ReadWrite-grogsgamut

Here was the big splash on the front page of The Oz yesterday:

Carbon tax to hurt more than ETS, warns energy sector

…miners said failure to deal effectively with the trade exposure of export industries could cut more than 23,500 forecast jobs to 2020 and threaten the resources boom.

In submissions obtained exclusively by The Australian, the Energy Supply Association of Australia warns that delays to an ETS "would only serve to increase investor uncertainty", while the Minerals Council of Australia warns that the hybrid approach as proposed "will result in substantial volatility in carbon prices and will compromise investment certainty".

The MCA said the design of the carbon pricing scheme threatened the resources boom and could cost the industry $30bn over the period to 2020, threatening an investment pipeline worth $140bn and contradicting the government's strategy of "maximising the opportunities of the Asian century".

The energy and mining submissions will add to growing pressure from the business community over the design of Labor's carbon pricing scheme.

There was more:

Miners say 23,000 jobs at risk

MINING companies have warned Julia Gillard the design of the carbon tax threatens the resources boom and could cut more than 23,500 jobs this decade.

The Minerals Council of Australia says the carbon pricing scheme's design could cost the industry $30 billion to 2020, "threatening an investment pipeline worth $140bn and directly contradicting the government's own strategy of maximising the opportunities of the Asian Century".

Well actually it was the same, but hey – why not bang out 2 articles for the price of one…

I wondered, given the MCA and various chairmen and CEOs of carbon heavy companies are predicting the end of life as we know it (including poor Whyalla being wiped of the face of the earth), how the share prices in these companies has been going since the announcement on 24 Feb by Gillard that a fixed carbon price (or carbon tax if you must), was being introduced.

If the carbon tax was a killer for the industry, logically you would expect that since that announcement, the share price in those companies would be gloom and doom – unless you think people will invest in a company even though they believe it will be pretty well trashed next year.

Firstly let’s have a look at who is most exposed:

The Vic Super Carbon Count 2009 report lists the most carbon heavy industries:

Metal and mining aren’t happy campers it would seem.

Incidentally Scope 1 and 2 are defined as this:

Scope 1: Direct Greenhouse Gas (GHG) emissions emitted from business activities such as fuel combustion, refrigerant use and industrial processes. For example, emissions from a gas boiler used for heating or process emissions released during iron and steel production.

Scope 2: Indirect emissions from purchased electricity.

OK. Let’s have a look at the top 10 carbon-spewing, GHG-emitting companies:

And how important are these 10?

10 companies accounted for 75% of the combined Scope 1 and 2 emissions in the Index

Ok, but there are other companies that are smaller but whose emissions are m0re intense – ie when compared to their revenue. These would no doubt be the most worried by a price on carbon. Here are the Top 15.

Only Alumina, BlueScope Steel and AGL Energy are in both the Top 10 biggest and the Top 15 most intense.

Right, let’s get on to the share prices. Each chart shows the performance of the company’s share price in the last 3 months (which is quite handy since the announcement on 24 Feb was just under 3 months ago). Let us have a look, and given the dire words in The Oz yesterday, I expect a full on carnage as we see evidence of investors fleeing these companies about to be slaughtered by Julia Gillard and Bob Brown.

BHP

So around the time of the announcement it was trading at about $46 a share. Now it is $44. The only problem though is in the time since the Carbon Tax announcement the shares also went up to nearly $50 a share, and BHP has also announced it is continuing to expand its mining in Olympic Dam. How much is it spending on the project? Oh a lazy $20 billion or so. As a shareholder of BHP I sure as hell hope they know what they’re doing. Don’t they know the mining boom is about to be killed??

Just quickly (and I won’t do this for the others) you can see that BHP has been doing OK in the last 12 months despite Gillard also in that time announcing that the MRRT will continue.

RIO-TINTO

Like BHP, RIO’s share price is lower than it was when the carbon tax announcement was made, and like BHP it also went higher after the announcement. Hardly a sign of investors fleeing in distress.

BlueScope Steel

OK, here we have a company that has gone down and down since the announcement – from around $2 to 1.50. Must be the carbon tax. Err no:

BLUESCOPE STEEL has confirmed its earnings are being hit by the effects of the rising dollar, lower steel prices and weakness in demand in the domestic steel market.

there’s also this:

BlueScope has about $1 billion in debt. While its gearing is modest at about 14 per cent, some in the market had concerns about what the earnings pressures on the company could mean for its debt covenants.

And the carbon tax?

The company is a leading critic of the federal government's planned carbon tax and the impact it could have on the steel industry. But in the short-term, the spike in the dollar has been of greater concern.

Indeed analysts, JP Morgan, downgraded their outlook for BlueScope:

Analyst Benjamin Wilson said the cut was driven by a tough coming 12 months, including the high Australian dollar, BlueScope's falling share of the domestic market and uncertainty regarding the carbon tax.

The uncertainty of the carbon tax. Though not the actual carbon tax. (And incidentally at the same time JP Morgan upgraded their outlook for OneSteel).

Qantas

Hmmm. Not good numbers for Qantas. It was trading around $2.32 when Gillard made the announcement. Now it is $2.10 – a 9 per cent slide. Obviously the carbon tax?

Qantas Airway's pre-tax fiscal year profit could drop nearly 10 per cent as a result of the A380 engine fiasco that engulfed the company in late 2010, according to an analysis reported on by The Australian.

and:

Tough times have long been a recurring theme at Qantas and the latest round of challenges - rising oil prices, threats of industrial action and a string of mid-air emergencies last year - is nothing new.
…

In terms of capacity, its latest half-yearly accounts indicate that Jetstar increased domestic capacity by 20 per cent and international capacity by 18 per cent. This pace is in contrast to Qantas, which expanded capacity by 3.3 per cent, with plans to increase it by 4.5 per cent.

Whatever surveys and customer service reports that Qantas brings up, mounting anecdotal evidence shows it has lost the mindshare of customers. The growing perception is Qantas doesn't care about safety, customer service or its employees.

So carbon tax? Nope. Oh and also once again:

The airline's chief noted: "Australia's Qantas Airways Ltd. (QAN.AU) faces an increasingly tough battle making its international flights profitable amid rising fuel costs, foreign competition and a surging Australian dollar that's hitting inbound tourism.

