Tuesday, 31 March 2009

The Attorney General’s break with tradition


The standard response of the Federal Attorney General for 50 years has been to refuse to answer questions about national security. That tradition was broken last week when Robert McClelland released this press statement:
This unequivocal response to suggestions that Ms Helen Liu was some kind of security risk would satisfy any reasonable person. In this age of whistle blowers, neither an Attorney General nor a head of ASIO would expose himself to being proved wrong by the leaking of information to the contrary. Yet the slur of being called a spy continues to be fostered by the Murdoch press — no doubt at the urging of members of the Federal Opposition who have no concern at trashing an innocent woman’s reputation in their pursuit of the political scalp of the Defence Minister Joel Fitzgibbon.
It is ugly politics at its worst.

The Turnbull mistake — Chinese votes

The last Australian census shows some 670,000 people of first, second or third generation Chinese origin. Add on those whose Chinese ancestors arrived up to 150 years ago and that’s a substantial bloc of voters that the Liberal-National Coalition is at risk of alienating with its rather crude suggestion that to be an Australian Chinese is somehow to be a security risk. Perhaps Malcolm Turnbull’s advisers have identified the streak of xenophobia among white Australians that is clearly present and believes he can win more votes from them than he loses among coloured Australians. I doubt that they are right.

Another promise kept


Special Minister of State John Faulkner continues to practice what he preaches. In opposition he was a persistent critic of the Liberal-National Coalition for its refusal to provide timely information about the cost of Government propaganda campaigns. Now as the minister in charge of such spending, he has released, with his colleague the Finance Minister Lindsay Tanner, the first half year report on Campaign Advertising by Australian Government Departments and Agencies.
The historical data in the report shows clearly why Labor was critical of the use of government money to advertise in the lead up to an election.

In the six months to 31 December last year, television stations were the beneficiaries of half the government’s advertising expenditure:

Talking down the rates


Federal Treasurer Wayne Swan is another minister who has chosen to avoid the normal form of words that are applied when someone asks about the activities of a statutory body under his control. Treasurers traditionally leave comments on possible interest rate decisions up to the Reserve Bank which makes them. But from Japan yesterday Treasurer Swan told the Reserve Bank that it has room to cut interest rates further. Talking at a business function, he said that while the bank had cut the cash rate further and faster, and to a lower level, than in living memory, “importantly, however, it has room to cut rates further if necessary — a luxury that many of the world’s key central banks no longer have.”
The market seems to agree with the Treasurer. The Crikey Interest Rate Indicator has a clear majority believing that the Reserve Bank will cut rates again at its April meeting.

Melting down to a jobs and social crisis


The price that will be paid for the failure of the Group of 20 to agree on a policy to stimulate the world economy was spelled out in Rome overnight in aspeech by Angel GurrĂ­a, the OECD Secretary-General:
This meltdown is rapidly turning into a jobs and social crisis. Labour market conditions are weakening throughout the world, as companies are cutting production, closing factories and dismissing workers. Our latest projections (to be released officially tomorrow) indicate that the unemployment rate in the OECD area could approach 10% by 2010 compared with 5.6% in 2007. This implies that the crisis could swell the rank of the unemployed in the OECD by about 25 million people, by far the largest and most rapid increase in OECD unemployment in the post-war period.
And the job crisis is spreading rapidly around the world. The International Labour Organisation estimates that world-wide unemployment could increase by 40 million people by the end of this year.
The most disadvantaged labour-market groups — youth, low-skilled, immigrants and temporary workers — are already bearing the brunt of the rapidly rising unemployment. They are the first to lose their job and tend to have only limited access to social safety nets. And since they also face serious difficulty in finding a new job, they run the risk of becoming long term unemployed or discouraged.
Restoring global growth is an economic and political priority, but also an ethical, moral, social and human imperative.
Meanwhile, back in London, the officials of the G20 countries are unable to reach agreement on any specific policies to avoid the gloomy prediction of Mr Gurria from coming true.

