in Melbourne and operate from nodes around the nation.

The IMCRC is a collaboration of:
• 14 initial manufacturing companies and end users who are already global, innovative and prepared to innovate further including many participants from the successful Advanced Manufacturing CRC
• 4 peak industry bodies that will help recruit over 300 additional SMEs as ‘Portal Partners’
• 16 Australian universities, CSIRO and the Fraunhofer Institute for Laser Technology

IMCRC Interim Chair, Dr Peter Jonson, said, “The decision to establish the IMCRC is visionary and provides an exciting opportunity for Australian manufacturing.  We shall be part of a powerful movement to transform the future of Australian manufacturing. Key members of this exciting cooperative venture will hit the ground running to help transform manufacturing in Australia. Ten major industry-research cooperative projects are ready to start just as soon as necessary formalities are finalised”.

Dr Jonson said that the Commonwealth’s grant of $40 million would be matched by more than $210 million of cash and in-kind contributions from industry, research institutions and State governments that will lift the total budget to over $250 million to seed the process of transformation.

The IMCRC’s four research themes will deliver high-impact programmes of collaborative research to intersect with the challenges of Australian industry. The IMCRC will focus on the needs of industry, which will be met by emerging technologies delivered by Australia’s finest researchers. IMCRC’s multidisciplinary research programmes will provide significant benefits to our participants and create important insights to be shared with our wider industry ‘Portal Partner’ community.

IMCRC's research programmes will be concentrated on the high-growth sectors recently identified in the Commonwealth Government's ‘Industry Innovation and Competitiveness Agenda’.The IMCRC will work in close cooperation with the new Industry Growth Centres (IGCs) to help companies build the innovative capacity to develop market-ready opportunities. Our participating peak industry ‘Portal Organisations’ will help facilitate the mission of the IGCs to better understand the needs of industry and to inform policy recommendations for government to improve Australia’s competitiveness.

For further information:

Peter Jonson – IMCRC Interim Chair on 0403 048 104 or peterdjonson@gmail.com
David Charles – IMCRC Interim Director on 0412026 302 or dtcharles@gmail.com
Robin Batterham – IMCRC Interim Director on 0417 351 776 or r.batterham@unimelb.edu.au
Mark Raphael – IMCRC Interim Operations Manager on 0432 752 646 or mark.raphael@imcrc.org
Website - www.imcrc.org

Further information follows:

Professor Robin Batterham, former Chief Scientist of Australia and a member of IMCRC’s Interim Board said, “Manufacturing in Australia has a bright future. It will involve change and it will involve innovation. It is about more science but primarily it is about more innovation – that is, when something new hits the market of end users prepared to pay real money. The IMCRC will be focussed on helping companies create new products and new businesses, assisted by an experienced team of researchers including scientists, engineers and business innovation experts.”

Dr David Charles, Chair of the Advanced Manufacturing CRC said,“the IMCRC is well positioned to build on the successes of the AMCRC and to contribute through collaboration to the change process both in industry and associated research organisations.”

The IMCRC’s ‘Industry Portal’ will undertake the important task of ensuring the diffusion of the new manufacturing paradigm to a wide range of small to medium sized Australian companies who have the potential to become Australia’s ‘Hidden Manufacturing Champions’. Through its ‘Industry Transformation’ research theme, the IMCRC will be giving high priority to putting in place the conditions needed for success. The support of the IMCRC’s strong ‘Portal Organisations’, the Australian Industry Group, Australian Manufacturing Technology Institute Limited, prefabAUS and STC Australia, will be vital in this regard.

The IMCRC includes a focus in the Medical Technologies & Pharmaceuticals growth sector with a number of highly innovative programmes of research already well advanced in their planning.

As one example of the many exciting programmes to be undertaken, Professor Peter Choong from the Department of Surgery at St Vincent’s Hospital Melbourne will lead a programme that brings together advanced techniques in robot assisted surgery and additive manufacturing to give patients with limb cancer new hope for better survival while saving limbs.