That high Aussie dollar…

AGL Energy

Now AGL Energy is in both the Top 10 carbon emitters, and also the Top 15 carbon intense companies. It’s share price was around $14.50. Now it’s around $14.50. Huh.

Wesfarmers

Wesfarmes is another whose price went down and then came up, and now sits around where it was when the announcement was made. I guess investors have concluded that the carbon tax won’t be introduced.

Alumina

Alumina is another in both the Top 10 biggest and Top 15 most intense. It has gone up and down. How does Don Morley, its Chairman feel about its share price?

THE price of alumina has jumped 28 per cent in the past year but is still too low, according to Alumina Limited.

The strong Australian dollar and higher energy prices were constraining its performance, the company said.

Margins for the commodity were tighter than they should be and its price did not reflect the cost and economics of producing and selling it, chairman Don Morley said.

China had been able to increase alumina and aluminium production to meet demand, which had limited price increases.

"This has limited aluminium price increases and meant that aluminium has underperformed relative to other commodities," Mr Morley told shareholders at Alumina's annual meeting.

And the carbon tax?

Mr Morley attacked the proposed carbon tax, saying China's alumina and aluminium industries did not pay a similar tax and would shift production away from Australia if one was introduced here.

So he doesn't want it, but even he doesn’t suggest it is constraining their performance. (But yeah that strong Australian dollar…)

Onesteel

Not good signs for One Steel. A steady decline. Bloody Gillard and Bob Brown – there’s your proof! Oh wait:

IN a sign of mounting pressure facing the nation's manufacturers, OneSteel has slashed second-half profit guidance by a quarter because of a high dollar and wet weather in South Australia, sending its already battered share price to a fresh two-year low.

Wet weather? High dollar? That’s not quite on the script where hearing.

Orica

Well it was trading around $25.50 and now it is around $26.50. A horror story, I know. Close your eyes and just keep reading, maybe it’ll all go away if we pretend we didn’t see it. 

Boral

The evidence here is pretty overwhelming…

Building materials supplier says it remains on track to deliver a turnaround in annual net profit, despite soft residential markets and bad weather earlier in the year.

Again with the bad weather and local demand.

OK, look, these are just isolated examples… let’s move onto the Carbon Intense companies, there we’re sure to see the Carbon Tax at work:

Energy World

Ummm….

Adelaide Brighton

Adelaide Brighton’s share price certainly has gone down. Though again at the time of the announcement they were around $3.30, but in April they rose to $3.35, so the price fall is certainly not due to any carbon price announcement. They too would have been affected like Boral and OneSteel by bad weather and falling demand (oh and yeah, the strong Australian dollar).

Paladin Energy

Ouch. Look at that fall! And it came just a little bit after Julia Gillard put the knife into the mining industry. Quod erat demonstrandum.

Thing is, Paladin Energy is in uranium mining. What event happened on 11 March that may have seen a fall in the share price of companies whose main revenue is uranium? Yep the tsunami and subsequent  Fukishima Plant 1 “issues”:

However, the shallow 9.0 Tohoku earthquake on 11 March 2011 off the coast of Japan caused significant accidents at four nuclear power plants in Japan with the release of radioactive material from the Fukushima I Power Plant.
Paladin addressed the issue in the company’s recent quarterly report reminding readers that “nuclear power still has an impressive safety record when judged alongside other energy sources.”
Uranium prices fell sharply after the earthquake.

So carbon price? Sorry nothing to see here, move on.

Santos

So after the announcement Santos share price went up, then down to about where it was. Why?

SANTOS has told shareholders to get used to lower dividends for the next five years, as it prepares to spend more on its plans to become a substantial liquefied natural gas producer.

At the meeting, chief executive David Knox brushed off questions about a dinner at Kirribilli House on Wednesday night to discuss Julia Gillard's planned carbon tax.

Instead, he restated the company's position that a carbon price was needed, but that industries exposed to overseas competition, such as LNG, should be compensated.

How much is it planning on spending on LNG production?

In January, Santos and its joint-venture partners started construction of the $16 billion Gladstone LNG project, which is planning to export onshore coal-seam gas to Asia from 2015.

Has this project been suspended since the announcement on February 24? That’d be a no.

Look I know share prices can be influenced by numberless things. I know BHP, Rio etc have operations overseas. But the next time you hear some mining company talking head or paid spin doctor going on about the destruction of the industry, the end of the boom, the death of Whyalla, or Tony Abbott saying the carbon tax will kill the mining industry “stone dead”, ask yourself, if that were true would you be investing in companies likely to heavily affected by a carbon price (and indeed a mining tax) if it was your job to make money from investing on the share market?

Investors in the market may be cocky and arrogant and brash. But they’re not stupid. They’re not investing in these companies on the assumption that the carbon tax or the mining tax won’t get passed. They’ve factored it in and and still investing in them.

What these charts show however is that the impact of the Australian dollar is the big item affecting revenue and profit. This is not surprising – certainly not for the Treasury, which noted in a minute published by Peter Martin that, for example, with respect to steel:

A 5 per cent appreciation in the exchange rate, is the equivalent to a price reduction (or cost increase) of $30 per tonne in Australian dollar terms. The $A has appreciated by 7.5 per cent so far in 2011 and by almost 57 per cent since the beginning of 2009. These effects are multiples larger than any potential impact from a carbon price

So a 5 per cent rise in the dollar is like  $30 per tonne price on carbon. The graph on the left shows the percentage increase in the value of the dollar since the start of 2009. 5 per cent happened a long time ago. Has the mining, manufacturing, cement industries been destroyed? Is Whyalla still here? Even a $40 per tonne price that is being bandied around or the $49 per tonne price that is being suggested will be in place once the ETS begins, will not be as big an impact as the increase in the dollar over the last 12 months.

Look there will be job losses from a price on carbon. It will not be great for everyone. But let’s get some perspective – there are things happening in the economy and in industries that have had bigger impacts than a price on carbon and yet Armageddon has been avoided.

So when you read that the end of times is coming. Take a deep breath and ask why has BHP share price increased about 22 per cent over the last 12 months? Because it sure as hell ain’t because Tony Abbott says he will wind back the tax in 2013.

