It's Time to Neutralise NIMBYs

Idiocy, selfishness and small-mindedness are 3 things that never fail to irritate me. Unfortunately despite a looming future where it is critical that people start putting self-interest to one side and start thinking more altruistically, you only have to pick up a paper or watch a reality TV show to realise that global issues aren't exactly at the forefront of everyone's mind.

With the world population predicted to hit 9 billion by 2050 and world resources being chewed up at double the sustainable rate, you would think that governments and other authorities around the world would recognise the danger in everyone adopting a "stuff you, Jack" attitude. However they either don't seem to be bothered by the world's current course, or else lack the will to address it in any great hurry. We are currently witnessing a dangerous paralysis worldwide on key issues such as unsustainable population growth, climate change and resource allocation. Failure to act decisively on these and a number of other key issues is likely to result in a major world crisis in our children's time, not to mention the possibility of a devastating conflict between the fading power of the USA and the rising powers of China and India.

Anyone with half a brain can see what the current trajectory of human activity will lead to if left unchecked, so why is it that governments seem incapable of acting to head off the potential catastrophe?

The answers to this are of course complicated, but it seems to be that it has much to do with self-serving behaviour at all levels, be that individual, local or national. While acting in one's self-interest is of course an inherent human survival trait, it has probably only in the last century, with the vast rise in both educational standards and individual wealth, that people or groups have felt sufficiently empowered to start imposing their views on the governments of the day and thereby, alter the course of the rest of society.

This is not always a bad thing, of course. If it weren't for determined individuals or groups challenging the status quo, chances are that women still wouldn't have the right to vote, 10 year old children might still be working down mines and St Kilda could still be on the bottom of the ladder.

However, as with everything, it comes down to a question of balance. By granting one individual or minority group a right, you are by definition curtailing the rights of others, and so in granting rights to particular individuals or groups, there needs to be a consideration of what is in the broader interests of society as a whole. Observing the paralysis of world governments on key issues (and with First World goverments in particular), the signs seem fairly clear that policy is generally pandering to special interest groups which is a trend requiring urgent reversal.

As individuals or special interest groups clearly cannot be relied upon to behave altruistically in exercising their rights, it is incumbent on governments to start making the necessary bold decisions that redress this and ensure that all their constituents, not just a select few, can look forward with confidence to a sustainable, peaceful future.

Despite their awareness of important issues, governments like Australia won't start behaving appropriately overnight. They are far too scared about their re-election chances to risk offending powerful lobby groups or getting a bad rap from the local press. Political leaders who are prepared to implement their agenda no matter what the fall-out may be are all too rare in this country. However, everyone needs to start somewhere, and something positive they could do without risking too much political capital would be to stamp out NIMBYs.

For those of you unfamiliar with the acronym, "NIMBY" stands for "Not In My Back Yard". At some time or another, we've all had exposure to these people. They are the ones who pop up on television griping about things like medium density residential developments and desalination plants and claiming that the offending development is part of dastardly government conspiracy to disenfranchise them. Never mind that in 90% of the cases, they have chosen to live in an area where it is highly probable under planning guidelines or due to proximity to existing infrastructure that the thing they are complaining about was going to be built at some point.

It's important to point out that I am not having a go at people who are opposing patently wrong government proposals on altruistic grounds, for example, the proposed damming of the Franklin River in Tasmania back in the 1980s which would have had a devastating impact on somewhere now classified as a world heritage area. Nor, on a local scale, people who quite rightly try to stop idiot phone companies from wanting to build mobile phone towers next to kindergardens.

It's only where people try to prevent things being built that are patently needed for the effective running of the community in locations that are patently suited to that thing that I start to get irritated. What aggravates this irritation is that NIMBYs don't ever dispute the need for the road, prison or desalination plant - it's just that they don't want it built near them. You could almost have some sympathy with their objection if it were on altruistic grounds, but the fact that they would happily have their problem foisted onto someone else reeks of hypocrisy.

