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Dec 17, 2011

Labor confusion on sovereign risk, while its results occur.

Cartoon: By Pickering.

On Tuesday the Communications Minister Mr. Conroy, totally lost it during a speech to the National Press Club. Most of his spray appears to be directed at the Productivity Commission for daring to warn that the NBN could breach its competitive neutrality policy because of its projected low rate of return, estimated at about 7 per cent. However he then demonstrated his ignorance of sovereign risk:

The Communications Minister expressed frustration at suggestions that sovereign risk had increased in Australia's telecommunications sector because of the introduction of the NBN. “If a tax goes up, God, that is sovereign risk, but if a tax goes down, its f***ing fantastic. Excuse me - that is fantastic,” he said.

“The complete hypocrisy around sovereign risk is staggering, because apparently we've been engaging in sovereign risk all of these years every time we've lowered a business tax.”
The reference to lowering taxes constituting sovereign risk is in regard to the imposition of a massive tax on mining profits, some of which is supposed to be used to lower corporate taxes in other sectors as a sort of corporate redistribution of wealth. The factor that creates the risk is the mining tax, which makes such activities more attractive in other countries where the tax does not apply. In other words its nothing but spin.

The real result of sovereign risk inducing policies came home to roost for Australia, or at least its cattle producers today with Indonesia cutting our export quota by nearly half and announcing that all imports from here were to be phased out within four years. Our cattle industry supplied the bulk of Indonesia’s import requirements owing to the closeness of our countries and the perceived reliability of supply.

The reputation for reliability was smashed in June when the Gillard government unilaterally banned exports to Indonesia overnight for a month during the peak export period. Some suppliers were driven to the wall, while others were seriously disadvantaged to the point where they are still struggling to get back to normal. It was pointed out at that time by the industry that this action would destroy confidence in us as a reliable supplier and cause the Indonesians to look elsewhere.

While the Minister, Joe Ludwig is making noises about sourcing other markets, there are none as convenient and offering the high numbers we had in this one. He has been plying the line that it is simply caused by the Indonesians wishing to be self sufficient, this has been cast in doubt by reports that cattle will be sourced in other neighboring countries.

Being governed by Labor has been like a storeowner taking a break while the village idiot runs the shop.

The Greens who want the live export industry banned entirely, should consider the ramifications of this decision. It is doubtful that Greens leader Bob Brown has considered just how much pristine rainforest will be destroyed in any effort by Indonesia to provide pasture for enough cattle to supply over half a million cattle per year for consumption.

2 comments:

  1. Nice articles. I'm just blogwalking and very happy to stop here. And also give you some comment and following your blog here.

    Dont forget to give us some your comment into my blog and following me back too.

    ReplyDelete
  2. Far from the worst thing that idiot has said, but anything that causes the ALP embarrassment is fine by me.

    ReplyDelete