And just on the rise of the Australian dollar which has hurt so many companies like BlueScope and Qantas, Matt Cowgill last year pointed out that the Treasury had already thought of a policy that would help out downward pressure on the dollar:

Their solution was a resource rent tax that would flatten out the disparities in our two-speed economy and put downward pressure on the exchange rate (particularly if some of the revenue was invested off shore).

Now if only that had been introduced….

As we leave Budget week behind us for another year, two polls – by Newspoll and Nielsen - came out to see if there was any budget bounce. Actually there is no such thing as a budget bounce, and probably the only person left around who believes in it is Peter Costello who is still waiting for the bounce from the 2007 Budget to arrive.

The polls – regardless of whether or not there was a budget – were pretty dire for the ALP. Newspoll had the ALP at 46 to the LNP 54, the Nielsen was worse – 44-56.

The big news was though the disapproval ratings of the PM – in Newspoll her approval rating went up 6 points and her disapproval rating went down 4 – giving her a net satisfaction rating of minus 21! Abbott meanwhile was sitting on a relatively fun net satisfaction rating of minus 13.

Geez people hate the leaders at the moment.

The budget was also given a run by Newspoll, and not surprisingly it didn't go down well. The ALP rather intriguingly thought the best way to deal with Budget week was to start it by talking about asylum seekers (never the ALPs biggest seller) and to end it by talking about Tony Abbott. In between we had the idiocy from the media of $150,000 non-rich people whining about it not being fair they don’t get welfare, and Gerry Harvey saying he could install set-top boxes for less than the Govt says it will cost – although I’ve yet to hear if Harvey has responded to Stephen Conroy’s call for Harvey to put in a tender if he thinks he can do it for less.

On the issue of set-top boxes, Tony Abbott is taking the rather interesting approach of criticising it at every opportunity but not saying whether or not he will vote against the measure. Take this on AM this morning:

TONY ABBOTT: Well, the trouble with the budget is that it was tough on families but it wasn't tough on waste and that is the problem. I mean, this is a government which never seems to learn. I mean the set top box issue, I mean why should the Government be paying $350 to do something which the private sector will do for $168? Why should the Government be sending people into pensioners' homes to do a bad job at a high price?

ALEXANDRA KIRK: Well on that issue will you oppose that measure?

TONY ABBOTT: Well, again what I've said Alex on all of the various budget items is that our position will be clear when they come into the Parliament but we are not going to run a, you know, will you do this and will and will you do that just to suit the convenience of the Labor Party.

Huh? He cites it as a prime example of waste, and yet won’t say if he will block it? Talk about boldness of leadership! 

Perhaps his lack of clarity on this issue is because he realises that his argument that the private sector doing something more efficiently than a Government tender is the exact opposite of his reasoning for why he is against an ETS and is in favour of “direct action”….

So given all that it’s not surprising that the Budget did not perform well – only 37 per cent in Newspoll said they thought it was good for the economy, compared to 32 per cent who thought it would be bad (not a terrible result, but not great historically). The thing with such polls however is while it might be nice to say it’s all the fault of Gerry Harvey, or Wayne Swan’s poor salesmanship, a look at the same question on budgets going back to 2006 shows that people’s thoughts on whether or not a budget is good for the economy is very strongly linked to whether or not they think it was good for themselves personally.

The correlation between the two is pretty strong.

If we look at the opposite view – ie whether the economy has been bad for you personally and bad for the economy we see much the same thing:

They are pretty well lock step together except for 2008 where people thought the budget was not as bad for the economy as it was bad for themselves (32% to 23%) and again this year where 41% thought it bad for themselves, but only 32% thought it bad for the economy.

And so we really shouldn’t get too caught up in one-off polls – people not surprisingly have a tendency to see themselves as the centre of the economy, and fair enough –  you’d have to be pretty bloody altruistic, for example, to think losing your own job is good for the economy – though you may be more inclined to think that getting money is bad for the economy (but you’ll take it anyway).

But, yes, the polls were bad for Julia Gillard – killing-zone bad in fact, were it not for the fact that there is not going to be a change of leadership because any change of leadership would mean the end of the minority Government and a slaughtering at the polls. The ALP know the polls are bad, Laura Tingle in her column on Friday wrote:

…. the two important things to know about Julia Gillard's government this week are that it has boxed clever enough in framing a budget to offer no obvious grounds for a parliamentary defeat, and that everyone from MPs to senior cabinet ministers are working on the pragmatic assumption that they will lose the next election, whenever it is called.

So the polls are bad, but because of the minority Government, polls are actually less relevant than they have been for a very long time – at least since Rudd took over from Beazley. Sure backbenchers will be nervous (though show me any Government backbencher in any Government who isn’t nervous and I’ll show you one without a pulse), but life goes on – and that means at least two more budgets yet before the next election, and lots of policy – Carbon Tax and Mining Tax among them – to go.

Gillard is trying to run this line in her speech today at the Australian Agenda UBS Lunch in Sydney, she ended on this note:

As we move into the conversation stage of today, I do want to conclude by reinforcing the need to reform conversations. As Prime Minister, I lead a Government committed to reform and we, day after day, work as consultatively as we can to put together those reforms. Ultimately we will lead, and we have done, by the budget, having collected views across the business community and beyond as to how the budget should be shaped.

But reform leadership requires not just the Government to be out there as a proponent of the reform conversation. It requires all elements of our community to be in the reform conversation. We are a nation, I believe, with not a day to waste, not a day to waste in some of the more frivolous conversations that beset our national life. We need to make sure we are having a deep reform conversation about the changes our nation needs now, as we move into this history-making period of economic growth.

So, my challenge to you, to the nation more generally, is to be in that reform conversation. There are inevitably many issues that are intriguing in the moment, but we’ve got to look beyond those issues that are intriguing in the moment and work through those things that are truly momentous together.

Hmm “look beyond those issues which are intriguing at the moment”? Good luck with that – especially on a day that Newspoll and Nielsen came out.

In his Quarterly Essay, George Megalogenis wrote of the polls:

“Newspaper opinion polls – Newspoll, ACNielsen, Galaxy – have becomes the cheapest form of content for a political reporter.
…

The Australian no longer just publishes a report of the fortnightly poll and an accompanying analysis. The results are cross-referenced  in all sorts of stories. Every other media organisation covers Newspoll as well…
…
We have poll driven columnists tut-tutting at poll-driven politicians. Polls create a false sense of precision in what is an imperfect science

So was he on the money?

