Thursday, April 9, 2009

The Christian Thing To Do

The decision by an unnamed bureaucrat to remove the cross and the bible and all religious paraphernalia from the chapel at the Royal North Shore hospital has been described as political correctness gone mad. In fact, it’s worse than that. It is offensive and insulting and bigoted and only adds to the vilification of religious minorities who inevitably suffer the backlash from such ill considered decisions. Nobody gains anything from the intellectually bankrupt and morally perverse depiction of any religious faith as offensive.

Such a decision is insulting to everyone. It is insulting to Christians who are told that they cannot be permitted to display the symbols of their faith for fear of offending somebody else, while efforts to accommodate other faiths mean that all of us witness daily the symbols of minority faiths in public places. Somehow the majority faith has been turned into something that has to be hidden away, while at the same time members of that faith are instructed to be tolerant of all others. It is hypocrisy, and it is insulting.

It is also insulting to the Muslims, the Jews, the Buddhists, the Hindus, the Hare Krishnas, The Shaolins, and even the atheists who are not in the least bit offended that Christians might wish to display Christian symbols. Worse than being insulting, the claim that Christian symbols must be hidden away because it offends non-Christians only serves to incite resentment against people who were not offended in the first place. The innocent get the blame for idiotic decisions made by people who possibly don’t even have a firm grasp on religious concepts anyway. Certainly it’s clear they don’t have a grasp on basic common sense.

The truly ridiculous thing is that many people of other faiths cannot understand why supposed Christians are not more active in displaying the signs of their faith. They cannot understand why Christians act is if they are embarrassed about who they are or what they believe in. Many of them even realize, quite rightly, that if the right to be openly Christian is gradually undermined then it is only a matter of time before the right to be openly displaying any other faith will also come under attack.

The Chapel in question at the Royal North Shore Hospital is used as a multi-denominational place of reflection and worship. There is nothing wrong with that. There is nothing wrong with displaying the symbols of a number of different faiths, but to display none seems to rob it of any kind of significance or sense of purpose. It is a fact of life that our community is shared by people from a variety of faiths, and a public amenity such as a Chapel at a hospital will be too.

That means all who share that space must accept and tolerate each others’ differences, which ultimately mean very little in the light that most of them are there for very similar reasons in the first place. Muslim or Christian, Hindu or Jew, they are all there because somebody they care for is sick or dying and they are seeking a place of spiritual comfort. That is something we all share, and that is why a place such as this should not be made sterile and meaningless. It should instead be filled with care and compassion and love for each other. Oddly enough, that would be the Christian thing to do.

Wednesday, April 8, 2009

Banks Are Squeezing Every Last Drop Out Of Interest Rates

Yesterday’s decision by the Reserve Bank of Australia to cut official interest rates by 0.25% was immediately welcomed by the big banks with a massive round of doing pretty much nothing. Some passed on a small portion of the reduction, while others passed on none at all, keeping the entire rate cut for themselves. The banks argue that despite the official rate coming down, the actual cost of funds to them is still high because of international conditions. While that is true, our banks continue to be among the most stable and profitable in the world and are in a position to pass on at least a fair share of the saving. But that’s only part of the story.

While much of the focus is on mortgage rates, and of course they are an important indicator for the economy, the impact on business lending is being overlooked. Banks have been reluctant to pass on interest rate cuts to business borrowers, and indeed have actually re-rated business loans for increased risk due to the economic contraction. The conundrum there of course is that by charging businesses more for finance they actually contribute to increasing the risk that those businesses may become no longer viable.

Looking at the big picture, failure to facilitate business lending actually contributes to making the economic climate worse, and if credit dries up enough it could get to the point where banks themselves begin to suffer. While that might sound like poetic justice, it would further contribute to the damage to the economy. The truth is that our banks remain sound, and that is at least in part thanks to the government guarantee of bank deposits. For that reason, as well as for the benefit of the broader economy, banks have a responsibility to maintain the supply of credit to working businesses in general, and to do so at rates of interest which will help those businesses to remain afloat.

There is also another lending sector which is being completely ignored when it comes to interest rate relief. Credit cards. Some credit card customers are paying more than 20% per annum for their credit card balances at a time when the official cash rate is now 3%. If that’s not highway robbery, I don’t know what is. Admittedly there are lenders including the big banks who do offer cheaper credit card rates at around 11% or 12%, but you have to wonder why they are allowed to get away with charging some of the higher rates that are still being imposed.

Credit card interest rates are also important to the economy because higher rates undermine consumer spending power at a time when policy makers want to encourage consumers to start spending and thus kick start the economy. Banks claim that credit cards are unsecured debt and therefore represent a higher risk, and that’s true, but much of the risk management hangs on how the banks decide to whom to issue cards in the first place and what conditions, limits and restrictions to impose. The reality is that the banks are still using credit cards as a magic money machine, and if the credit risk really was that high we would have already seen many more people actually defaulting on their cards.

While we can be thankful that our banks are sound and profitable, meaning that they are in a position to help keep the economy moving, it would be nice if those banks were themselves more thankful to the people who helped to make them so profitable in the first place: their customers.

Tuesday, April 7, 2009

Welcome To The 21st Century

Welcome to the 21st Century. Not just the gritty reality of a world struggling with the unforeseen Global Financial Crisis, with a New Age multi ethnic United States President, and the threat of nuclear armed rogue states such as Iran and North Korea, but the 21st Century we were all promised by years of watching Star Trek and reading Arthur C. Clarke books. The brave new world of instant communications thanks to a technological revolution providing new opportunities for new and unprecedented wealth. That’s the 21st Century we’ve all been waiting for, and it has just been delivered.