The problem is that currently, the law gives rights to NIMBYs to challenge and frustrate important and necessary decisions and these rights are frequently abused. Some of the instances I have read about border on the ridiculous, for example where residents in the CBD have banded together to try and put a stop to the construction of office buildings - in the centre of Collins Street.

Apart from racking up enormous legal and other costs on what are often pointless disputes, the NIMBYs are either blissfully unaware or don't care about the broader consequences of their actions. To illustrate, consider the following examples:

• When Barry Humphries flits into Australia to stop a medium-density residential development in inner-city Camberwell, he is contributing to the proliferation of urban sprawl and the crippling costs to the taxpayer of building infrastructure to service that urban sprawl. How ironic then given his objection that Barry chooses to live over in medium-density London instead of somewhere like Los Angeles. He clearly doesn't find the concept offensive in all cases; just don't do it in his old backyard.
• If Wonthaggi residents were successful in preventing the construction of the Victorian desalination plant along an otherwise non-descript part of the coastline, then they could cause the dangerous depletion of Victoria's water reserves and wind up drinking their own recycled urine.
• Now that Dale Kerrigan has stopped the expansion of Melbourne Airport, thousands of airline passengers are inconvenienced by having to circle around the airport waiting for a landing window. As well, tonnes of climate-warming jet fuel are unnecessarily dumped into the atmosphere. Actually, its a little hard to pin that on Dale as he is only a fictional character, but you get my drift.

It's hard to see NIMBYs being tolerated in places like China, which is hell-bent on modernising its economy and becoming a first world country. I don't advocate the sort of punishments that might be dealt out to NIMBYs there. However given NIMBYs are clearly unable or unwilling to consider the broader implications of their actions, the following measures might lead to some well-overdue behavioural change:

• Introduction of a NIMBY-trading scheme: kind of like K-Rudd's emissions trading scheme, NIMBYs can either pay the extra cost involved in moving the offending infrastructure somewhere else or alternatively, pay a NIMBY-tax to have it foisted on the next lot of NIMBYs.
• Cost awards against NIMBYs: similar to the "loser pays" system applicable in most law suits, NIMBYs should be required to pay any legal and delay costs racked up by the taxpayer as a result of them making a spurious challenge to a proposed development.
• Setting up an independent "Essential Infrastructure Panel": the panel would be comprised of industry experts who would determine whether a particular project submitted to it is of sufficient national importance to exempt it from the usual objection rights and other red tape that would normally cause it to be held up. Not only would this potentially divorce the government from any political fall out (an essential requirement if you want the government to act decisively), it would ensure that urgently needed infrastructure could get built on a timely and efficient basis without the usual wrangling and frustration that occurs.

NIMBYs of course won't like dipping into their pockets or potentially having the rights that they currently have being taken away. However, if nothing else it will force them to properly consider the consequences of their actions and eventually, start recognising that the general public has rights as well.

Then once the government has dealt with NIMBYs and received a bunch of bouquets from a thankful electorate who now have decent water access, free-flowing roads and liveable cities, maybe it can move onto eliminating lobby groups, the Republican Party and any other organisation which is a pox on modern society.

I know its unrealistic, but let me dream.

Let CEOs get on with the job

Before I launch into my next diatribe, it would be remiss of me - not to mention cathartic - to lay the ghosts of the Grand Final to rest. Unlike many caught in the great ticketing bungle, I was fortunate enough to get to the game and to the impartial observer, it must have been a titanic struggle. To a success-starved St Kilda supporter, however, it was two and a half hours of pure gut-wrenching, spine-tingling torture. The disappointing thing is that we know as a club we were good enough however as is so often the case in close games, the team that took better advantage of their scoring opportunities prevailed on the day. If I were Ross Lyon though I would be spending less of my time in the off-season deliberately trying to get up Luke Ball's nose and more of it teaching Schneider, Milne and the rest of those rotten small forwards how to kick straight.