Well this morning Julia Gillard gave a doorstop press conference where she talked about the $3 billion skills package that was announced in the Budget – it was a key plank of the Budget, and central to Gillard’s outlook on economic policy. Let’s check in and see what questions were asked:

PM: I’m very happy to take any questions.

There’s her first mistake

JOURNALIST: Prime Minister, have you been satisfied with the way the Government is selling the Budget?

OK. Not sure what the journalist expects her to say – maybe she thinks Gillard will say “No, Swan has been lousy”. Wasted question there.

JOURNALIST: But do you think that message has penetrated? I mean, is it getting a fair go, in terms of reception?

The reception? You mean the media coverage of it – unless you think most people receive the budget by actually watching it?

JOURNALIST: Are you frustrated with the Government seemingly just can’t take a trick in terms various initiatives, like the Budget, like the Malaysian (inaudible)? Are you getting frustrated with the reception of all these?

So you want the PM to talk about the media coverage? Look at moi! Please tell us off!

JOURNALIST: And yet day after day they’re seemingly being rejected. At least, that’s how the headlines would have it, and that’s how today’s poll results would have it as well.

Ah the headlines. Ah the polls. More “talk about we the media.” I would criticise this question, except, well as you can see it is not actually a question. So I think we should just take it as a statement.

JOURNALIST: Based on that poll result, though, can you claw this back in terms of your own popularity as Prime Minister? (inaudible) past the point of no return?

The poll! Please PM, talk about the poll – we the media pay a lot of money for those polls, we need to drag out the story as long as we can. We need your answers to focus on the polls so we can say you are focussed on the polls.

JOURNALIST: What does this say about your personal approval rating dropping today? Is that a reflection on the work you’ve done on the Budget?

I’m not sure if you heard – there was a poll out today. Buy the way, you know how many people in the real world it affected? Yep. That’d be zero. $3 billion in training, however, that might affect real people – or it might not. It would be nice if a journalist tried to pry open the policy and see what lies within. It may be awful, it may be great. Patricia Karvelas for The Oz is writing a lot about Work for the dole, why not read her article and come up with some questions?. The Budget was announced almost week ago so you think they’d have a few questions on it… 

JOURNALIST: (inaudible)

Question of the day

JOURNALIST: Do you think you need to change tack in how you communicate that to the people, and to stop them, you know, the Coalition, gaining momentum in the polls?

Remember this key fact if you want to get ahead in political journalism – polls are the important thing in life – they put bread on the table (well on the table of media organisations at any rate).

JOURNALIST: Well, aren’t the polls a representation that you’re not getting the job done, if you’re losing favour with them?

The polls are life. All around their margins is the gulf.

Let’s remind ourselves of something else Megalogenis wrote: “Newspoll has created a self-fulfilling cycle of anticipation, interpretation, rejection and impatience for the next instalment”. Now sure, politicians seem to live poll to poll, but don’t for a moment think journalists just follow like sheep – we see here the lazy desire of journalists to just ask about polls so they can then write about polls.

JOURNALIST: (inaudible) a number of Labor backbenchers who are feeling uneasy about how Labor is faring in the polls. Are you feeling under threat?

Ahh the backbenchers – guess this question explains this story. The backbenchers of course are all off the record. I guess it is only in the national interest to know just that there are worried backbenchers, and not to know which ones are undermining Gillard by talking out of school with journos?

JOURNALIST: Why do you think people are so unhappy with things as they are at the moment? (inaudible) good things about the Budget?

The frustration for these poor hacks must be rising here – there have been 10 questions about how the Government is travelling in the polls and she refuses to be obsessed about the polls. Time to change tack.

JOURNALIST: Two significant wage claims are being decided upon today. What does that mean for the costs of government and business if they do go that way?

Hurrah! Finally we get to a question on an issue affecting real people.

Fair Work Australia were to hand down a decision in which about 200,000 community and disability workers employed by the non-government sector are asking for a 25 per cent pay increase (yeah non-Govt community and disabled workers – not exactly a group synonymous with well to do. In fact doing it bloody tough would be most people's thought’s I’d wager).

The big issue they were arguing was that because the workforce was 87 per cent women they were being paid less because they were women.

Fair Work Australia found that they were right:

SAMANTHA DONOVAN: Fair Work Australia has found that the work of about 200,000 people like Jaina Devlin is undervalued. Eight-seven per cent of them are women. And the tribunal found that their gender is largely the reason they've been underpaid.
The question now is how much of a pay rise will fix the undervaluation.

It was good that one journalist thought it worth asking about.

JOURNALIST: Do you think there’ll be uncertainty surrounding Australia’s borders and your move with Malaysia may be having an effect on how people are feeling at the moment?

OK, asking about the Malaysian asylum seeker deal good – but for God’s sake not how people feel about it. How about ask her about the Malaysian asylum seeker deal, because geez if you can’t think of a question that may have the PM jumping around uneasily on that, you might as well give up being a journalist right now. Like – how for example will she be able to guarantee that the asylum seekers sent to Malaysia won’t be abused? Sure the UNHCR is involved, but what will the Government do to ensure the Malaysian Govt isn’t just treating them with lip service?

No? I guess time to move on to the big issue of the day

JOURNALIST: Prime Minister, yesterday a Brisbane man died in a new craze called planking. What’s your message to people who are thinking of taking part in these kind of planks?

Seriously?

OK, here is how the PM answered this:

PM: Well, I guess there’s a difference between a harmless bit of fun done somewhere that’s done really safe and taking a risk with your life. This is a really tragic thing - there’d be a family that’s just devastated today – a really tragic thing. So, my message would be everybody likes a bit of fun, but focus has to be on keeping yourself safe first.

She gave a brief response – didn't overegg it. Acknowledged that a family is grieving and said a fairly standard message about playing safe.

Here’s how it got reported:

Julia Gillard joins warnings against the craze of 'planking'

Oz PM Calls For End To Planking After Death

Planking death prompts Australian prime minister's call for safety

PM appeals against dangerous planking craze

And two of those were from UK news websites!

Ah well enough of this, let’s get down to why we’re all here:

JOURNALIST: Prime Minister (inaudible) reports over the weekend, may you be attending your own wedding (inaudible)

Sigh.