Professor Choong said, “this collaboration between the University of Melbourne, RMIT University, University of Wollongong, industry partners Stryker and Anatomics and the CSIRO focuses on the delivery of just-in-time patient specific implants by developing new ways to acquire, manipulate and transfer data related to patient tumours to facilitate the role of robots in surgery, and 3D printing of limb parts. This programme will push the boundaries of personalised patient care in manufacturing and treatment”.

Further details on the many exciting programmes to be launched soon are available at the IMCRC website www.imcrc.org

The speech by Minister of Industry and Science Ian Macfarlane that announced the IMCRC is available here.

Saturday Sanity Break, 23 May 2015
Date: Saturday, May 23, 2015
Author: Henry Thornton

'Consistency is the sign of a middle class mind'. This is one of Henry's favourite aphorisms, and today Paul Kelly points out that Tony Abbott lacks consistency. 'Despite some relieving polls the flaw in the Abbott government’s reinvention project is obvious and will need to be confronted — it is the risk of confusion about the beliefs, consistency and principles that constitute Tony Abbott and his government.

'The beauty of political retreat is the reward of popularity. While necessary, it remains an overrated quality.

'The Abbott government will need time to sort a political reconciliation between its brutal 2014 budget measures and its bullish 2015 economic messages'.

Read on here.

Henry once shared a platform with Tony Abbott, who was launching Henry's editor's book Great Crises of Capitalism. 

After the formalities were over, we conducted a seminar on economics that went on for 40 minutes, by tacit agreement each taking turns to respond to questions.

Mr Abbott showed on that occasion a strong grasp of economics and a consistent conservative orientation. Every prime minister takes time to find his essential voice when thrust into the fierce test that is that of governing a nation. 

Henry agrees with Paul Kelly that Tony Abbott has to reconcile the very different approaches in the 2014 and 2015 budgets.

The view in the Thornton household is that not enough thought has gone into policies, especially into the 2014 budget, and that the Abbott government has shown a tendency to jump onto policies without sufficient thought.  This is a constitutional weakness of anyone with a quick mind. Someone close to Henry once advised him to put his brightest ideas into a loop through his brain before offering them to the waiting world.

In a speech to the Fabian Society on 21 February 1940, Maynard Keynes is reported to have said: 'I am a highly teachable person. I learn from criticism and before now have laid myself open to the reproof that my second thoughts are often better then my first thoughts - which is an indication, some people think, of a dangerous instability of character'.

(Thanks to Richard Toye for this snippet.)   

Mrs T reminded Henry today of his bet with another businessman-turned-painter that Tony Abbott will survive to be re-elected.  We are feeling increasingly confident.


Fiona Prior sees Mad Max. OOOOO-eeeee!


The Blues got belted by Geelong last night despite what an ever-optimistic Henry thought were glimmers of what economists would call 'green shoots'.  Some of Geelong's stars were held, and one especially notes the wonderful work of Ed Curnow, but not everyone on the team showed the same resolve.

Mick the Merciless is annoyed because his overseers used the word 'rebuilding' in discussing strategic intent, and one wonders how long this gulf can remain.  Henry if invited to take over would tell the lads to go out and have fun while playing like Ed Curnow, or the team that came from behind to win the premiership when 10 goals behind Collingwood at half time in the famous Grand Final.

More exciting games to watch in the rest of the weekend, but somehow Henry just cannot summon the energy.

In cricket, 'Watto' has decided to put his family ahead to the team, on the advice of coach Lehman.  Good on yer, Watto, not doing this is one of the classic mistakes made by the dreary blokes with no family worth speaking on when their business career is over.

Dear readers, have you followed the fate of the old gaffers in the UK who pulled off an historic jewel heist? Sadly they have been nabbed but as the court case develops we may well learn that in the name of reform their pensions or superannuation balances have been slashed.