The Federal Government tender process for the construction of a Broadband network was already in danger of going off the rails after Telstra essentially shot itself in the foot when the personal battle between Sol Trujillo and the Government resulted in that company being dumped form the process. Now, the whole thing is academic because the Government has decided to throw the whole process out and build the network itself. More importantly, the new network will be superior to the specifications previously laid down in the tender process, literally paving the way for a whole new telecommunications landscape.

Despite the observation by one of the tenderers that this decision is unfair because they had proposed a bid based on the specifications previously given rather than those that the government has now decided upon, the outcome delivers a positive result for almost everyone, including Telstra. That’s because the door is now open for Telstra to participate in the process rather than remain completely frozen out. At the same time, the new plan achieves a radical restructuring of the whole sector, over the next decade, which might have been impossible to achieve any other way.

One of the outcomes is that when the new network is established, Telstra will no longer have a near monopoly on network infrastructure. In effect it achieves the separation of the retail and wholesale arms of Telstra without ripping the company apart. While there are no guarantees for Telstra, the fact is that this arrangement presents opportunities, a fact which appears to be reflected by the immediate jump in the Telstra share price after the announcement. Telstra shares climbed about 3% after the news, on a day when the rest of the market has been falling.

More importantly, the commitment to construct a fibre optic network which reaches all the way to the customer, instead of just to the exchange, or the street corner, means that 21st Century communications will finally be delivered to 90% of Australians. While the home consumer will enjoy immense benefits from the vast improvement, business stands to reap great gains from access to the kind of communications capabilities that were pure science fiction just a few decades ago.

The plan has been described as the most significant nation building infrastructure program since the Sydney Harbour Bridge and the Snowy Hydro Electric Scheme combined, and even that might be an understatement. $43 Billion will be invested over eight years, creating 37 000 jobs. The initial $4.7 billion dollars will come from the Building Australia Fund, money which is already in the bank, so it does not come out of the budget bottom line. Other funds will be raised by the issue of bonds which will ultimately be financed from the returns generated by the infrastructure itself, while up to 49% of the capital will come from the private sector. When the network is completed, the 51% held by the government will then also be privatized. This is not simply expenditure, this is wealth creation.

Monday, April 6, 2009

A Penny Saved Is A Penny Earned

Following last week’s high court decision to allow the Federal Government to give taxpayers their own money back, cheques for up to $900 are now being delivered to their intended recipients. Much to the relief of those battlers who had already decided just what they would be doing with the money, the challenge by University Of New England Law expert Bryan Pape failed to convince the High Court to stop the payments. Now, the plans that people may have made can go ahead, whether it may have been for updating household appliances, taking a holiday, or even buying a big screen TV.

Of course, there will be some people who decide not to spend the money. Some will decide that the sensible thing to do is to reduce their debt, or to simply tuck the money away in their savings. Judging from the experience of the first round of stimulus spending last December, perhaps as many as half of the recipients might be tempted to save it rather than spend it. Given that the whole reason for handing out the money in the first place is to dump cash into the economy, some will undoubtedly see this as counterproductive. The question is, if the money isn’t spent, how does it help the economy or sustain jobs?

That is precisely the criticism which has been leveled by the opposition, who have labeled the cash hand out as wasteful and reckless, suggesting that it won’t do anything to save jobs. The Shadow Treasurer Joe Hockey has even gone so far as to indicate that should there be further such measures in the forthcoming Federal Budget the opposition may vote against them. While consistent with the opposition’s recent stance against what it depicts as profligacy, this is a politically driven position which ignores some fundamental realities.

First and foremost, if the Australian taxpayers who are receiving a refund of their own money in this current round of stimulus spending should choose to save the money rather than spend it, then good for them. Each Australian should be able to best decide for themselves what is the best use of their money. Some will indeed spend it, and that will help retailers and other businesses to benefit from the cash. But those who choose to save it are also doing the right thing. Each individual should make that decision based on his or her own circumstances, and for many people, putting the money aside or paying off some debt will make more sense than spending it.

The good news is that this is still good for the economy, no matter what Joe Hockey or anybody else says. Economic strength depends on many things, and one of them is good national savings, something that Australians haven’t been especially good at. But when it comes to the bug picture, any contribution to boosting savings and reducing debt is good for the nation’s overall balance sheet. It provides stability and security and brings closer the future time when people will feel more confident about spending.

We generally believe we are a wealthy nation, and it’s true. Thanks mainly to a plethora of minerals and other natural resources, we have enjoyed the benefits of wealth without having to recognize that the real seed of all wealth and prosperity is in retained earnings which are in turn reinvested in productive activity. Saving some or all of the bonus money increases wealth in the economy, as well as adds to the lending reserves of the banks where it is invested. Saving the money may mean there is less immediate benefit to the retail economy, but it is still good for the economy.

Ironically, even if every recipient went out and spent the bonus money, much of it will still wind up in savings somewhere. If I buy a digital TV, I might spend the whole $900. But the shop which sold me the TV will bank a profit from that sale, thus adding to the savings of the business. The salesman who sold me the item will spend some of his commission on his groceries, but if he is a prudent manager of his own financial affairs he will bank a portion of it into his savings. The shareholders in the company which owns the TV shop will bank their dividends. The grocer who sold the food to the TV salesman will bank his profits… and so on. At every point, as the money changes hands over and over again through the system, the prudent people will take a portion of it and put it aside into their savings. It is the sensible thing to do, and it is the seed of all wealth.

So whether you decide to spend or save your bonus money, rest assured, you are still doing your bit for the economy. The important thing is that you also do the right thing for your own finances.