This week’s Flick of the Week takes with Donna Reed from her Oscar winning role as Alma 'Lorene' Burke in From Here to Eternity to the movie role she is probably most famous for, Mary Hatch), in Frank Capra’s absolute classic, It’s a Wonderful Life. 

I must say right off the bat that It’s a Wonderful Life is in my all-time Top 5 favourite movies. In reality there are probably about 8 or 9 films in that Top 5, but this one would never be pushed out. I love it on many levels and have done since I first saw it as a 20 year old in 1992.

It was a film I had read about, but never come across. Unlike America, where it is a staple of TV at Christmas time, in Australia it is rarely seen, and does not hold any grip on our culture in the way it does in America. I came across a video copy for sale in Woolworths for bugger all (literally – I think it was $4.99, which even back then was easily spent for a student surviving on Austudy). I was living in a flat at the time, and my flatmate was out that Friday night and no one else was all that interested in watching an old 1946 black and white flick, and so I watched it on my own.

This turned out to be a good thing because by the end of the film I was an absolute wreck. I don’t mean a little bit misty eyed, or just blinking away a few tears. I mean bawling my eyes out and going through two hankies. Such a state is generally not best displayed in front of friends when you’re 20 and struggling to maintain some level of coolness (a struggle I pretty well lost I must say).

The film concerns George Bailey (James Stewart) and his life in the small town of Bedford Falls. It follows his life from childhood to adulthood. We see others leave the town and go on to better fortunes and what George believes are better lives, while George himself – although the smartest one in his class – is left behind. Along the way he gets married (to Mary Hatch) and things are comfortable if boring, until the fateful day where his life seemingly falls apart and then due to divine intervention (Clarence Oddbody, Angel Second Class) he gets to see the world as it would have been had he never lived.

For those who have not seen it I won’t give away the ending suffice to say this is a Frank Capra film and Capraesque is not an adjective used to describe films with unhappy endings.

Other Frank Capra films such as Mr Smith Goes to Washington, Mr Deeds Goes to Town, You Can’t Take it With You, It Happened One Night, Arsenic and Old Lace, rightfully sit high up in the American film canon, but this one I think easily outshines them. It was also Capra’s last great film, which is odd given he was only 49 at the time and would live till 1991. 

But while Capra is a masterful director, and the screenplay – based on a short story by Philip van Doren Stern – which included uncredited work from left wingers, Dorothy Porter, Clifford Oddets and Dalton Trumbo is just about the best tale ever of the little man fighting against the rich and powerful, the film is carried to great heights by one man – James Stewart.

Filmed in 1946, this was Stewart's first film role after serving in the American Army as a bomber pilot during WWII. Some actors’ roles in the war may have been elevated a bit by studio publicity, but with Stewart there was no need to pad. He joined the Army Air Corps before Pearl Harbour (he was33 at the time), flew 20 combat missions over Europe, won the Distinguish Flying Cross twice and finished the war as a Major. He was also a lifelong conservative – and an early supporter of Ronald Reagan. Despite this – and showing politics is not the be all of life he was also best friends with Henry Fonda who was of the complete opposite political view.

That Stewart was such a conservative is rather surprising when you see him in this role. Far from being a paean to the great American Dream – where hard work and honesty will see you succeed – here we see George working hard, being honest, finding some small measure of success, but being grossly dissatisfied with it all. Some of this is his own choosing – he turns down an offer to get in “on the ground floor’ of the plastics industry run by his old school friend Sam Wainwright – but mostly it is because he feels trapped into doing that honest, hard working, proper thing. He stays while his brother goes. He stays while Sam Wainwright goes. Sure at the end (ok bit of a spoiler) he is declared the richest man in town, but the reality is that has happened in spite of his best efforts – and is in no way a monetary sense either.  George wanted to leave – he wanted to do “great things”. He tells his father his attitude to this supposedly perfect example of small town America that is Bedford Falls, and his father’s small business running the Bailey “Building and Loan” (a type of Building Society):

George Bailey: Oh, now Pop, I couldn't. I couldn't face being cooped up for the rest of my life in a shabby little office... Oh, I'm sorry Pop, I didn't mean that, but this business of nickels and dimes and spending all your life trying to figure out how to save three cents on a length of pipe... I'd go crazy. I want to do something big and something important.
Pa Bailey: You know, George, I feel that in a small way we are doing something important. Satisfying a fundamental urge. It's deep in the race for a man to want his own roof and walls and fireplace, and we're helping him get those things in our shabby little office.
George Bailey: I know, Dad. I wish I felt... But I've been hoarding pennies like a miser in order to... Most of my friends have already finished college. I just feel like if I don't get away, I'd bust.

George’s tale is not the tale of American capitalism succeeding; more it is the tale that shows success is not found through chasing financial riches but the riches of friends and family.

The great thing about Stewart's performance is we see him as Jimmy Stewart, all around good guy, but then we see him “bust”. On the day when it all goes wrong – $8,000 from the Building and Loan has been lost by George's uncle (though George takes the blame) – we see George Bailey get angry at his kids, his wife, his kid’s teacher. And at no stage does Stewart give the audience a little nod to let them know it’ll be ok – that he’s just pretending. We see the pent up rage of a man who has been wanting to get out of this crummy town being let loose and it ain’t pretty.

When the angel does arrive, George is cynical and contemptuous. The first thing he does is take him to a bar (bear in mind this is Christmas Eve!). The scorn and anger in his performance only dissipates when he discovers that his wish to never have been born means his wife Mary does not know him.

I think Stewart’s performance is the greatest leading-acting role in any Hollywood film. Better than any by Bogart, or Grant, or Clift or Brando, or Hoffmann or Nicholson or Pacino or De Niro. Heck it’s better than Morgan Freeman in The Shawshank Redemption! He truly runs the gamut of emotion from A to Z and back. We see him young and cocky. We see him assertive and bold. We see him loving, caring, and kind. We see him angry, hurt, and truly at the end of his rope.

Here is a scene of George arguing with the town richest man Mr Potter (Lionel Barrymore) over the value of the Building and Loan. It displays the brash force behind Stewart's performance perfectly:

Now compare that scene to one later in the film when George goes to Potter after the $8,000 has been lost:

I cried when I watched this film (and still do – though I have seen it many, many times) not because of the cutesy things like his daughter telling us that “teacher says every time a bell rings and angel gets its wings”, but because the journey George Bailey takes was one I could relate to oddly even as a 20 year old. That desperate desire to do something with my life, that want to shake the dust of the small town in which I grew up of the shoes of my feet. That knowing knowledge that were I George I would probably make the same choices he does.

