I was chatting yesterday to an internet entrepreneur and consultant in Sydney named Billy Tucker and asked him why there is a new internet boom going on that feels bigger, and much more substantial, than what happened in the 90s.
His answer surprised and excited me: it’s because in the past one to two years, women aged 55 have suddenly gone online, en masse. They control the nation’s purse strings. When they are buying online, everything changes, and every night they are sitting in front of the TV using a laptop or a tablet… and shopping.
At about the same time as that conversation was taking place in Glebe, the Secretary of the Treasury, Martin Parkinson, was delivering his annual post-budget address to the Australian Business Economists at the Westin Hotel in the city.
His address focused on the three shocks that Australia has faced in the past few years: "the most significant – some may say the largest – shocks seen since World War II…” They are: Mining Boom Mark 1, the GFC (the collapse of Lehman brothers), and the "renewed mining boom with GFC after-effects”.
To those three can be added two more shocks: the new digital revolution and the collapse of Greece. More importantly, these two events, plus the last of Martin Parkinson’s three shocks, are occurring now, all at once.
To deal with Greece first: yesterday the chief executive of Poland’s largest bank, PKO Bank Polski, Zbigniew Jagiello, compared the latest version of the eurozone crisis with the collapse of Lehman Brothers in 2008.
Obviously it is still early days and another colossal, messy bankruptcy that closes the global banking system again may still be avoided, but it is beginning to be hard to see how. Certainly the choices facing Europe’s leaders are now quite stark in the aftermath of the inconclusive Greek elections.
The open talk that Greece may leave the eurozone, possibly followed by others, will have killed off investment already because of the potential for unhedgable devaluation losses; if it happens, contagion affecting at least Portugal and Spain would be inevitable.
Moreover it’s becoming increasingly evident that several countries, including Italy and probably France, cannot restart economic activity without a devaluation. The only alternative to a break-up of the euro now is deeper federalism in Europe – that is, mutualisation of sovereign debt, and centralised bank guarantees – which would be horrendously complicated and unlikely.
In discussing the "third shock” yesterday, Martin Parkinson lumped together "Mining Boom Mark II” and the GFC after-effects, including the new crisis in Europe, but these are two quite distinct events.
Parkinson used this as a launch pad for a discussion about whether monetary policy and fiscal policy are working at cross-purposes in Australia at the moment (unsurprisingly, he says they’re not). He made two points: with close to full employment the new effect of both monetary and fiscal policy is smaller than when there are under-utilised resources, and second, that both policies are merely returning to normal.
The mining (or rather LNG) construction boom is more or less locked in and holding unemployment down. Meanwhile the dollar has been forced below parity again because of the new eurozone crisis.
At the same time we have the 'fifth shock': Billy Tucker’s insight into the new digital revolution, in which the true engine room of consumer spending – 55 females – are moving online.
The fact that these three things – the mining/LNG boom, the new eurozone crisis and the new, permanent, digital revolution – are happening at once is massively disruptive, and completely beyond the ability of government to influence.
Retailing is being especially disrupted by online sales, as is manufacturing by the high currency – although with any luck we might get just enough eurozone crisis to keep the dollar below parity without a global banking meltdown.
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