THINKING MR
How do you feel? “It’s the vibe of it. It’s the constitution. It’s Mabo. It’s justice. It’s law. It’s the vibe and ah, no, that’s it. It’s the vibe. I rest my case,” Dennis Denuto, Lawyer for the embattled Kerrigan family. The Castle, 1997 Australian Movie Classic. By the time you read this, dear comrades, we will either have the same government we have today, a new majority Labor government or, God help us, a coalition of the mad, the bad, the misguided and the plain crazy. However the numbers fall we can be sure of one inescapable truth, we live in a world where facts no longer matter, and the vibe holds sway. Don’t believe me? Here’s a simple example…
aircraft has 162 economy seats and 12 business seats. That’s a maximum of 174 passengers each requested to remain 1.5 metres from the next. The simple maths suggests that in spite of the vibe we’ll need 261 metres if the plane is full, and we comply with the social distance rule. According to Boeing the 737 is about 40 metres long of which the cabin is about 25 metres. You see the problem. While the vibe is great the maths doesn’t work. In fact, to maintain 1.5 metres in the aisle of a domestic airliner you would need to reduce maximum passengers to a point where the airline would simply go broke. And that’s my worry. The vibe in much of public debate now takes precedent over fact-based discourse and no one seems to be checking the maths. Take inflation as another example. We predicted some time back that excessive money printing
To make matters worse I believe we now live in a country where the tough decisions are avoided and the popular vibe rules.
Take the NDIS. No one with a heart would suggest that we should not look after our most vulnerable and challenged. However, with systemic rorting and cost blow outs expected to exceed $60B by 2030 (and dwarf Medicare spending) no one with access to a calculator could suggest that the scheme, in its current form, is sustainable. The maths doesn’t work but don’t hold your breath waiting for a politician to call it. The only way to fund such a scheme is increased taxes or print more money, maybe a magical combination of the two. In a perfect world we could fund all the initiatives that improve people’s lives. Sadly, the maths doesn’t work. I cling to hope that a political saviour with the guts and vision to call things as they are, will emerge from the swamp, but I’m not holding my breath. Here’s a few things to consider while we wait. Interest rates are going up. How far, who knows. If you believe the CEO of our largest bank (yes, a stretch I know) the cash rate will hit 1.35 percent later this year before levelling off at 1.60 percent mid-way through next year. To put that in perspective the cash rate prior to the last RBA board meeting was 0.1 percent (thank you Anthony, you may put your hand down now) and now stands at 0.35 percent.
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Recently I had the pleasure of travelling on a domestic aircraft. A Boeing 737 800 in fact. The preflight check in included a request to remain at least 1.5 metres from other passengers while boarding. Seems reasonable in these days of Covid hysteria. The message even has the right vibe, you might say. Anyway, let’s set aside the obvious problem of being squeezed cheek to jowl once seated and concentrate on the 1.5 metre request. The
Mike Phipps, Director, Mike Phipps Finance
combined with supply chain disruption would ultimately put upward pressure on prices, and so it has come to pass. Setting aside a slight feeling of self-validation that I finally got a prediction right, this is good news for no one. Incredibly the response from some politicians has been to suggest wages need to keep pace with inflation. Ok, seems fair, cost of living going up, lets help working families, it’s the vibe. Again, the maths suggest otherwise. If it is true that inflation is a product of too much money chasing too few goods then one might quite rightly suspect that increasing wages, of itself, is akin to pouring fuel on an already raging fire. Increased wages are not going to magically fix supply chain issues, sort out our ongoing blue with China or improve productivity. More concerning, increases will reduce business profitability with a certain knock-on impact for business investment. These assertions can be costed and tested mathematically but no one seems to care. With businesses struggling to get back on their feet after COVID I believe all we need is a wages blow out to send us into recession. In fact, there are signs that it may already be too late.
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MANAGEMENT
ResortNews | June 2022