Anyway, what's done is done. The Cats can go off satisfied on their end of season trip and leave us other Melburnians enjoying the other delights the city has to offer. Which if this godawful weather keeps up, doesn't give us a whole lot to work with. Unless of course Makybe Diva comes out of retirement in a few weeks.

Apart from grieving about the football I have been following with some interest the story in the press about dissatisfaction with executive pay levels in Australia. According to the papers, some mysterious government organisation called the "Productivity Commission" is looking at the issue and has come up with a suggestion that shareholders in public companies should effectively have the power to vote down the remuneration arrangements of any CEOs or other directors that they consider excessive. The suggestions of this body were supported in the major papers a fortnight or so ago by an investment advisor organisation called "RiskMetrics" whose spokesperson huffed and puffed about how Australian executives were grossly overpaid and what a great idea it would be for shareholders to have the power to put a stop to this excess.

Unfortunately, as far as this whole idea is concerned, never has the expression "The road to Hell is paved with good intentions" ever seemed so apt. There is no doubt that in the wake of the Global Financial Crisis (or GFC as it has become in the vernacular), the government has been put under intense political pressure to act on executive pay. The logic giving rise to this pressure goes something like this:

• The average person has been hit hard financially by the GFC;


• The average person is also (whether directly or indirectly through their superannuation fund) a shareholder in ASX listed companies whose share prices have fallen, thereby generating further wealth destruction;


• The CEOs and senior executives of these companies tend to be remunerated relatively well compared to the average person, even in years of poor profit and share price performance;


• The average person looks at their circumstances relative to the executives of the companies they have invested in, perceives an injustice and wants to bring the executives down a peg or two.

I don't think anyone could argue with the proposition that underperforming CEOs shouldn't have their pay arrangements scrutinised and criticised. However granting shareholders the power to effectively set executive pay levels is ultimately going to lead to the shareholder's investment performing more poorly than it otherwise would. I am about to go to some pains to explain why, so bear with me.

Simply put, people who decide on a career in business and rise to the level of CEO are all motivated to some degree by the financial rewards involved. Sure, there are other drivers involved but anyone who suggests a CEO of a major company is undertaking the role purely for the intellectual challenge or other non-financial factors is kidding themselves. In the course of my job I have had dealings with a fair number of CEOs and senior executives of both listed companies and large unlisted organisations, and it is not a job for the faint hearted or feeble of mind. You are answerable to a whole host of different interest groups including customers, employees/unions, shareholders, financiers and a board of directors. As with most high profile jobs, the hours are invariably long, family life suffers and as many of them comment, being the person at the top of the tree can be incredibly lonely. It's hard enough running an organisation when times are good, but when a 1 in 70 year financial catastrophe like the GFC happens, things get even harder and the scrutiny intensifies as everyone expects you to lead the company safely through troubled waters - sometimes against insurmountable odds and appalling market conditions.

This is not to say anyone should feel pity for a CEO as it's a life they ultimately choose. However equally people need to recognise that it isn't all beer and skittles as the papers would sometimes have you believe, which is why it is important for companies to remunerate their CEOs well in order to attract and retain the best people for the job.

Generally, the system in Australia seems to work. Certainly the CEOs I have come across, while being a fairly eclectic bunch, all have been highly intelligent, articulate and diligent individuals - qualities you would typically want in someone who you have entrusted your investment to. Unfortunately, none of these qualities seem to be apparent in those who are formulating recommendations to the Productivity Commission or advising investors on the question of executive pay.

Granting these sorts of powers to shareholders is a daft idea for four main reasons. First, it will encourage executives across the board to leave ASX-listed companies and go find employment elsewhere where they can earn what they want to earn with about 20% of the hassle. Dealing with all the grief that goes with running an ASX-listed company only to have your pay arrangements voted down by capricious shareholders at the annual general meeting is hardly going to appeal to a high flying executive.