This film has become so ubiquitous to American culture that it has been parodied in The Simpsons and South Park and just about anything else that wants to take a stab at American culture. And while I am cynical of media and politics and manipulative films, this one destroys my cynicism because it comes from such an honest core. It is not all saccharine and angels. It is actually a film of frustration and greed and struggle. It is that basis that makes the ending so magnificent.

When the film was released it was moderately successful. It made back its budget, was nominated for  5 Oscars – including Best Picture, Actor and Director. It didn’t win any. Now I suggest it would win the lot, and a few more besides.

A great film.

Previous Flicks of the Week:

From Here to Eternity – Burt Lancaster
Sweet Smell of Success – Elmer Bernstein
The Great Escape – Richard Attenborough
Elizabeth – Geoffrey Rush
Pirates of the Caribbean – Johnny Depp
Platoon – Willem Dafoe
Inside Man – Clive Owen
Gosford Park – Robert Altman
The Player – Tim Robbins
Bull Durham – Kevin Costner
Field of Dreams – Ray Liotta
Goodfellas – Samuel L Jackson
Pulp Fiction – Frank Whaley
Swimming with Sharks – Kevin Spacey
Working Girl – Sigourney Weaver
Aliens – Bill Paxton
Apollo 13 – Ron Howard
American Graffiti – Richard Dreyfus 
The Graduate – Dustin Hoffmann
All the President’s Men – Jason Robards
Once Upon a Time in the West – Henry Fonda
Mister Roberts – Jack Lemmon
Some Like it Hot – Billy Wilder
Witness for the Prosecution – Marlene Dietrich
Touch of Evil – Orson Welles
The Third Man – Trevor Howard
Brief Encounter - David Lean
Lawrence of Arabia – Claude Reins
Casablanca – Humphrey Bogart
The Big Sleep – Howard Hawks
His Girl Friday – Cary Grant
Charade – John Williams
Schindler’s List – Liam Neeson
Love Actually – Emma Thompson
Sense and Sensibility – Ang Lee
Crouching Tiger, Hidden Dragon – Michelle Yeoh
Tomorrow Never Dies – Pierce Brosnan
The Thomas Crown Affair – Renee Russo
In the Line of Fire – Clint Eastwood
Where Eagles Dare – Richard Burton
Zulu – Stanley Baker
The Guns of Navarone – Peter Yates
Breaking Away – Dennis Quaid
The Right Stuff – Ed Harris
The Rock – Sean Connery
The Longest Day – Richard Beymer
West Side Story – Ernest Lehmann
North By Northwest - The first one

So today the unemployment figures came out.
Always a wondrous moment for economics nerds and a damn boring moment for the media – unless the figure does something good (ie bad). It actually did not much (and not much is never going to lead the news). It stayed level at 4.9 (or if you want to really break it down it went from 4.9193716% seasonally adjusted to 4.850852%).

Employed persons however went down in seasonal terms 

Employment decreased 22,100 (0.2%) to 11,436,500. Full-time employment decreased 49,100 to 8,056,800 and part-time employment increased 26,900 to 3,379,700. 

Also the participation rate fell from 65.8% to to 65.6%. The trend was steady, but while “the trend is your friend” I like looking at seasonal terms.
This fall in the participation rate is the main reason unemployment stayed steady:

Unemployment decreased 9,800 (-1.7%) to 583,000. The number of persons looking for full-time work decreased 1,700 to 413,000 and the number of persons looking for part-time work decreased 8,100 to 170,000.

So all in all not the rosiest of pictures, but not a horror state of affairs.
What does it mean? (Which we all know is code for what does it mean for interest rates?)
Well here is a shot of the exchange rate market:
The red line dropping on the far right hand side of the graph is the dollar dropping in value against the US dollar by one cent on the announcement of the figures.
The reason for the drop is the market believes the figures make it less like rates will go up in June, and as rates won’t go up, less investors, speculators and other assorted currency exchange buyers and sellers, didn’t want their money in Aussie dollars and thus the price of the dollar went down.



This is all clear in the market’s expectation of an interest rate rise:

Trading Day	No Change	Increase to 5.00%
3-May	95%	5%
4-May	80%	20%
5-May	87%	13%
6-May	62%	38%
9-May	70%	30%
10-May	75%	25%
11-May	72%	28%
12-May	85%	15%

Interestingly on Monday the expectation of a rise in interest rates was 30 per cent. Since then the expectation has dropped to 15 per cent. So it is hard to argue that the budget has put pressure on interest rates. It may not have completely eased the pressure, but even before today’s Labour figures the expectation was well bellow what it was last Friday.
But as I say there was not much interest in the labour figures today because the focus was all on the class war breaking out around Australia due to the Government doing evil things to people who earn more than $150,000.
Before we get to the coverage let’s have a look at what is being done courtesy of Peter Martin:

Income freeze is nothing new, but the reaction is

The budget documents themselves say that for the next two years the cutoff for getting family tax benefit B, paid parental leave and dependency tax rebates will be frozen at $150,000. That's $150,000 of personal, rather than family income - anything but typical.
The cutoff for receiving the baby bonus will be frozen at $150,000 of family income and the cutoff for family tax benefit A will be frozen at $94,316 of family income, increased by $3796 for each additional child after the first.
What the budget doesn't make clear - but should - is that these cutoffs are already frozen.
Labor introduced the $150,000 ceilings in 2008. Before that, family tax benefit B and other payments could go to the families of millionaires.

As I wrote yesterday, there was bugger all in the budget for households earning over $150,000 that we didn’t already know about. And yet we have had this type of coverage:

You're rich enough on $150,000 a year, says Treasurer Wayne Swan

Really? He said that? Wow what an idiotic thing to say. Oh wait let’s read the story:

FAMILIES in Sydney on $150,000 a year aren't rich, Treasurer Wayne Swan admitted yesterday - but they're rich enough.
Mr Swan, who has been accused of triggering a new class war with his decision to freeze the indexing of family payments to 40,000 families, said: "I don't think a couple on $150,000 a year is rich, I don't think that at all. Families come in different shapes and sizes and with different incomes. There are plenty of families on incomes of $60,000 or $70,000 a year."

