Sovereign wealth funds revisit the spirit of Australia

by Colin Chapman

Ramp up and kill off Covid-19. Or relax, and get Australians back to work when the current restrictions run out in mid-May?

It’s a simple question now being asked, but there is no simple answer.

Two young female prime ministers recently acclaimed for their handling of the virus, Mette Frederiksen of Denmark and Jacinda Ardern of New Zealand, have different strategies. Ms Frederiksen has relaxed many restrictions and reopened primary schools while Ms Ahern will ratchet them up, tightening non-essential movement. We think she will be proved right.

Australia’s PM Scott Morrison is wise to extend Australia’s federal restrictions for another month – and states should follow suit. But he also needs to plan now for the next stage of this horrible epidemic. There are two parts to the next stage: providing Australian medical, scientific and financial assistance to poor countries in the Indian-Pacific region who are struggling to cope with despair and destitution; and confronting the financial reckoning needed at home. Both are urgent tasks, but the gravity of the first is only now emerging. 

It’s not that the domestic reckoning will be without pain. The generous schemes introduced to support furloughed employees and the self-employed will have to be paid for, along with big increases in social security, especially if unemployment were to rise the 10 per cent predicted by some economists.  The International Monetary Fund (IMF) forecasts that GDP could shrink by 6.7 per cent this year.  It could be worse, boosted by the possible collapse of significant companies whose business has been wrecked. Virgin Australia, some regional and local newspapers, travel and holiday companies, some pubs and restaurants, and rationalisation in the health funds sector come to mind. The government can’t and won’t bail them all out. Treasurer Josh Frydenberg would be well advised to start withdrawing some schemes right away, like the instant write off on purchases of capital goods up to $150,000, a giant leap from $300,000 and extended beyond small companies  Modelling indicates that this measure will mostly benefit imported goods like cars, computers, air conditioners and the like; it won’t help the real economy. Buying a new executive car fleet of BMWs will only help the Bavarians, not the folk of Balgowlah or Bendigo.

Some aspects of Australian life may change for ever. I said ‘may’, because old habits die hard and we may revert to type. But as the Dutch educational philosopher Christien Bok told the newspaper Volkskrant, “we’ve gone from 2020 to 2030 in one weekend”. Here are some likely changes:

Carry on Cruising? Going on holiday in a 16+ storey ungainly floating ‘resort’ that requires tugboats to navigate in and out of Australian docks may lose its appeal. These unwieldy vessels have proved to be death traps and havens of infection in the past three months, with Carnival Cruises’ Ruby Princess being the most high profile example. Who would want to board one of these toxic high emitters in the near future?  Not until their owners fit aircraft-style ait conditioning, I’d suggest. My travel agent tells me that rather than demand money back for this winter’s cruises, many people have chosen to roll over bookings to 2021. 

Working from home appears to be the success story of the last month. Many sectors, not least in the professions, have found what many thought impossible to be not only workable but desirable. One benefit has been a significant reduction in overcrowded public transport and congested roads, particularly in Sydney and Melbourne. Home working has saved time and money for commuters and employers alike, taking advantage of the convenience of iPads, mobile phones and cheap video conferencing. There have also been obvious benefits to the environment from much lower carbon emissions and cleaner air. Many companies and professional firms are likely to seize on home working as a way of reducing property and other overheads. It is likely we shall see an increase in it, with provisions for employees who work in teams to get together on a monthly or more frequent basis.

Better hygiene. Australia has long had a higher standard of hygiene than in many other countries. Nevertheless, we can expect to see the benefits of being drilled to wash hands frequently, given that many infectious diseases including the common cold and gastric illnesses are spread through touching door handles, stair rails, bus, train and ferry seats, and other common areas. 

Business closures.  Unless the Coalition comes up with hard cash for severely damaged businesses there will be closures, leading to higher unemployment. Many of these will be small or medium size businesses, especially in the services sector, but the pain will be felt in big companies also. The mining sector will likely see exports to China fall, as the world’s second largest economy tumbles by as much as 50 per cent, with one leading Chinese bank suggesting growth could fall to 2.5 per cent. Tourism to Australia dropped sharply after most airlines cut flights in February and is unlikely to recover previous levels next summer. We face the prospect of only one significant domestic airline, giving Qantas a monopoly which will likely lead to higher fares. Virgin Australia was looking weak even before Covid-19 struck and it is hard to see this overseas-owned corporation securing sufficient finance to survive. Qantas, effectively mothballed by the canny Alan Joyce before the virus really hit Australia, may well be the best strategic buy for investors looking for long-term gain, though Josh Frydenberg may demand a stake for the government in return for any cash he pushes its way.