Secondly, giving powers like this to shareholders dangerously blurs the previously clear distinction between a company's management and its investors. Clearly, investors play a very important role as they provide the capital which allows the company to operate and make a profit. However, most investors lack the knowledge and operational expertise necessary to run the company successfully and allowing shareholders the power to second-guess management decisions sets a dangerous precedent. What's next? Forcing the board to put an investment decision or the prospect of hiring a new CEO to an extraordinary meeting of unitholders? The mind boggles. I read in Marcus Padley's column on the weekend about some research that says that if you spend 1 hour researching a company before investing, you are likely to know more about that company than 99% of other investors. If that's remotely true then shareholders should recognise their relative ignorance and realise they have no valid basis to second guess management decisions.

Thirdly, the performance of a company for good or ill often has little to do with the performance of the executives and everything to do with external factors, such as market conditions. It's often the case that in a downturn, executives do their best work and lay the foundations for a return to profit growth. Unfortunately, all shareholders and advisors like RiskMetrics see is the scoreboard in terms of profit and dividends and if given the power, will likely vote down pay arrangements in a bad year and alienate executives. This is in spite of the fact that as a result of the executive's work, the next year is likely to be a very good one for investors. One only need look at the fracas raised by RiskMetrics and others the other day at Qantas's AGM. An inordinate amount of time was given over to hurling abuse at the board over Geoff Dixon's departure package, while conveniently ignoring the fact that because of measures Dixon took when he was in charge, Qantas is in very good financial health relative to other airlines and its share price is up approximately 100% off its low point earlier this year.

Finally, shareholders already have sufficient power to adequately protect themselves such as lodging a protest vote against the pay arrangements, kicking out the board, or, if they think the company has really lost the plot, by selling their shares. Granting them further powers which they do not grasp the potential consequences of using or which are exercised from a position of ignorance does neither them or the company concerned any good whatsoever.

For all their faults, governments usually act sensibly when confronted with these sorts of suggestions and I think it will exercise common sense and reject this latest suggestion of the Productivity Commission.

While the government is at it, I hope they also take the 22 page diatribe written by RiskMetrics to the Commission and put it to good use by starting a bonfire with it. I took some pains to read it, so I don't see why I shouldn't inflict it on everyone else as well. Here is the link. http://www.pc.gov.au/__data/assets/pdf_file/0010/89524/sub058-part1.pdf.

After about 15 pages of preaching and proselytising I did however get bored so I thought I would instead go look at the SEC filings of said RiskMetrics to try and determine if they practised all they preached about it being essential that executive remuneration be tied to company performance.

Given RiskMetrics platitudes, imagine my surprise when I discovered that over the course of the past 3 years while RiskMetrics profit fell from $16M in 2006 to $4M in 2007 and then sunk to a whopping $137M loss in 2008, total operating costs (which includes executive salaries) rose from $79M in 2006 to $396M in 2008.

Dudes, you are hypocrites of the highest order. Butt out of the debate, and let executives get on with their jobs.

GRAND FINAL EDITION - Go the Saints !

Well, if everything else I have written in this forum turns out to be a load of rubbish, at least I was right about something - the Saints HAVE indeed proven to be contenders this year. And yet, despite a season of 22 wins and 2 losses by less than a kick, we go in as underdogs against Geelong on Saturday.

Hard to believe on one level, but I suppose when you weigh up Geelong's demolition of Collingwood versus St Kilda's hard fought scrap against the Doggies, it's easy to draw the conclusion that the Geelong of 2007 has got its mojo back and will easily beat a nervous Saints outfit unused to the last day in September.

Don't be fooled by the weekend's results, however. I was at Friday night's match, which was nerve-racking right to the last minute when our champion captain finally put the game beyond the Doggies reach. Geelong, by comparison, had a very easy time of it as the Pies capitulated more or less entirely after half time, kicking one goal to Geelong's 10.

So-called experts will debate all day about the relative merits of having an easy ride of it through the preliminary final as opposed to a tough hitout, but if Geelong are expecting the Saints to tire later in the game and let in a succession of easy goals, then they have another thing coming. The Saints of 2009 is made of far sterner stuff than the failed preliminary finalists of 2004-5 and 2008, not to mention the grand final side of 1997.