Image of the week

Courtesy The Oz

Growth through Innovation and Collaboration
Date: Wednesday, May 20, 2015
Author: Henry Thornton

The Hon Ian Macfarlane, Minister for Industry and Science, yesterday announced: 'An updated and more targeted Cooperative Research Centres Programme will build stronger connections between research and industry, as the Australian Government implements the findings of the expert review into the delivery of the CRC Programme'.

'An updated and more targeted Cooperative Research Centres Programme will build stronger connections between research and industry, as the Australian Government implements the findings of the expert review into the delivery of the CRC Programme.

'Minister for Industry and Science Ian Macfarlane said a key finding of the review was that the CRC Programme was valuable and effective, but had scope for improvement.

“Australia’s CRCs have a notable record of facilitating research and development in a range of areas by bringing together researchers, industry and the community,” Mr Macfarlane said.

'The Australian Government has committed more than $731 million to the CRC programme this year and over the forward estimates. Since 1991, the Government has committed more than $4 billion to the programme and has supported 209 CRCs on a merit-based system.

“CRCs have made an important contribution to diverse and high quality research, but more can be done to ensure the valuable research done by CRCs is translated into practical and commercial outcomes that not only benefit the Australian community, but also have the best opportunities for international applications.

“The review by prominent lawyer and innovation expert Mr David Miles AM found that the programme should continue with a new, more targeted focus to meet the Government’s priority of putting science at the centre of industry policy, according to a review released today.

“CRCs have delivered significant economic, environmental and social benefits over the last 25 years by successfully linking researchers with end users, but it was time to review the programme’s goals and structures to ensure Australia gets the best return on our significant investment in science and research. 

“This comprehensive, high quality review has developed 18 practical recommendations that the Government will now implement.

“These recommendations put industry front and centre in the CRC Programme, ensuring that CRCs focus on improving the productivity of all Australian industries, establishing industry-led research, and improving research commercialisation.

“As part of this, CRCs will be the engine of innovative research to support the work of the five industry Growth Centres established under the Government’s Industry Innovation and Competitiveness Agenda.

“This comprehensive approach, utilising the full range of Australia’s research resources, will create new opportunities and jobs in sectors where we are globally competitive, developing and commercialising ideas identified by the Growth Centres, and taking them to markets.

“Strengthening the CRCs’ ability to connect researchers and industry in these sectors will ensure that our research investment drives a competitive and forward-looking economy.

“The report also recommends improving smaller organisations’ access to the programme by establishing an additional stream, CRC Projects or CRC-Ps, for short-term industry-led research designed to benefit small and medium enterprises in particular.”

'A new CRC Advisory Committee will be appointed to implement the recommendations of the review and to oversee the revised CRC Programme. Distinguished business leader Mr Philip Clark AM will Chair the group, working with Dr Megan Clark AC, Dr Michele Allan and Australia’s Chief Scientist, Professor Ian Chubb AC.

“An advisory committee has been a key part of the CRC Programme since it began 25 years ago. I would like to express my sincere gratitude to the outgoing committee for the work it has undertaken, its high quality advice and the outstanding service of its members. The new committee will build on this work and drive the revised programme forward,” Mr Macfarlane said.

'The CRC Programme Review can be found at www.business.gov.au/CRC-Review and the Department of Industry and Science will commence consultations on new CRC guidelines shortly'.

The executive summary is available here.

Saturday Sanity Break, 16 May 2015
Date: Saturday, May 16, 2015
Author: Henry Thornton

Terrible situation with Asylum Seekers to Australia's north.  Much worse than that for the Asylum seekers who try to get to Australia - we pick them up, feed them and house them, provide medical attention, etc, and find them a new home or send them back to their old home. Surely now the time is right for a regional solution in which the Australian approach is adopted by all and there is similar treatment including serious attempts to put the people trading on human misery out of business.


The budget seems to have been well received though alleged descriptions of 'double dippers' for parental leave schemes as 'rorters' or 'fraudsters' was a welcome diversion for the opposition. The underlying issue here is whether one as a minister is entitled to obey 'the rules' or do what is morally preferable.  But as Henry's grandad used say, people in glass houses should forebare to throw stones, obviously. 

