My thoughts #AICD “Shaping a Nation” with Mark #Pesce Futurist, Paul #Broad CEO Infrastructure NSW, Warren #Hogan Chief Economist #ANZ, Michael #Reenie #McKinsey and Co.

My thoughts #AICD “Shaping a Nation” with Mark #Pesce Futurist, Paul #Broad CEO Infrastructure NSW, Warren #Hogan Chief Economist #ANZ, Michael #Reenie #McKinsey and Co. http://wp.me/p2g64Q-1Z

• Productivity is the number one question
• Major infrastructure projects started and stoped, very poor use of capital
• Rail system in Sydney works at half the throughput of a similar one in Europe
• Productivity is about innovation
• Innovation has 3 type -Things you want to do, ones you have to do, the ones forced on you
• People do not like to change, new businesses need to be extremely thin
• Planet is now very well connected, need to realise the potential of being connected
• Australian working off Hawke / Keating Changes and we have had no structural reform since that period
• Currently being ran by populism with no courage for change
• Currently no vision in Government, no leaders
• Politician do not understand innovation, Swan does not understand
• Need Competition, Need intellectual capital, get politicians out of the way to let market deal with it
• Government needs to get out of town, need to get away from career politicians

Labour Market Productivity
• Unions killing Businesses, they hate flexibility, they just want fee’s some they can spend
• Need greater labour mobility, even Executive staff don’t like to move. 20 yrs of good times have set this up. US has been traditionally flexible due to their low social blanket
• Labour security is falling onto the worker
• People like FIFO because people will not live there. FIFO increases project costs.
• Skills training needs to be continuous and not a one off retraining session
• A welfare state stifles innovation and competitiveness. If we didn’t have payments over last 10 years we would have $0.5T
•

Innovation
• We have a lot friction but not a lot of innovation. Will lead to driverless trains, people free mines etc
• The smartest people are the poorest people, staying on the edge of technology is an advantage
• The connected world is driving us, A cloud world will change the world. Call centres can be decentralised,
• Need to find the technology and work out how to utilise it.
• The difference between an idea and an innovation is commercialisation and this is hard
• Necessity is the mother of invention
• The Drought lead to a lot of innovations, we need to create a pressure
• Some great education initiative’s

Future Investment
• Education is key
• Need to build up our knowledge base

The Big Risks
• Don’t address Productivity
• Government interfere in the markets
• Lack fitness – High $, Low productivity, become non competitive
• Government investment in welfare
• Will always have overseas difficulties, up to us to be the best, hence we need leadership
• Politicians do not give the electorate any credit

Questions

• Should we have a Melbourne Sydney Fast Train – North Coast trains needs to be more efficient, better option than NBN but economics don’t stack up
• Should be driving our trains from low cost countries, this can be safer, lower O&M
• War can be fought by remote control
• Productivity Improvement, what needs to occur? Bring in short term workers, Health system needs to be rebuilt, the IR laws need to go back, 70% of productivity is in organisation.
• Need to challenge organise to improve
• Education – Need to keep University’s and TAFE separate. TAFE should be supported by Corporate and are about skills, Universities are investment in the Future and need higher levels and Government Funding and they are about learning.
• Educations – Masters degrees have become a ticket and need to increase. Need a Stafford etc
• School Class sizes, halls etc don’t matter, Teaching Skills are the most important thing.
• New Industries ie CSG take a period to sell to the community, we are pushed back by government and the media, we need to tell out story, get rid of spin merchants and get the CEO to be the spokesman
• If you wish to get through to a politician, get in the newspaper
• Outside Carbon what are the big Environment Issues? – Cyclones in north, Flooding Western Sydney (200k people), Should price pollution and let the market work it out.

Final Comments
• Best Environment for wealth creation, though unstable
• Australia is in the best position in the western world, but at tipping edge
• Corporate World needs to tell its stories and debate the pollies
• Need Courageous Leaders, that allow the economy to run
• Need more industries to link into Asia
• Best Country in the World, good democratic system

My thoughts on the #AICD“Shaping a Nation” with Warren Hogan Chief Economist #ANZ, Michael Reenie #McKinsey and Co.

