3 Predictions for Life in Australia in 2008

COMMENT, Australia — Normally I don’t do this.

Make predictions, that is (in public, yet!).

However I am testing innovation models used for prediction. My innovation analysis though shows 3 likely outcomes for Australia.

(Photo by Ester Inbar )

These things are not a sure bet, as they are based on using analysis tools to make a predictions. Predictions are always difficult. But more likely than not, I believe these results will come to pass in late 2007 and early 2008.

1. The Result of the Australian Election

At the election, Kevin Rudd will win government with 51-54% of the total vote cast, my likely calculation is 52%.

For those of you don’t get why Howard is disliked, electors are a selfish bunch, and they believe Howard is force-feeding them workplace reform. They also believe Howard is not giving them as many benefits as he once did.

In our analysis, the reason Howard is commiting electoral suicide with Workchoices is he is doing this is to contain wage costs by controlling the lowest-paid in society through preventing collective bargaining.

In other words the magic trick of growth with low inflation needs work on the wage side of the wage-price spiral. And to Howard’s mind the low-paid complain less, as they have less access to media, and the middle-class are constantly expanding.

Urban-dwellers may punish Howard on environmental issues as he is ‘out of touch’ with mainstream opinion, and is clearly not comfortable.

2thinknow Australian Election Prediction

Our educated specific prediction is a December 1 election with a 52% winning result for Kevin Rudd.

We believe Howard will hold onto his own seat by 0.25-0.75% of the vote, however if he loses his seat to McKew it will be on environmental issues.

2. Artificial Inflation Break-out

Inflation in Australia is in practical terms likely to break-out. There is continual pressure on wages upwards in all major cities. This was the reason for WorkChoices.

Inflation is nominally higher than stated.

There are 7 major ways that the ‘headline rate’ of inflation is being artificially contained:

1. Less Goods for the same money (smaller pack size, reduction in active ingredients)
2. Lower Quality Goods for the same money
3. Less choice of products in supermarkets
4. Being forced to buy larger Pack sizes
5. Importing goods from China
6. Supermarket analysis and monitoring of sensitive ‘price’ goods
7. WorkChoices reducing collective bargaining

The nature of Australia and the mindset of its citizens has changed. All these measures work on the Wage Price Spiral reduction measures.

Having worked on prices through co-operation with big enterprise, Howard has to use point 7, Workchoices, to push down wages.

It is no coincidence that all these measures weaken the traditional union base, and strengthen Howard’s big business base.

Potential for a perfect storm

However, food costs are rising. This is due to the drought and rising fuel costs.

Business costs are rising. The two overhead costs in business are property and staff.

Rising property costs (due to shortages) drive up business costs. The opportunity costs of commercial and residential property are involved. The current renewed boom is at the high end of the market for houses.

Staff costs are rising as productivity falls. Staff are less productive than ever. Every Australian business I talk to is complaining about a lack of good staff in major cities.

These and other factors will feed into a wage price spiral preventing such manipulations having traction. Interest rate rises themselves may lose traction, though the debt-makeup gearing of households is an unknown.

3. Economic Growth Slowdown in 2008

The economy has a higher than average probability to slow down by the end of 2008, regardless of who wins the election.

Labor however will do more for the social services, and have more tendencies towards ‘priming the pump’.

The main reasons for this slow down will be related to infrastructure and our trading partners. Asset-price bubbles are an issue.

Innovation is being contained by infrastructure and asset bubbles, and lack of policing of predatory market power by big organisations.

Rudd may be able to offset some of the effects of Howard’s decidedly ‘big business’ bias, by releasing smaller organizations from predatory practises.

2thinknow Australian Economic Prediction

China will be important. The quality of credit held by institutions (which is an unknown) will have an effect. My main concern though is the US economy, as according to leading US Economists, many of the Bush government measures have damaged the economy.

On the pluses, Australia may offset economic conditions by increasing it’s trade in Defence products and expertise, something already flagged by Defence minister Nelson. Uranium will also be important, whatever your opinion of that.

And, Australia will increasingly use the US FTA to trade in professional services with the USA.

However, we are going through the very early stages of growing pains of a post-industrial economy. Most likely my analysis shows there will be an economic shock, perhaps a panic.

The 1st of April, or thereabouts, 2008 is looking like a particularly poor time for economics, or the peak of the cycle.

Unless, I were an educated investor, I would sell any shares I had that were not ‘low-risk’ prior to April. As a moderately risk averse person I would sell them now.

Also August 2008 or possibly July look poor, and September 2008 is almost guaranteed to have a shock turmoil event.

How these predictions were made

I won’t disclose the models I used to create these predictions, as it is more an art than a science. The models cannot be robotic in their application, as they are qualitative.

In the past, I did manage to predict the dot-com crash one month before it happened.

Einstein said something about the wisdom of predictions, I believe it included the phrase shipwrecked on the laughter of the Gods.

This is a test and refinement of the innovation analysis tools for prediction. Previously the tools have only been used for analysis.

I may be wrong, so it goes without saying you should not place reliance on these predictions. This is a TEST.

But I’d like you to print them out and keep them handy.

And let me know how I did afterwards!

Take care,

Christopher

Connect to Christopher Hire.

Speaker. Author. Editor-In-Chief. Executive Director of Innovation, 2thinknow.

Filing. Economics & Trade, Innovation
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