So he said they aren’t rich, and then referred to families on $60,000-$70,000. He didn’t say they’re rich enough, or anything like such a thing.  But hey, who needs a quote when you can write whatever the hell you want. Makes journalism a lot easier I must say.
How about this typical family from the SMH:

'Rich' family struggles to meet living costs

So who is calling them rich? Someone must be because the word rich is in quotation marks. Let’s see:

THE Hadfields earn a combined income of about $153,000, tipping them over the threshold for what the government has deemed a ''modest'', not ''rich'', income.

So the quotation “rich” is actually from Swan saying they are not rich. Oh good. That’s not distorting at all.
You know last night I beat myself up over getting part of the Budget wrong. I don’t know why, when I read crap like this being reported – stuff which let’s be frank has a very limited connection with reality and truth.
Over in the Herald Sun the class war was heating up

Families hit with 'class war' taxes under Gillard Government's first Budget

So who was saying class war? After all it is in quote. Let us read shall we:

With Labor well behind the Coalition in opinion polls, the verdict on the Budget is grim news for the Government as it faces claims it has sparked a "class war".
Almost 28,000 people responded to the poll at heraldsun.com.au, 92 per cent saying the Budget will make them worse off. Just under 8 per cent say it will leave them better off.
Opposition Leader Tony Abbott said the Government was punishing aspiration and hard work by families earning $150,000 a year.
"These are class-war cuts that the Government is inflicting on people," Mr Abbott said.

I see. Tony Abbott said it. Yes, you should put that in a headline, because why on earth would you want to convey objectivity in a newspaper?
But look it wasn’t all bad. The Oz actually ran a decent editorial:

Government doesn't need to be centre of everything

Mr Swan gets full marks, however, for starting to scale back middle-class welfare, a cause The Australian has been fighting since the 1980s. It is a measure of the prosperity we now enjoy that some newspapers yesterday portrayed families on incomes of $150,000 a year as the new poor mired in "mortgage poverty" in Sydney's western suburbs. While cost of living pressures are real, and are felt disproportionately in the outer suburbs, there is no justification for doling out welfare to those on this level of income.
Even in Sydney, this is an income most families only aspire towards. If the government wishes to support families, it should do so by lowering taxes. It is far preferable for income taxes to be kept low and for thresholds to be regularly adjusted upwards so that individuals can keep more of their own wages and make their own decisions about how to spend their hard-earned money.

Now I don’t agree with half of it (taxes are not especially high), at least the editorial made a coherent case. Unlike the editorial for the Herald Sun:

Labor crushes rewards for work

THE Gillard Government's first Budget has ridden roughshod over the aspirations of the very people it needs to stay in power.
In what smacks of old-style Labor class divisions, Treasurer Wayne Swan, with the enthusiastic approval of his Prime Minister, has redefined the meaning of "rich".
They are the families bringing in $150,000 a year and it has stung people Ms Gillard and Mr Swan should be protecting, while stamping on the ambitions of others.

Crushes rewards? Seriously? How? Is the reward for work now government welfare. Oddly I thought the reward for having a job that paid over $150,000 was the $150,000. Guess I was wrong.
The Oz as well in many respects following on from the outstanding work by Matt Cowgill yesterday, produced a report that again featured a family, but this time didn’t play the sob story line, and also brought in some facts:
We're not rich, but wealthier than most: Sydney family

HOUSING costs, utilities, petrol, groceries. It feels as if there's never anything left at the end of the week, even for families on the Gillard government's wealth litmus test of $150,000 a year.

Certainly, that's how it feels for Sydney couple Mark Fowler and Tegan Hardcastle-Fowler, who worry they're "one disaster from being stuffed" while trying to bring up baby Logan on their combined $150,000 income.

Ok, nice portrait and also lack of use of “rich” but nothing over the top. Then the facts:

HILDA project director Mark Wooden says 13.5 per cent of households earned more than $150,000 in its most recent survey in 2009. Wages growth since then would have pushed the proportion up to about 15 per cent. "They don't feel rich because they are comparing themselves to the people around them, at work, in their neighbourhood, people probably in the same earnings ballpark," Professor Wooden says.

"And because people are aspirational, they look to the person with the best house or the best car in the street, and compare themselves unfavourably. But if they looked beyond, they would see many, many suburbs across the country where people earn nowhere near that amount."

So households on over $150,000 are roughly in the top 15 per cent. Geez. 
So there was a lot of hopeless reporting that focuses on the who is rich angle – a damn easy one that, because hardly anyone thinks of themselves rich – rich is a millionaire. Anyone less than that likes to automatically think themselves middle class.
But there was also within there some decent coverage. And while the idiotic stuff – the “you’re rich enough” crud is straight out of Lindsay Tanner’s book, that doesn't mean the Government has a right to sit back and think why is everyone so unkind, and expect the media to play nice. They have to give them something to report.
The Government has actually done bugger all to eat into middle class welfare and yet from that nothing this debate has sprung. When in Government you have to be fleet footed and see the opportunities and seize them. For over a decade during the Howard years and into the Rudd term, middle class welfare was just what you got with the rations:  another budget, another election, another bribe.
Suddenly there is a debate on the whole issue. It is here in a way it never was such as when the Govt tried to means test the Medicare rebate – that issue always gets mixed up with health policy and private health insurance and etc etc.
This debate right now is about middle class welfare. And at its most pure it is about Howard’s Australia versus another kind. Sure it has a dumb element, but the opportunity to grasp it by its throat and lead it to a conclusion that has the community thinking differently about the issue is there to be taken. The Government has to articulate that different kind of Australia to the public.
Thus far I have not seen any evidence of a desire to do this from either Julia Gillard or Wayne Swan.
This morning for example Julia Gillard gave a press conference. The first question came from The Oz’s Matthew Franklin.  As soon as I heard it my ears pricked up, because it was in my opinion, a bloody good one. It was in essence a “why” question. I love “why “ questions.

JOURNALIST: Prime Minister, Tony Abbott and Joe Hockey say that you are, in the Budget, trying to attack aspiration. Should we really think that people are going to not make the best they possibly can for themselves and their children for the fear of losing a small, relatively, Government benefit that’s actually really targeted at battlers?