My thoughts on the #AICD“Shaping a Nation” with Warren Hogan Chief Economist #ANZ, Michael Reenie #McKinsey and Co. http://wp.me/p2g64Q-1W

We have a Global Infrastructure boom
• Under investment on 1980’s /90’s
• The rise of the emerging economies
• Asian incomes rising
• Change of urban population
• This Boom will not have a bust

The commodity Boom
• Strong Commodity demand due to increase in metals
• Most growth is coming from China, but others to follow
• S2T investment on Australia over next 20 yrs
• New projects appeared to have peaked out in Aust
• Aust currently not set up to take the continued Boom

• A$ based on Commodity price and hence it will stay high

Productivity Growth drives income

• Currently not on government agenda
• Can’t keep redistributing wealth unless we get it on the agenda

• We have just come off 20 years of reform
• We have consensus on good financial management and low debt
• The mining boom has taken the pressure off, given free money 50% was change in terms of trade
• Commodity prices have reached there peak, hence investments will be constrained
• We are a low performing economy and Productivity needs to get back on the agenda
• Politicians don’t lead, they only respond and hence industry needs to put productivity back on the agenda

The big opportunities include;
1. Capital Productivity – Currently 30% too expensive, the time take to get to market, the number of regulations, Green tape, most companies are overspending to get projects too market
2. Health Care – We need to reform our health care
3. Labour flexibility and IR – eg retail 20% less productive than US
4. Approvals, Zoning, Deregulation – Ease of doing business getting worse
5. Energy Policy – Cheap Energy equals high living standards, this is changing, in 5-7 yrs this will slow growth, it is a elephant in Aust, US is now an net exporter of Energy.
6. A lot of productivity improvement is in the hands of our managers, only attacked we are pushed too

• China is being oversold. Eg Japan was the same. 30 year growth
• In 30 years China’s demographics looks like Japan
• Longer term India will keep going
• Africa is huge for the future.
• The US responds to issues quite well, it will be back in 2 yrs
• Europe will keep muddelling through

My thoughts on the top 10 director issues after #AICD session from Fiona Harris, Chair Barrington Consulting, James Strong, Chair Woolworths, Yasmin Allen, Director IAG

My thoughts on the top 10 #director issues after #AICD session from Fiona Harris, Chair #Barrington Consulting, James Strong, Chair #Woolworths, Yasmin Allen, Director #IAG http://wp.me/p2g64Q-1S

• Hasn’t changed of lot, same factors around now
• Issue can be divided up into issues that effect specific companies and general issues for company directors

Issues of Concern
• Standard questions of, Have we go right strategic? Have we got right team? What is the corporate performance etc
• Continuous Disclosure is an issue
• Issue around public perception and media
• Availability of capital
• Economic uncertainty, especially due to Europe, getting money of European banks, effect of European elections
• Risks due to bringing new operation online eg new mines
• Understanding the risks around growth
• Rapid Change in technology, the solutions will be there, but we don’t yet know what they are, will change the commodities market, insurance companies losing money due to increased competition. Printing of solid objects, Online strategy must be integrated, not separate
• Remuneration of talent, hanging onto you top people, development of people

Good issues
• AICD getting on top of issues
• Aust Company Directors are high class and we are well governed

General
• Renewable Energy – Not possible to invest due to the oppositions pledge to reverse the tax, similar situation in UK, this is slowly down the development of these industry’s
• Boards now spend time spent on alternative realities, the rate of change is increasing,
• Power needs to be given to the consumer, so they need a variety of methods to interact with you. Need to continually assess this, because it changes
• Dynamic tension between Board and Management is important, trust versus risk versus opportunity
• Risk assessment includes in depth look at politics, need to stay close to the government (and opposition) at all times
• Public is now interested in shares due to their super funds and hence the politicians want to run the show, 10-15 yrs ago they weren’t interested
• Remuneration excesses in Australia is rare, need to ensure it is aligned with performance
• How do you see the wood from the trees, lot of board papers are well too long, need to cascade reporting and only look at things once, reporting should not be undertaken only for the board, management needs to get benefit as well.
• When things go wrong, they get blown out of proportion, eg Centro etc
• Liability of directors should be centralised under the corporations act to simplify
• HSE and Environmental issues will continue to exist and need to be dealt with

Lessons
• Leadership makes a real difference, though this is hard to convince the public (Remuneration)
• The most important this a board does is appoint the CEO and those around them
• The Chair needs to establish a good relationship between the board and management, needs trust, respect, openness etc
• Difficult when dealing with poor performing CEO or board members
• Whole point of being a director is that you take responsibility

Questions
• How do we deal with social media and the media as a whole? We need to be constructive with the press; you get the reputation that you deserve, most comments are ill informed and without detail, need to engage regulators, media and others to ensure they understand your position, need to be there all the time.
• How do you gain understanding of how you will work with a new board? The business and financial due diligence is easy, the culture and how they work together is hard. Talk to people who have sat on boards with the other board members.
• Role of Common sense on a board. Real important, many of the court issues have raised due to directors not stopping to think. Important to keep a pulse on the business.