Friday night's game was another classic example of this. The Doggies played absolutely out of their skins, killing St Kilda on possessions, clearances and just about every other vital statistic, yet still couldn't find a way to win. St Kilda, on the other hand, had a clanger-laden first quarter that would make the Werribee Seconds wince with embarrassment, yet somehow clawed themselves back from a 15 point quarter time deficit to snatch victory.

By the look of it, the conditions on Saturday are not going to be tailor-made for our tall forwards but if all else goes to plan, that shouldn't matter. The strengths we have shown all year such as contested possession, fierce tackling and stingy defence, if executed well, should be good enough on the day. Even if things aren't initially going our way like on last Friday night, you know that this St Kilda side is not one that is going to throw in the towel but will keep working away until the momentum swings and the team collectively wills its way to the front. If it is wet and windy, then the game promises to be another low scoring scrap, but one suspects that would suit Ross Lyon fine.

It has been interesting in the last couple of weeks seeing the colour footage of the 1966 Grand Final that was found somewhere in the vaults of the BBC. It gave a real modern feel to a match that has been replayed ad nauseam on Grand Final marathons in soulless black and white. However, the colour footage did starkly highlight one thing - Darrel "Doc" Baldock holding up the premiership cup wearing not his famous number 4, but a Collingwood jumper!

Of course in those days it was the tradition to swap jumpers with the opposition side after the match, but given the tradition is (thankfully) long dead and buried, one hopes that Nick Riewoldt can consign that picture and the whole brouhaha about 1966 to the dusty history vault where it belongs. God knows the 1966 players must be sick of being wheeled out at every club function and probably want to retire to their loungerooms and the comfort of their slippers and walking frames. It's time for this more than capable bunch of players to create their own history.

I don't think my heart, blood pressure or nerves could handle another 1-point Grand Final, but given the conditions, I suspect it is going to be another close one like round 14, with the game going right down to the wire. I am tipping Rooey marking on the 50 with 5 seconds to go, lining up for goal and the ball shanking out of bounds on the full and sconning an unsuspecting security guard. But it won't matter coz we'll already be in front.

Saints by 5.

That's what I'm talking about.

The Intern vs. The Mogul

For anyone who bothers to read this, I apologise for the long time between posts. Amongst other things, I have been experimenting with becoming a rock star and a few weeknights have been taken up with band practice so we didn't make complete asses of ourselves when we did take to the stage. You can see the results of our efforts if you go onto youtube.com and type in "Captain MREMS and the BJs". As things stand today, despite the depressed condition of commercial property markets, I am not contemplating a career change. However if anyone has an "in" with Michael Gudinski, please let me know.

Now back to a story which piqued my interest a few weeks ago concerning the future of the media. Funnily enough it all started with a 15 year old intern at Morgan Stanley in Europe. It's not often that anyone takes notice of the remarks of a callow adolescent, however the remarks he made to his employer sent something of a shockwave through the media world.

Apparently, media analysts at Morgan Stanley in Europe had interviewed this particular intern about the media consumption habits of his generation, which found, amongst other things, that teenagers don't watch much television, think newspapers are irrelevant and prefer downloading music for free or from on-line forums like iTunes rather than going out and buying CDs from the shops.

Media analysts and some traditional media companies reacted with horror and surprise at the report Morgan Stanley subsequently issued based on the interview with their intern. However, when you think about it, what is most surprising (and disturbing if you are a shareholder of one of these companies) is that the media companies were actually surprised by the findings. Because when you assume the perspective of someone born into the digital age, the limitations of traditional media like newspapers and television are blindingly obvious.