It does look as if Morrison now has his strategy right. He no longer falls for the tom foolery of Donald Trump, declining to echo the latter’s ridiculous policies such as ending financial support for the World Health Organisation or, even worse, rejecting the IMF Special Drawing Rights proposal previously endorsed by G-20. Morrison has listened to good advice from wise counsel in the Reserve Bank and Treasury, appears to be ready to reshape economic policy towards infrastructure and sound business investment, and, not before time, taking the whip to some of the employment and regulatory practices thar stifle productivity. 

It will be a long haul, but it is no surprise to learn that the ten biggest sovereign wealth funds, led by those in the Gulf, China, Singapore and Norway are opening their eyes again to opportunities that beckon in Australia.

Ramp up and kill off Covid-19. Or relax, and get Australians back to work when the current restrictions run out in mid-May?

It’s a simple question now being asked, but there is no simple answer.

Two young female prime ministers recently acclaimed for their handling of the virus, Mette Frederiksen of Denmark and Jacinda Ardern of New Zealand, have different strategies. Ms Frederiksen has relaxed many restrictions and reopened primary schools while Ms Ahern will ratchet them up, tightening non-essential movement. We think she will be proved right.

Australia’s PM Scott Morrison is wise to extend Australia’s federal restrictions for another month – and states should follow suit. But he also needs to plan now for the next stage of this horrible epidemic. There are two parts to the next stage: providing Australian medical, scientific and financial assistance to poor countries in the Indian-Pacific region who are struggling to cope with despair and destitution; and confronting the financial reckoning needed at home. Both are urgent tasks, but the gravity of the first is only now emerging. 

It’s not that the domestic reckoning will be without pain. The generous schemes introduced to support furloughed employees and the self-employed will have to be paid for, along with big increases in social security, especially if unemployment were to rise the 10 per cent predicted by some economists.  The International Monetary Fund (IMF) forecasts that GDP could shrink by 6.7 per cent this year.  It could be worse, boosted by the possible collapse of significant companies whose business has been wrecked. Virgin Australia, some regional and local newspapers, travel and holiday companies, some pubs and restaurants, and rationalisation in the health funds sector come to mind. The government can’t and won’t bail them all out. Treasurer Josh Frydenberg would be well advised to start withdrawing some schemes right away, like the instant write off on purchases of capital goods up to $150,000, a giant leap from $300,000 and extended beyond small companies  Modelling indicates that this measure will mostly benefit imported goods like cars, computers, air conditioners and the like; it won’t help the real economy. Buying a new executive car fleet of BMWs will only help the Bavarians, not the folk of Balgowlah or Bendigo.

Some aspects of Australian life may change for ever. I said ‘may’, because old habits die hard and we may revert to type. But as the Dutch educational philosopher Christien Bok told the newspaper Volkskrant, “we’ve gone from 2020 to 2030 in one weekend”. Here are some likely changes:

Carry on Cruising? Going on holiday in a 16+ storey ungainly floating ‘resort’ that requires tugboats to navigate in and out of Australian docks may lose its appeal. These unwieldy vessels have proved to be death traps and havens of infection in the past three months, with Carnival Cruises’ Ruby Princess being the most high profile example. Who would want to board one of these toxic high emitters in the near future?  Not until their owners fit aircraft-style ait conditioning, I’d suggest. My travel agent tells me that rather than demand money back for this winter’s cruises, many people have chosen to roll over bookings to 2021. 

Working from home appears to be the success story of the last month. Many sectors, not least in the professions, have found what many thought impossible to be not only workable but desirable. One benefit has been a significant reduction in overcrowded public transport and congested roads, particularly in Sydney and Melbourne. Home working has saved time and money for commuters and employers alike, taking advantage of the convenience of iPads, mobile phones and cheap video conferencing. There have also been obvious benefits to the environment from much lower carbon emissions and cleaner air. Many companies and professional firms are likely to seize on home working as a way of reducing property and other overheads. It is likely we shall see an increase in it, with provisions for employees who work in teams to get together on a monthly or more frequent basis.