The Ascent and Descent of Money

Thoughts and issues – The Ascent and Descent of Money #ACID Conference – Niall #Ferguson http://wp.me/p2g64Q-1N

The Ascent and Descent of Money # ACID Conference – Niall Ferguson

• Coming via video out of Oxford England
• 5th year into the slight depression (as opposed to the great depression)
• This time some of the smaller economies are being effected more than the big ones eg Greece

The Slight Depression

• In 2007-2009 the collapse was similar to the great depression
• From June 2009 the economy pulled out of the trend
• This was for 3 reasons
• Bank Failures – We learnt from the GD on monetary policy and saved the Banks from collapsing. Only a few failed
• All the major economies went into debt. Debate continues on if this was at the right level. Ie too much or too little. They mitigated but didn’t cure
• China, the third reason. 2nd largest economy in world, they maintained demand.

Europe
• Appears to be limits to what can be done with monetary union without fiscal union. Eg like EU
• No chance that the EU will be dismantled due to the high cost. If Greece left than it will be cut off from funds form EU, the rest the global and high inflation would lead to the collapse of banks.
• If Greece left, many others would be keen to do the same, eg Italy and Spain
• Germany have been going well due to structural reforms in 1990’s and they have been able to control their exchange rate
• Don’t bet on the break up of the Euro, but expect more EU to increase control of the member states
• Might be a EU control over foreign debt, EU Bonds, Money for bail outs, Germany wants a Federal Republic of Europe,
• Europe is bad but not terminal

China
• Overtake US in 4 yrs
• Worries about a China Crisis are over stated.
• Issues in China are more political than financial
• Party knows its doomed if discussion on Democracy occurs
• But expect that the new leadership will have 1 party state with the rule of law. Hong Kong is closer to this model.
• More secure Private Property, More internationalisation of the Yuan
• If the middle class output is larger that will do well for the Yuan.
• Expect economic liberalisation 12 month after the new leadership

Global Economy
• US not much room left to stimulate economy
• US has election in Nov and will experience contraction after this
• This will be a close election, expect BA in Presidency and still locked house
• US Companies have the balance sheet to assist but the government is not giving them confidence
• US Silicon Valley is still providing great input into the economy eg Facebook and Google, but is facebook a phase or not?
• Globalisation is still working
• The US share index is a barometer of global economy due to the effects of working globally
• It isn’t over yet, the outlook is very cloudy, but better than the 30’s
• Financial Services will be effected by popularism

• US getting close to Debt Ceiling, but it is a superpower and prints the worlds currency, So it is expected that they will keep borrowing.
• Unlikely that the US will hit an inflation issue and the dollar be devaluated, can’t inflate things like social security
• India has advantage over China that is has Law, Free Press and Democracy in place. The States are improving and they will need to move further before the Country settles
• Indonesia – Biggest problem is corruption and this needs to be tidied up
• Politically Populism is increasing but doesn’t appear to be revolutionary
• China’s middle class is larger and growing quicker than India
• The Arab Spring continues but we don’t know where it will end, expect it will be anti democratic

Thoughts and issues #AICD Conference in Darwin from Prof Kishore Mahbubani

My thoughts and issues, #Asia #Economic Forecast #AICD Conference in Darwin from Prof Kishore #Mahbubani

http://wp.me/p2g64Q-1g

• 10 years left of western domination before Asia takes over
• 2016 China of GNP will be greater than US. (18-17.5%)
• 20 yrs time the China economy will be twice Us
• Asian living improvements of 10,000% percent in a lifetime
• Seven Pillars of Western Society
1. Markets Economics – China is doing it better than the rest, Lot of free trade agreements in Asia
2. Mastery of Science and Technology – fast shift into Asia, huge R&D spending as opposed to US
3. Culture of Pragmatism 
4. Brian Power – Asia has largest pool of brain power, both used and unused
5. Culture of Peace – Little prospect of war in Asia today, chances decrease as countries rely on each other
6. Rule of Law – Significant change in 30 years
7. Education – Significant increase in education at al levels

• The relationship between China and US is good, they understand that they have to work together.
• When will China have to become a democracy?
• World reform will occur, eg IMF and World bank appointments can’t last.
• What does Australia need to do? Are we having new thinking or just carrying on with the old thinking? Need to start thinking out of the box!

• Where is India? We talk of China, but the whole region is the real issue. India is growing despite its Government.
• Will North Korea have an effect? South China Sea, India / Pak., China/Tawian economies are intertwined. Low chance of war in Korea due to the interest from the major powers. It will continue for next 20 yrs though.
• What role will religion play in Asia? Generally Chinese people are not very religious. They have a spiritual base due to their age and don’t need the need to define themselves. Will not be a driver of behaviour.