The government's budget seems based on two propositions, one unstated.  Unstated is the possibility that commodity prices might recover, although there is also the possibility that they fall further. Assuming the tougher elements of budget 2014 do not get through the Senate, and any new attempts to remove goodies this time around are blocked, the hope of a return to budget balance is based on 'bracket creep', the automatic tendency of taxes to rise as inflation raises incomes.

Labor, however, in the dulcet tones of Bill Shorten, propose vast new spending plans without saying how these plans will be consistent with a return to budget balance, let alone surplus.  One is forced to conclude that Labor's big spending on the national credit card is unaltered and that the opposition is uncaring about any solution but 'soak the rich', meaning anyone (not a politician or a senior public official) who has accumulated sufficient assets to enjoy a decent retirement.  This would be easier to cop if Labor promised it would tax pensions of Pollies and public servants at the same rate as folk not in the receipt of pensions funded by taxpayers.

Fortunately, Tony Abbott has said simply and clearly 'We shall not hit super'.  More here on the Super debate.

We also present this week a lovely article on 'Family Tax Equity' by Henry's political correspondant Gary Scarrabelotti.

'Think equity. If a middle class member of a two-income family that already benefits from two tax-free thresholds (or $36,000 tax free income per annum) gets paid welfare to go to work, then why can’t a single-income family split its income and have the same tax-free income while saving the state the cost of childcare?

'I mean, you’d have to be dim not to get the point. And I don’t think that dim people lead the government.  Oh, sure, they made some almighty blues in 2014, but they want to be re-elected. That’s why I’m confident that, in 2016, Tony Abbott, Joe Hockey and Scott Morrison will deliver on a fairer tax treatment for single-income families'.

But Graham Richardson has taken the prize this week, with his brilliant satire on the 'double dipping' issue and the 'entitlement' mindset.

'How could I have been so bitterly critical day after day, week after week, column after column of such a good and decent man?

'God bless the Treasurer, who not only has a deep, firm commitment to middle-class welfare but a fundamental acceptance of the need for upper-class welfare as well.

...  'As a sole trader, with a turnover of less than $2 million a year, unincorporated but having an ABN, I am a big winner. Until June 2017 I can deduct assets that cost less than $20,000. I can replace the family’s nine-year-old Toyota Aurion with a three-year-old version as long as it is used in the business. A new computer and a range of new office equipment also beckon. No wonder Gerry Harvey has a spring in his step.

'I will have no trouble in providing the tax man with invoices for $40,000-$60,000 in that period. For the next two years I will get an extra $20,000-$30,000 in the hand — but wait, there’s more. I am eligible as well for a tax offset capped at $1000 a year for the next couple of years.

'While I earn less than $2m, I would be less than truthful if I didn’t concede that I earn a little more than the average citizen.

'Upper-class welfare does not end with me, though. There are well to do couples earning up to $400,000 a year out there who will happily accept government handouts for childcare'.

Gor blimey, comrades, maybe Henry can get his snout in this trough.


Fiona Prior sees Boys will be Boys and Testament of Youth. She also gets to use the 'F' word :) 

Image: Courtesy of the photographer and Sydney Theatre Company -  Boys will be Boys

Image of the week.

Courtesy The Oz

« PREVIOUS   | ... 5| 6| 7| 8| 9| [10] | 11| 12| 13| 14| 15| ... |   NEXT »
For member services:
Forgot Password?
Online Opinion »
Online Opinion
Quadrant »
MacroBusiness Blog »
MacroBusiness Blog

Other sites we like »
Membership to
is FREE and the benefits, are overwhelming!
ONLY AUD $55.00 pa
Show your real colours and signup as a
proud, card carrying friend of Henry
HOME | Economics | Econart | NEWS + Views | Politics | Investments | Corporate | SMERSH | Lifestyle | FORUM | SIGN UP
Sydney web design by Sydney web design by Wiliam web developer
© 2009. henrythornton.com Pty Limited. All Rights Reserved. The Herald Tribune is powered by the New York Times.