Better hygiene. Australia has long had a higher standard of hygiene than in many other countries. Nevertheless, we can expect to see the benefits of being drilled to wash hands frequently, given that many infectious diseases including the common cold and gastric illnesses are spread through touching door handles, stair rails, bus, train and ferry seats, and other common areas. 

Business closures.  Unless the Coalition comes up with hard cash for severely damaged businesses there will be closures, leading to higher unemployment. Many of these will be small or medium size businesses, especially in the services sector, but the pain will be felt in big companies also. The mining sector will likely see exports to China fall, as the world’s second largest economy tumbles by as much as 50 per cent, with one leading Chinese bank suggesting growth could fall to 2.5 per cent. Tourism to Australia dropped sharply after most airlines cut flights in February and is unlikely to recover previous levels next summer. We face the prospect of only one significant domestic airline, giving Qantas a monopoly which will likely lead to higher fares. Virgin Australia was looking weak even before Covid-19 struck and it is hard to see this overseas-owned corporation securing sufficient finance to survive. Qantas, effectively mothballed by the canny Alan Joyce before the virus really hit Australia, may well be the best strategic buy for investors looking for long-term gain, though Josh Frydenberg may demand a stake for the government in return for any cash he pushes its way.

It does look as if Morrison now has his strategy right. He no longer falls for the tom foolery of Donald Trump, declining to echo the latter’s ridiculous policies such as ending financial support for the World Health Organisation or, even worse, rejecting the IMF Special Drawing Rights proposal previously endorsed by G-20. Morrison has listened to good advice from wise counsel in the Reserve Bank and Treasury, appears to be ready to reshape economic policy towards infrastructure and sound business investment, and, not before time, taking the whip to some of the employment and regulatory practices thar stifle productivity. 

It will be a long haul, but it is no surprise to learn that the ten biggest sovereign wealth funds, led by those in the Gulf, China, Singapore and Norway are opening their eyes again to opportunities that beckon in Australia.

Ramp up and kill off Covid-19. Or relax, and get Australians back to work when the current restrictions run out in mid-May?

It’s a simple question now being asked, but there is no simple answer.

Two young female prime ministers recently acclaimed for their handling of the virus, Mette Frederiksen of Denmark and Jacinda Ardern of New Zealand, have different strategies. Ms Frederiksen has relaxed many restrictions and reopened primary schools while Ms Ahern will ratchet them up, tightening non-essential movement. We think she will be proved right.

Australia’s PM Scott Morrison is wise to extend Australia’s federal restrictions for another month – and states should follow suit. But he also needs to plan now for the next stage of this horrible epidemic. There are two parts to the next stage: providing Australian medical, scientific and financial assistance to poor countries in the Indian-Pacific region who are struggling to cope with despair and destitution; and confronting the financial reckoning needed at home. Both are urgent tasks, but the gravity of the first is only now emerging. 

It’s not that the domestic reckoning will be without pain. The generous schemes introduced to support furloughed employees and the self-employed will have to be paid for, along with big increases in social security, especially if unemployment were to rise the 10 per cent predicted by some economists.  The International Monetary Fund (IMF) forecasts that GDP could shrink by 6.7 per cent this year.  It could be worse, boosted by the possible collapse of significant companies whose business has been wrecked. Virgin Australia, some regional and local newspapers, travel and holiday companies, some pubs and restaurants, and rationalisation in the health funds sector come to mind. The government can’t and won’t bail them all out. Treasurer Josh Frydenberg would be well advised to start withdrawing some schemes right away, like the instant write off on purchases of capital goods up to $150,000, a giant leap from $300,000 and extended beyond small companies  Modelling indicates that this measure will mostly benefit imported goods like cars, computers, air conditioners and the like; it won’t help the real economy. Buying a new executive car fleet of BMWs will only help the Bavarians, not the folk of Balgowlah or Bendigo.

