THE DISTILLERY: Small thinking

A jotter takes a contrarian view on the real value of small business, while another gives Telstra some media buying advice.

Small business, the engine room of the Australian economy, is over-rated. That’s the brave conclusion offered up this morning by The Australian’s Judith Sloan. It’s not that the writer suggests small businesses are a bad thing, but she does ask why we look upon them so favourably while treating big businesses with such scepticism. These are seriously questions that should be asked because of the enormous implications for domestic policy. Meanwhile, The Australian’s John Durie says the Future Fund is still a bit of a mystery to voters and fund managers, and new chairman David Gonski should do something to address this, while another commentator considers a compelling takeover opportunity for Telstra.

The Australian’s Judith Sloan attempts to break the mindset that small business is good and big business is bad with the simple question of what actually constitutes a small business.

"What is small in one industry – say defined by number of employees or turnover – is huge in another. There can never be a consistent and reliable definition of small business. So why should small business be given preferential treatment, such as that being proposed by the Greens? The point is often made that small businesses are the principal source of new jobs. What is rarely pointed out is that small businesses are the principal source of job losses. Small businesses are also run by people who risk a lot and the chances of failure are much higher than is the case for big businesses. By the same token, large listed companies are, in part, owned by people as retail investors or through their superannuation holdings. The retirement prospects of people – ordinary folk – are actually quite dependent on the performance of large companies.”

The Australian’s John Durie says David Gonski should reshape the Future Fund not just in terms of strategy – as every chairman does – with general manager Mark Burgess, but also how the fund conducts itself in the public arena.

"All the hoopla over his appointment has raised expectations. His mandate is to take the fund to the next level, whatever that may be. That explains why he needs to take a look and then tell us what his plans are and what changes he wants to make. Burgess was appointed to the job 12 months ago, and is now stepping up external communications to explain what the fund is up to…The taxpayer should know the top underlying investments, just as ASIC is demanding of private funds. The fund should also play a role in raising debate on investment issues, not just serving as a platform to let it be known that Murray held Donald McGauchie to ransom at Telstra. Most fund managers are loath to speak publicly about the fund, in part because they want more money thrown their way and in part because they don't know how it works.”

The Australian Financial Review’s Chanticleer columnist Tony Boyd suggests that Telstra chief executive David Thodey will think long and hard about making a bid for the 50 per cent of Foxtel the telco doesn’t already own, given that billionaire James Packer is a likely seller thanks to his ambitions for high-rolling Asian gamblers in Sydney.

"If Thodey is serious about transforming Telstra into a media-telecommunications company he will examine this option seriously. However, the opportunity is not as clear cut as it first looks. Also, if he proceeds he will come up against News Corp chairman and chief executive Rupert Murdoch and media billionaire Kerry Stokes, who is a significant minority shareholder in Consolidated Media. Murdoch is in the mix because he owns 25 per cent of Foxtel and the other half of Premier Media. Murdoch has known and liked the Foxtel business for years. He has a strong foot on it because his Australian arm News Ltd gets to appoint its chief executive. Former Foxtel CEO Kim Williams now runs News Ltd.”

In other company news, The Sydney Morning Herald’s Ian Verrender says there’s a serious shake up going on at Billabong International, while Fairfax’s Insider columnist Ian McIlwraith takes a look at Dart Energy and its intentions to spin off its international business.

The Australian’s Tim Boreham looks at Qube Logistics, Pharmaxis and NewSat in his Criterion column. The Sydney Morning Herald’s Elizabeth Knight sifts through some more details of the Rinehart family court battle.

The SMH’s Malcolm Maiden says there are good reasons why the Australian sharemarket will underperform US equities for a while, while the Herald Sun’s Terry McCrann believes that we should start remembering the benefits of the mining boom rather than the problems it presents.

And finally, The Australian Financial Review’s Alan Mitchell says that structural change and investment in research and development needs to take place if Australia is to realise its potential of becoming a true food bowl for a growing Asia.


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