THE DISTILLERY: Age old wisdom

One jotter deciphers a simple message from the US Fed, while another says ageing China must urgently learn from the West.

As is usually the case on a Monday, The Distillery has a mixture of musings about the international and domestic economies and the state of political debate in Australia. Thankfully, there’s some specific policy discussion as well as a corporate story from the business scribes to vary things a bit.

Fairfax’s Malcolm Maiden believes there’s actually a pretty simple message to be found in the apparently conflicting statements from the US Federal Reserve last week.

“The messaging is the message. The Fed hasn't made a decision to begin retracting stimulus. Bernanke made that crystal clear when he appeared before a congressional joint economic committee on Wednesday night, Australian time. It is, however, actively debating the matter, and saying so. That means ‘risk on’ volatility is back in the markets, as an undertow to the broader ‘risk off’ currents that have pushed up on asset prices as fears of a renewed global crisis ease.”

The Australian Financial Review’s economics editor Alan Mitchell has picked up on some material from the Centre of Excellence in Population Ageing Research by director John Piggott and senior research fellow Rafal Chomik. The research relates to the crucial juncture in a country’s demographic cycles where the working age population is ideally placed – not too young, not too old.

“By 2040, China will have a population older than either Australia or the United States, and Asia will have an extra 500 million people over the age of 65. As the authors put it, the speed of ageing means the countries of developing Asia may grow old before they grow rich. That makes it all the more important that they learn from the West’s mistakes, including its unnecessarily costly health care and the excessively generous pension schemes of Europe and North Asia. Asia’s developing economies are at different stages in the demographic chain of events that lead to the growth dividend and then population ageing.”

Why is this important? From The Distillery’s point of view, it underlines how Asia won’t buy minerals from Australia forever, which is something we’re coming to grips with in a hurry.

But it also underlines where our next natural export is – health services. Let’s stop panicking and start planning.

Of course, we can’t start planning until this government is kicked out because, well, we just can’t for some reason.

The Australian’s Judith Sloan is on the march with a pointed piece highlighting just how poorly Labor’s blame of the Coalition will sit with the electorate.

“Can you really imagine John Howard, when he was prime minister, going on and on about it all being Kim Beazley's fault? Or Simon Crean's fault? Or Mark Latham's fault? Or Kevin Rudd's fault? He was much too wily a politician to provide oxygen to his opponents on a constant basis. And do you really think that Peter Costello, when he was treasurer, would have wasted budget week by simply banging on about the fiscal legacy that Paul Keating's government had bequeathed the Coalition in 1996?”

On the other hand, Fairfax’s Ross Gittins counters that Costello had “much better luck” and, in a separate piece, the Coalition’s critique of Labor and its promises for the future are similarly laden with poor assumptions and misleading arguments.

None of this is even close to new. It’s symptomatic of the limited material commentators have to work with over the weekend and the state of our national discussion in the media. It’ll be the same stuff over and over again until election day unless someone starts talking about policy.

Thankfully, Fairfax’s Kenneth Davidson has a bit of policy material this morning.

“There are two important areas (telecommunications and superannuation) where Coalition policies are superior. The government's plan to roll out high-speed fibre-optic telephone cable to the home is now estimated by most experts to cost $90 billion to $110 billion, compared with the government's latest guesstimate of $45 billion. The shadow communications minister, Malcolm Turnbull, argues it is unaffordable. The rollout of fibre should stop at the node at the end of the street, he says, using the existing copper loops to connect to the home, thereby limiting the cost to about $35 billion.”

Meanwhile, there was a corporate story from last week that occupied the minds of two business journalists going into the weekend – billionaire James Packer’s decision to sell out of Crown.

Business Spectator’s Stephen Bartholomeusz says Packer’s move is consistent with the strategy he had from the beginning.

“From the moment Packer’s Crown Ltd emerged as a substantial shareholder in Echo last year he made it clear that his interest wasn’t in Echo itself but in building a new, arms-length, exclusive six-star hotel and gaming facility at Barangaroo. The shareholding was one means to that end. Given that Echo has an exclusive casino licence until 2019 the initial strategy was to use the 10 per cent stake as leverage and as a threat to convince Echo to co-operate and 'lend' its licence to enable Crown to pursue the Packer vision.”

And in the battle for the future of Sydney’s casino industry, The Australian’s John Durie reminds readers that it isn’t all about Packer.

“In some respects, Echo chairman John O'Neill should be privately relieved that the threat of a takeover is now off the agenda, at least for the moment. O'Neill has put Echo at the decision-making table on the Barangaroo proposal, albeit some way from the head of the table.”

In other business commentary news, Fairfax’s Michael West has an amusing piece crucifying Tourism Australia’s ‘best job in the world' campaign. His argument that the best job in the world is an Australian fund manager, with its huge pay, maximum praise and minimum accountability.

The Herald Sun’s Terry McCrann says Ford’s decision to end manufacturing in Australia from 2016 and Bernanke’s statements will define the investment and economic outlook for the rest of 2013.

The Australian’s economics editor David Uren expects a division between the expectations of the Reserve Bank of Australia and Treasury over business investment prospects should be settled on Thursday with March quarter capital investment due.

And finally, The Australian’s Robin Bromby reports that Hartley’s David Michael believes “it may be just about time to ring the bell for the bottom of the resources cycle”.

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