Some aspects of Australian life may change for ever. I said ‘may’, because old habits die hard and we may revert to type. But as the Dutch educational philosopher Christien Bok told the newspaper Volkskrant, “we’ve gone from 2020 to 2030 in one weekend”. Here are some likely changes:

Carry on Cruising? Going on holiday in a 16+ storey ungainly floating ‘resort’ that requires tugboats to navigate in and out of Australian docks may lose its appeal. These unwieldy vessels have proved to be death traps and havens of infection in the past three months, with Carnival Cruises’ Ruby Princess being the most high profile example. Who would want to board one of these toxic high emitters in the near future?  Not until their owners fit aircraft-style ait conditioning, I’d suggest. My travel agent tells me that rather than demand money back for this winter’s cruises, many people have chosen to roll over bookings to 2021. 

Working from home appears to be the success story of the last month. Many sectors, not least in the professions, have found what many thought impossible to be not only workable but desirable. One benefit has been a significant reduction in overcrowded public transport and congested roads, particularly in Sydney and Melbourne. Home working has saved time and money for commuters and employers alike, taking advantage of the convenience of iPads, mobile phones and cheap video conferencing. There have also been obvious benefits to the environment from much lower carbon emissions and cleaner air. Many companies and professional firms are likely to seize on home working as a way of reducing property and other overheads. It is likely we shall see an increase in it, with provisions for employees who work in teams to get together on a monthly or more frequent basis.

Better hygiene. Australia has long had a higher standard of hygiene than in many other countries. Nevertheless, we can expect to see the benefits of being drilled to wash hands frequently, given that many infectious diseases including the common cold and gastric illnesses are spread through touching door handles, stair rails, bus, train and ferry seats, and other common areas. 

Business closures.  Unless the Coalition comes up with hard cash for severely damaged businesses there will be closures, leading to higher unemployment. Many of these will be small or medium size businesses, especially in the services sector, but the pain will be felt in big companies also. The mining sector will likely see exports to China fall, as the world’s second largest economy tumbles by as much as 50 per cent, with one leading Chinese bank suggesting growth could fall to 2.5 per cent. Tourism to Australia dropped sharply after most airlines cut flights in February and is unlikely to recover previous levels next summer. We face the prospect of only one significant domestic airline, giving Qantas a monopoly which will likely lead to higher fares. Virgin Australia was looking weak even before Covid-19 struck and it is hard to see this overseas-owned corporation securing sufficient finance to survive. Qantas, effectively mothballed by the canny Alan Joyce before the virus really hit Australia, may well be the best strategic buy for investors looking for long-term gain, though Josh Frydenberg may demand a stake for the government in return for any cash he pushes its way.

It does look as if Morrison now has his strategy right. He no longer falls for the tom foolery of Donald Trump, declining to echo the latter’s ridiculous policies such as ending financial support for the World Health Organisation or, even worse, rejecting the IMF Special Drawing Rights proposal previously endorsed by G-20. Morrison has listened to good advice from wise counsel in the Reserve Bank and Treasury, appears to be ready to reshape economic policy towards infrastructure and sound business investment, and, not before time, taking the whip to some of the employment and regulatory practices thar stifle productivity. 

It will be a long haul, but it is no surprise to learn that the ten biggest sovereign wealth funds, led by those in the Gulf, China, Singapore and Norway are opening their eyes again to opportunities that beckon in Australia.

Ramp up and kill off Covid-19. Or relax, and get Australians back to work when the current restrictions run out in mid-May?

It’s a simple question now being asked, but there is no simple answer.

Two young female prime ministers recently acclaimed for their handling of the virus, Mette Frederiksen of Denmark and Jacinda Ardern of New Zealand, have different strategies. Ms Frederiksen has relaxed many restrictions and reopened primary schools while Ms Ahern will ratchet them up, tightening non-essential movement. We think she will be proved right.

Australia’s PM Scott Morrison is wise to extend Australia’s federal restrictions for another month – and states should follow suit. But he also needs to plan now for the next stage of this horrible epidemic. There are two parts to the next stage: providing Australian medical, scientific and financial assistance to poor countries in the Indian-Pacific region who are struggling to cope with despair and destitution; and confronting the financial reckoning needed at home. Both are urgent tasks, but the gravity of the first is only now emerging. 

