Each day, Distillery selects the three or four best ideas that have been put forward by the nation’s leading business and economic commentators (and lists other items they have covered). Readers are invited to comment on the Distillery selections in The Conversation.
The amount of column inches devoted to Julia Gillard’s polling numbers compared to Tony Abbott – or indeed, Kevin Rudd – on a daily basis vastly outweighs the amount that actually considers the prime minister’s policies. Under her predecessor, the government’s balance between industry and innovation swung in favour of the latter in the hope that Australia’s ideas could be nurtured and ultimately exported to the outside world. Now the outside world has pumped up our Australian dollar, making our ideas less attractive and our industry vulnerable. The Australian’s David Uren spots a simple, but unmistakable sign of Gillard’s handling of this. Meanwhile, another commentator donates some ink to a frequently overlooked topic for Australia’s economic future – India. Plus, this morning’s Distillery has one columnist gaining traction for an executive pay revelation and a counter-argument to Nathan Tinkler’s anticipated sell down of his stake in Aston Resources, now that it’s destined to merge with Whitehaven sometime down the track.
Firstly, while countless words were allocated to Labor’s power struggles, The Australian’s economics correspondent David Uren has noticed something about Gillard’s cabinet reshuffle that speaks volumes about the difference between her prime ministership and that of Rudd.
"A small thing in yesterday's cabinet reshuffle – the sort of thing only a nitpicking editorialist would notice – was that the Department of Innovation and Industry is to be changed back to the Department of Industry and Innovation. Under Kevin Rudd, there was a brand makeover for industry policy. No longer was the goal of government to be feather-bedding inefficient industries with subsidies in the interests of protecting trade union or Nationals mates. Instead, the Department of Industry was to be known as the Department of Innovation. Surely government had a role in bringing clever ideas from the laboratories to the commercial marketplace? ... But industry policy is now back, delivering the answer to the patchwork economy. It is not only about bright new ideas but also about preserving the steel industry, among others.”
Secondly, while Australia’s economic future is undoubtedly tied to the prosperity of China and India, a disproportionate amount of the commentary is focused on the former and not the latter. Just consider the sheer amount of analysis devoted to China’s recent slowdown. To help the balance, Fairfax’s South Asia correspondent Matt Wade offers this insight into the embarrassing back-flip by the Indian government over allowing increases to foreign investment in the country’s retail sector, which Woolworths was in line to benefit from.
"So moribund are India's supply chains that industry experts estimate about a third of fruit and vegetables rot before reaching a plate. The proposed reforms would have paved the way for foreign investment and expertise to upgrade supply-chain systems. This could have dragged India's retail sector into the 21st century, boosted economic efficiency and put downward pressure on food prices. But news the reforms had been given the go-ahead triggered a ferocious backlash. Small shopkeepers, fearful of competition from global supermarket giants, closed their stores and took to the streets. Protest from the opposition Bharatiya Janata Party was so virulent it shut down the national Parliament for days. One BJP leader, Uma Bharti, threatened to torch any Walmart store that opened in India, claiming it would put jobs for the ‘poor and backward’ in jeopardy.”
Meanwhile, The Age’s Michael West is reaping the rewards of his exclusive revelations yesterday that some major companies are paying dividends to management on bonus shares that, depending on the company’s performance, they may not ultimately be entitled to. Now the Australian Council of Super Investors has slammed the news and demanded these management figures return the money in instances where the incentives haven’t been earned.
"Executive bonuses often take the form of long-term incentive share plans with performance hurdles. For instance, if the share price rises by 15 per cent, the executive becomes entitled to shares after a certain period when the performance stock vests. It is only then that the executive becomes entitled to the bonus, but some boards are allowing executives to receive returns from stock before the performance stock vests.”
And fourthly in this morning’s Distillery, The Australian’s John Durie addresses the otherwise relatively unchallenged suggestion that Nathan Tinkler is poised to eventually exit, or at least sell down, his stake in Aston Resources once its merger with Whitehaven goes through, in order to settle some of his debts.
"Stacks of bibles were produced to say that even if Tinkler has $450 million in debts there is absolutely no truth to the rumours that once the deal, codenamed Project Trifecta, is complete, Tinkler will sell down his 19 per cent stake in the combined vehicle. If you want shareholders to support a takeover you are not about to announce the departure of the biggest shareholder. Indeed, there are plenty of positives to keep Tinkler motivated to stay, if you consider the $5.1 billion deal comes with $500m-$700m in operational synergy benefits on everything from head office costs to shared infrastructure.”
Staying with Whitehaven-Aston to finish off the rest of the commentaries for this morning, The Australian’s Bryan Frith gives the definitive history and summation of the two companies. His colleague Matthew Stevens says the one thing that is certain is that Tinkler will no longer be required to dominate a coal company in the same fashion for its existence to continue. The Australian’s Criterion columnist Tim Boreham also offers his perspective from a stock point of view.
In other company news, The Age’s Garimpeiro columnist Barry Fitzgerald touches base with Minmetals Resources, and in a separate piece with the Indophil listing in the Philippines. The same newspaper’s Adele Ferguson finds some even more distressing signs for the Australian property sector through the prism of builder National Builders Group, while Fairfax’s Insider columnist Phillip Wen picks over the latest movements of the apparently unretired Sir Ron Brierley.
On the latest eurozone agreement, The Sydney Morning Herald’s Michael Pascoe points out that the debt positions of a number of peripheral nations remain tenuous; the outlooks for Italy and Spain are still rocky and the bond markets have still not been won over. His colleague Ian Verrender invokes the memory of the Monty Python Pithy bicycle repairman sketch to describe the latest European episode.
And finally, the Herald Sun’s Terry McCrann delivers another rant against global climate change efforts, while The Australian’s Jennifer Hewett and The Australian Financial Review’s Chanticleer columnist Tony Boyd say new industrial relations minister Bill Shorten will have his hands full.