from Crikey …..

The thoughts of Chairman Don - same old, same old

Bernard Keane and Glenn Dyer write:

BHP, CARBON PRICE, DON ARGUS, FISCAL POLICY, IR DEREGULATION, NATIONAL BROADBAND NETWORK

Don Argus in his 3500 word screed in The Australian today claims he wants to "lift the tone of debate in this country to deal with the challenges beyond the next budget and leave a lasting legacy for future generations".

A worthy goal. And one completely missed by the former BHP chairman. All he can manage is a longer version of the same dreck he and a number of other business leaders, including his own replacement Jacques Nasser, have been running around with.

There's some weird obiter dicta from Argus during the course of his rant. It's chock full of straw men, for one thing. "The GFC and China's ability to power its way through the slowdown have persuaded some bureaucrats and commentators that a manipulated form of capitalism is the wave of the future," he reckons. Who? Where are they? Here? Overseas? Maybe Argus put the detail in and The Australian edited it out. And he blames Europe's woes on "lax fiscal policy", which will come as a shock to the Spaniards and the Irish, who ran tight fiscal policy throughout the 2000s. Indeed, the Spanish public debt in 2007 was half that of Germany's. Still, Don wants to talk more about fiscal policy later, so it wouldn't serve to complicate the narrative.

Argus essentially makes five points. Let's go through them one by one. First is that Australia's fiscal position isn't as good as we think it is, because we spend too much, and that Labor has mismanaged fiscal policy by concentrating on increasing tax revenue. There, Argus is straight out, point blank wrong. This financial year, tax revenue is forecast to rise to 22.9% of GDP. That's compared to a remarkable 25% of GDP under Howard in 2005. it is currently forecast to rise to 23.5% of GDP in 2015-16 -- still well below the levels the Howard government left us with. And this year spending will be 23.5%, well below the level of the Howard government for most of the decade.

Argus thinks we spend too much on welfare. Spending on education and health are OK, he graciously allows. But welfare "is not an investment in Australia's productive capacity". On that basis, you'd assume he'd recognise where we went wrong on the entitlement mentality, which was during the Howard years.

But Argus is, recall, a good friend of John Howard and a huge fundraiser for the Liberals in 1996 when he headed NAB. He has also been a serial critic of the current government, which he has attacked as "lazy". Presumably his interested in "lifting the tone of debate" only applies insofar as it doesn't mean departing from his partisanship. Maybe that's what he means when he says he doesn't want to get "tangled up in all the political mumbo-jumbo".

His second point is on productivity. Here, it's the same-old-same-old -- it's all the fault of unions and workers. "We must give our business leaders the flexibility to shape their workforces and manage their balance sheets without threats of disruption from unions and harassment from government". Presumably Argus didn't bother checking the most recent figures on labour productivity which show it rising strongly. But his timing is particularly poor given that yesterday, Treasury deputy secretary David Gruen gave a speech about productivity at a Melbourne conference. There's a telling graph from Gruen's speech that sums up why the focus of Argus and other business leaders on bashing their workers is mistaken.

As far as Argus is concerned, Australia's productivity problem is the blue line, and the red can safely be ignored.

Quite a few economists (two of whom, Henry Ergas and Warwick McKibbin are favourites of The Australian) got mentions in the Australian Financial Review's report of the Gruen speech this morning. According to the AFR report "[Ergas and McKibbin] said the industrial relations system was distracting managers". Talk about a weak rejoinder that completely missed the point of the Gruen paper, whether unconsciously or deliberately.

The other productivity villain for Argus is an unlikely one: the carbon price. Argus attacks the "dogmatic determination" of political leaders to push ahead with a carbon price. It's an odd choice of words, because in September last year, Argus was claiming the carbon price was "politically expedient". Maybe Don's been reading the last 18 months' polls upside down. Don's beef with a carbon price is that we're being "lone rangers" in taking action on climate. Again, of course, that's point blank wrong, as Argus would know if he'd bothered to check the Productivity Commission's report on offshore climate action schemes. He also forgets what every "lone ranger" critic also forgets, that Australia has much further to go in decarbonising its economy than any other developed economy, given our oil sheikhdom-like addiction to CO2.

Argus also has a beef with the NBN. Given that at the start of his speech he laments the threat of "potential cyber attacks that threaten intellectual data", it's probably safe to assume Don doesn't have much grasp of that whole internet thing. "[T]here was seemingly very little consideration of alternative options before the government committed to it," he complains. This is another regular furphy from NBN critics: in fact, the government spent millions of dollars testing the market to construct a FTTN network before deciding that the market response (remember Telstra's desultory expression of interest?) didn't stack up.

So, the Argus plan for Australia -- deregulate IR, slash welfare, dump the carbon price, dump the NBN, and bag a government even when it does exactly what he insists needs to be done. It's the same stuff we've been hearing for months from senior business people, and it doesn't get any less wrong for being repeated.

But then, Argus isn't exactly being consistent. When it comes to applying his philosophy to his own businesses, he's more than a little wanting. Argus presided over NAB's $3+ billion Homeside debacle. And what about Southcorp's over-the-top acquisition of Rosemount when Argus was chairman there? Or the $3 billion blown by BHP-Billiton on the Ravensthorpe nickel mine on his watch? As Gruen explains, high-quality management pursuing profit is what drives productivity gains. And on that score, Argus's productivity record has some gaping holes in it.