It’s not that the domestic reckoning will be without pain. The generous schemes introduced to support furloughed employees and the self-employed will have to be paid for, along with big increases in social security, especially if unemployment were to rise the 10 per cent predicted by some economists.  The International Monetary Fund (IMF) forecasts that GDP could shrink by 6.7 per cent this year.  It could be worse, boosted by the possible collapse of significant companies whose business has been wrecked. Virgin Australia, some regional and local newspapers, travel and holiday companies, some pubs and restaurants, and rationalisation in the health funds sector come to mind. The government can’t and won’t bail them all out. Treasurer Josh Frydenberg would be well advised to start withdrawing some schemes right away, like the instant write off on purchases of capital goods up to $150,000, a giant leap from $300,000 and extended beyond small companies  Modelling indicates that this measure will mostly benefit imported goods like cars, computers, air conditioners and the like; it won’t help the real economy. Buying a new executive car fleet of BMWs will only help the Bavarians, not the folk of Balgowlah or Bendigo.

Some aspects of Australian life may change for ever. I said ‘may’, because old habits die hard and we may revert to type. But as the Dutch educational philosopher Christien Bok told the newspaper Volkskrant, “we’ve gone from 2020 to 2030 in one weekend”. Here are some likely changes:

Carry on Cruising? Going on holiday in a 16+ storey ungainly floating ‘resort’ that requires tugboats to navigate in and out of Australian docks may lose its appeal. These unwieldy vessels have proved to be death traps and havens of infection in the past three months, with Carnival Cruises’ Ruby Princess being the most high profile example. Who would want to board one of these toxic high emitters in the near future?  Not until their owners fit aircraft-style ait conditioning, I’d suggest. My travel agent tells me that rather than demand money back for this winter’s cruises, many people have chosen to roll over bookings to 2021. 

Working from home appears to be the success story of the last month. Many sectors, not least in the professions, have found what many thought impossible to be not only workable but desirable. One benefit has been a significant reduction in overcrowded public transport and congested roads, particularly in Sydney and Melbourne. Home working has saved time and money for commuters and employers alike, taking advantage of the convenience of iPads, mobile phones and cheap video conferencing. There have also been obvious benefits to the environment from much lower carbon emissions and cleaner air. Many companies and professional firms are likely to seize on home working as a way of reducing property and other overheads. It is likely we shall see an increase in it, with provisions for employees who work in teams to get together on a monthly or more frequent basis.

Better hygiene. Australia has long had a higher standard of hygiene than in many other countries. Nevertheless, we can expect to see the benefits of being drilled to wash hands frequently, given that many infectious diseases including the common cold and gastric illnesses are spread through touching door handles, stair rails, bus, train and ferry seats, and other common areas. 

Business closures.  Unless the Coalition comes up with hard cash for severely damaged businesses there will be closures, leading to higher unemployment. Many of these will be small or medium size businesses, especially in the services sector, but the pain will be felt in big companies also. The mining sector will likely see exports to China fall, as the world’s second largest economy tumbles by as much as 50 per cent, with one leading Chinese bank suggesting growth could fall to 2.5 per cent. Tourism to Australia dropped sharply after most airlines cut flights in February and is unlikely to recover previous levels next summer. We face the prospect of only one significant domestic airline, giving Qantas a monopoly which will likely lead to higher fares. Virgin Australia was looking weak even before Covid-19 struck and it is hard to see this overseas-owned corporation securing sufficient finance to survive. Qantas, effectively mothballed by the canny Alan Joyce before the virus really hit Australia, may well be the best strategic buy for investors looking for long-term gain, though Josh Frydenberg may demand a stake for the government in return for any cash he pushes its way.

It does look as if Morrison now has his strategy right. He no longer falls for the tom foolery of Donald Trump, declining to echo the latter’s ridiculous policies such as ending financial support for the World Health Organisation or, even worse, rejecting the IMF Special Drawing Rights proposal previously endorsed by G-20. Morrison has listened to good advice from wise counsel in the Reserve Bank and Treasury, appears to be ready to reshape economic policy towards infrastructure and sound business investment, and, not before time, taking the whip to some of the employment and regulatory practices thar stifle productivity. 

It will be a long haul, but it is no surprise to learn that the ten biggest sovereign wealth funds, led by those in the Gulf, China, Singapore and Norway are opening their eyes again to opportunities that beckon in Australia.

© Australian Strategies 2002. All rights reserved.