“What if this is as Good as it Gets?” This pessimistic and defeatist statement from the movie with the same name was used by Melvin Udall (Jack Nicholson). Subsequent events then lead Melvin to review his life, and he realised that by changing to his surroundings, life can take a turn for the better.
During a recent trip to Europe, I was expecting to find this level of exasperation. The general population on the street didn’t show any signs of concern though, referring to the economic conditions as “the new normal of the last 5 years”. I guess if money continues to be magically made out of thin air and debt repayments put off indefinitely, it is only the journalists who get excited about it. Even though the problems haven’t been solved, people are content burying their collective heads in the sand. One day, the time comes for the banks to repossess.
There always comes a time to move on and get with the times. Only 5 years ago, Internet Café’s were on every street corner. In a change or die moment, Wi-Fi mobile technology has wiped out this business concept. Traditional Restaurants are back in vogue. Another observation was that even in Tourist areas, some Italian cities still enjoy their 1 – 3.5 hour Siesta. A “nice” concept, but closing your business for the busiest trading hours doesn’t make any sense. A note for the locals: take a look around. See all those Asians and Indians who have opened up in your street? Whether you like it or not, they are competitors, and they are cashing in whilst you sleep – quite literally. Tourists are only there for a finite time, and you don’t get a second bite of the cherry.
Wonder what needs to be done to awaken people to the changing nature of the Global Economy? In the USA, United Kingdom and Japan, foreign ownership is below 11%. Canadian foreign ownership levels have increased from about 22 to 27%, and there is serious talk about the need to halt this trend, as it means exporting of wealth, never to be returned to the country. Limits on Foreign Ownership exist in nearly every overseas country. In Australia, we stopped measuring about a decade ago, but experts estimate it’s now between 70 and 90%. I’ll go with the lower figure because of the clout of Super Annuation funds – forced savings with very few other places to go other than Australian shares and property. Australia has no real limits on Foreign Ownership, and no control of where the profits are taken. In any case, I’m sure if you start naming big companies operating in Australia you can think of, then look at the ownership, and you’ll see what I mean. Out of all Australian Taxes collected, less than 10% comes from these foreign organisations. Employees get to keep the dollars earned from hours put in (less tax), but the Profits (and hence the wealth) gets transferred overseas at the expense of Australians.
Add to this that businesses have evolved online and will continue to experience boom growth for the foreseeable future with little or no tax paid in Australia, and even the most naïve would understand that even less wealth will stay in Australia.
After 2 decades of booming conditions and with the Australian Dollar now starting to turn downwards towards more normal levels, our purchasing power will start to decline. We’ve had an abysmal savings record during this time, and “Is this as Good as it Gets?” is a really legitimate question. Most goods we consume are imported, and they will now be increasing in cost. We spent all our earnings when the opportunity to buy foreign Assets cheaply was there.
Australia has gone from one of the richest countries in the world to about 30th. When Social Security started there were 16 people working for every 1 person on the program. Today, the ratio is 3 working for every recipient. In about a decade, it is forecast to be one to one. That can mean only one of two things: those paying tax will need to pay more; or those relying on welfare will receive less. The reality will probably be a bit of both, but if the gap narrows too much, those paying tax will find ways to stop doing so (by joining those not working or moving overseas for instance).
We need to ask ourselves honestly: Is this as Good as it Gets? And if we don’t like the answer, we need to think of new ways to encourage an investment/savings mentality, entrepreneurship and wealth accumulation for everyone in Australia.
As always, onwards and upwards!
Footnote: One reason I’m proud to be associated with RD Williams is that RD Williams is completely Australian owned, employing Australians, paying taxes in Australia and re-investing all profits in Australia. We source Australian products whenever it is possible to do so, but unfortunately most products for our Industry are produced overseas.