Monday, 30 March 2009

Change the tone of voice

Malcolm Turnbull is sounding increasingly shrill and carping as his popularity goes down, with the result that his opinion poll numbers are likely to fall even further. There is a potential solution —  albeit one he is unlikely to adopt. The AC Nielsen poll in this morning’s Fairfax papers strongly suggests that Australians are not in the mood for opposition. There is broad support for the way Kevin Rudd is running the country and little interest in listening to criticism of him. Thus the best policy for this Opposition would be to stop opposing and predicting dire consequences from the Government’s actions. Ultimately it will be the result of those actions that will determine the future electoral outcome. There are no votes in being able to say we told you so. So Malcolm Turnbull should stop being so strident with his daily commentary and take a lesson from his colleague Peter Costello who makes only the occasional foray into the media.

Perhaps he should visit China

The Opposition Leader is no stranger himself to trying to get a few favours from that authoritarian regime in China. His 1995 visit to Dalian province where he met then city mayor Bo Xilai is well remembered. The then merchant banker was acting on behalf of a group, which included former NSW Labor Premier Neville Wran, that was trying to get permission to mine gold in the region. The request was unsuccessful not because of the forceful Turnbull manner but because of potential damage to the water supply from mining. Bo Xilai, now the Chinese Commerce Minister, would surely be happy to overlook the anti-Chinese sentiments of the last week and renew the acquaintance.

Ask Rupert


The Sydney Sunday Telegraph seems to think that any Chinese woman who meets a politician is a potential Mata Hari.
I am waiting for the page one expose in The Australian and The Times that tells us how the cunning Chinese have infiltrated News Corporation.

Let’s solve something completely different


There’s little likelihood of anything being achieved by the Group of 20 this week to lessen the impact of the global financial crisis, so the world leaders are desperately searching for something else they can agree on.Reports from London overnight suggest that the chosen face saver is to take uniform action to try and get rid of tax havens. Now that might be a very good thing to do but it has little or no relevance to stopping the world sliding in to an even deeper recessionary state.
On the contrary it is quite possible that causing an upheaval in international banking arrangements at this time of monetary turmoil will in the short term make things worse. That is a risk that politicians like our own Prime Minister Kevin Rudd, who have talked up the importance of the G20 gathering, are prepared to take as they don’t want to look impotent and simply announce that the only agreement is to meet again some time in the future.

The News Corp bonkability index


A new height (or should that be depth) was reached this morning on the news.com.au website.

Academic proof of the costs of fame


Financial journalists have been drawing attention for years to anecdotal evidence suggesting that fame and publicity for business chiefs and the future fortunes of their companies do not go well together. Now has come the academic proof. Ulrike Malmendier of UC  — Berkeley and Geoffrey Tate of UCLA have recently published their study Superstar CEOs  after looking at the records of all those chief executives touted in major business publications as being the best and the brightest. The two academics and backed up the following conclusions with a range of statistical evidence:
We show that CEOs who win awards exhibit drastic changes in behavior and performance:
  • Firms with award winning CEOs suffer declining performance. This decline is observed in stock performance for the three years following the award, in return on assets over the same horizon, and in the ability to meet market earnings expectations. The decline is also observed both relative to the firm’s own performance prior to the award and to the performance of similar firms in which the CEO did not win an award.
  • Superstar CEOs extract higher compensation from the firm, largely in the form of stock and stock options. They obtain significant and economically meaningful increases in total compensation in the years following their award despite sub-par firm performance. Further, this increase in compensation seems to occur mostly in badly governed firms.
  • Superstar CEOs increase their indulgence in tasks which provide private benefits, but have little (if any) influence on firm value maximization. They are significantly more likely to author books and sit on outside boards in years after they have won an award, relative to years before they won an award.
  • Superstar CEOs are more likely to manage earnings, and ultimately to experience negative earnings after several years have elapsed following their last award. The incidence of earnings management increases both relative to years before the CEO won the award and relative to CEOs who never won an award.