At first I thought he was going to go into the old “Is $150k rich” line, or perhaps the “when was the budget last in surplus?” or (God help us) “Wayne Swan dropped a glass, what do you think about it?” But this was much, much better than that. He started with the politics – the Abbott and Hockey bit, but he actually asked her the policy. Franklin was actually asking her to tell us her vision. This wasn’t some “sideshow” question; it was going to the guts of the whole thing.
I mean this in no disrespect to Franklin, but in the hands of a Keating, a Howard or a Hawke  this question would have been a Dorothy Dixer chance for them to reframe the debate. A chance to give the media a “this is how I see things” message.
Here was Gillard’s response:

PM: Well, first and foremost, let’s deal with the facts, and then deal with what this Budget is about.
Of course, what you’re referring to is some of the decisions the Government has taken on family payments. Let’s just be clear about the decision the Government has taken. We have decided to pause indexation of the thresholds. What that means is that in the next year around two per cent – two per cent – of families who would have got family benefit will not get family benefit.
What it also means is well over 90 per cent of Australian families will get more family payments than they have in the past, because the rate of payment will continue to increase.
Now, the Government took this decision because we want our family payment system to be sustainable today; sustainable in 4 years’ time; sustainable in 40 years’ time. So, it’s the right thing to do for us to make sure our family payments are sustainable. It’s also the right thing to do to make sure that more than 90 per cent of families get increased payments.
And I would also note this on Mr Abbott’s response – I mean, Mr Abbott, two years ago, when the Government took comparable measures, criticised the Government for being too soft. Now he’s out there criticising the Government for being too hard.
Now, the reality the Budget the Government delivered on Tuesday night is all about keeping our economy strong, getting the budget back into black, extending opportunities to Australians: the opportunity to get a job; the opportunity to get training; as well as extending to Australians the kind of services that they want and need today, including an historic investment in mental health.
The challenge for Mr Abbott today and tonight isn’t to carp about the Government’s Budget – it’s to explain to the Australian people what he stands for on budgeting. We know one of the reasons Mr Abbott is not Prime Minister is because Treasury concluded he was an $11 billion risk to the budget surplus.
So, tonight he’s got to explain to the Australian people if he doesn’t back our savings, what are the credible alternate savings measures he’s proposing.

Did your eyes glaze over? She responded with the pat talking point response on the issue. If you have seen a few press conference or ever watched Question Time, you’ve heard it all before.  There was the why the Govt is doing it economically – the keeping the economy strong etc, but there was no policy philosophy. That was what Franklin was after – and it was why my ears pricked up, because I really wanted to know the answer.
After someone else asked a pointless question on Swan as a salesman (I don’t think he’s any good, but why waste a question asking the PM that when she is never going to do anything but praise him?), Franklin jumped in and tried again:

JOURNALIST: Just on the question on aspiration, do you think that, what do you say on Tony Abbott’s claim that you are somehow attacking aspiration?

It was perhaps a bit more politically pointed, but the opportunity was there for the PM to outline some vision – to in effect change the way people should think on the issue:

PM: Well, of course the claim is completely untrue and absurd.
The Budget is all about jobs and opportunity: jobs and opportunity to enable people to aspire to a better future and a better life; to enable people to get a better future for their children. So, I understand Mr Abbott is wandering round desperate to distract from his inability to make the figures add up.
Tony Abbott will deliver his Budget reply tonight. Well, that’s got to be about the Budget, and it’s got to explain what he would do as Prime Minister.
I mean, three times he’s gone out to the Australian people with a set of figures. Last Budget reply night, complete shambles; during the election campaign, an $11 billion black hole, such a risk to the Budget surplus; and here, here earlier this year, in Parliament House in Canberra, they were unable to explain an alternate flood funding package.
Well, tonight, if Mr Abbott’s got criticisms of the Budget savings that the Government has made to get the budget to surplus in 2012-13 as promised, then he has to outline alternate, credible savings or back the Government’s Budget in.

Nothing. Standard lines, stuck to the script. Stuck in the script. 
Tanner made some excellent points in his book, but the media is defiantly not solely to blame – a Government needs to lead. And that means sometimes seeing a debate spark up and taking it by the throat and saying this is how I see it – and be buggered if it means someone might be “worse off” or opposed . In this case it means making the debate into – this is how I see Australia.
For mine, I think Gillard and Swan should be taking Howard’s language – the talk of un-Australian, the talk of hard work, honest day’s pay for an honest day’s work, the talk of wanting to stand on your own two feet, the talk of Government being there to help those who need help, but that Australians – true Australians, real Australians, everyday hard-working Australians know that when you are in the top 15 per cent of the income bracket you no longer need a hand out. In fact she knows that those people would much rather people in need be given the help, that people with disabilities be given help, that kids struggling with education be given help with better education, better hospitals and that the Government instead do all it could to reduce interest rates and improve unemployment.
And on and on. It won’t change things over night – it is a message that needs to be repeated (but not repetitiously). It needs to be something that Gillard takes the country with her. It needs to be her saying this is the type of country we’re going to be, come with me. The aspiration needs to come from the leader – forget “the aspirational classes”, we need to know and understand and feel what it is this Government aspires Australia to be.
She did do this somewhat yesterday when asked:

JOURNALIST: Prime Minister would you consider a household with a combined income of $150,000 to be rich?

PM: I’d consider them to be a household that probably wants to have their child go to a great school, which is why we’ve more than doubled the amount of funding going into school education – so their child can go to a great school.
I consider them a household that probably really wants the public hospital system to respond to their needs. If they had an emergency health situation then they would want the public hospital to meet their needs in a timely way. That’s why we’ve invested billions of dollars more in health, and we’ve engaged in health reform.

That is good. But it needs more. It needs to be framed as a belief rather than a we did this so we could pay for that.
She did do it as well in her speech to the Sydney Institute, but it got lost in the (in retrospect) very dopey reporting about bashing people on welfare. It also got lost because the “alarm clock” “dignity of work” phrases etc are just eye glazing spin.
Perhaps in the end the people won’t go with her. But doing nothing will see them just leave for Abbott (or someone else) anyway.
** *
Oh and Question Time? Dire. Very dire.