Take television, for instance. About 10 years ago, my wife and I got so fed up with the unadulterated excrement that screens on free to air television that we bit the bullet and signed up for Foxtel. However instead of providing more viable viewing options during the limited times we get to sit down and watch television (ie. after 9pm), all this has done has quintupled the amount of excrement available, at the considerable cost of $126 per month. Foxtel in Australia comprises over 60 channels, most of which are chronically unwatchable unless you are either a compulsive vidiot or borderline autistic. Weather, CNBC, Bloomberg Market Watch, Home Shopping channel - who cares? On the odd occasion that you might want to watch something they are screening, it is on either at 10:30 in the morning or 11:30 at night, which is an impossible ask for any professional person who wants to earn enough to pay for their Foxtel subscription.

What is perhaps most galling given the substantial subscription fees Rupert charges is the fact that you can be sitting down watching something vaguely watchable and then all of a sudden you get interrupted by a sequence of ads so long it would make a Channel 10 executive blush with embarrassment. It is usually at this point that I switch off with disgust and reach for the nearest newspaper, which is kind of lucky for Rupert as he has me covered there as well. However, when confronted with rubbish on television and not being able to watch what they want when they want to, most 15 year olds don't see the appeal in crosswords or sudokus and instead head to their bedroom to log on to Facebook, or, if their atrophied attention span can handle it, put on a DVD.

When you compare the limitations of live television with internet applications like youtube or other illegal variants which allow you to watch what you want, over and over again if you like, is it any wonder that television viewer numbers are sinking like a stone? I was reading an article by Jeremy Clarkson awhile ago lamenting that at the height of Morecambe and Wise's popularity in the early 1970s, over 5 million viewers would tune in, while nowadays, "Top Gear" struggles to attract more than 2 million. Market saturation of TV Channels might partly account for this but people embracing other media is clearly the major cause. Anyone who lives with children between the ages of 5 and 15 will know exactly what I am talking about. Even my technophobic wife has started up. Perhaps inspired (or appalled) by our band's performance last week, I came home on Friday to find her not perched in front of the Lifestyle Channel but instead on youtube looking up 1980s Australian film clips. I won't go into exactly WHAT clips she was watching, but suffice to say whatever was on television must have been particularly dreadful that night to force her to do it.

It will be interesting to see how the major media companies react to this generational shift in media consumption habits. So far, both News and Fairfax appear to have made a major hash of it. Fairfax have alternated between pretty much doing nothing in the hope the internet goes away, and setting up a half-baked website to recycle their newspaper stories without working out how to make money out of it. News, on the other hand, have ventured into a disastrous investment in One.Tel, overpaid for a US satellite company and then gone to great lengths to acquire another US newspaper (the venerable "Wall Street Journal") at the top of a speedily-shrinking market.

This failure to come to terms with the new media has shown up in the abysmal performance of their share prices. At the height of dotcom fever when both companies were expected to cash in on the promise of the digital age, Fairfax shares touched $5.50 and News Ltd $56. Today, 9 years later, they are trading at $1.50 and $15 respectively. Meanwhile companies like Google and Seek who were early embracers of the new technology and worked out how to make it profitable have gone from strength to strength.


How this all plays out is difficult to know exactly given the pace of change in the industry. However, given events to date, you would not expect traditional media to be the winners. Too used for too long to having their near-monopoly positions protected by complicit governments which have allowed them to blithely consolidate and expand at will, they lack the necessary mindset and flexibility to adapt to the changing environment. In fact, instead of focussing their efforts on innovation, you could almost put the house on these companies to use government lobbying, threats and good old fashioned bastardry to try and stop their more nimble competition.

Take Google Earth for example. On any measure, a program that has digitally recorded every square metre on the planet to the extent it has represents a phenomenal achievement, not to mention an amazingly lucrative revenue raising opportunity. Almost overnight, Google Earth has rendered telephone directories and street directories entirely redundant, as well as stopped cab drivers the world over from taking you on a 10 km detour en route to your intended destination.

It is also an incredibly useful real estate tool. Already, because of its "Street View" function, it is saving homeseekers an incredible amount of time and effort by exposing the so-called "Renovator's Delights" in a real estate agent's classified ad as the flea-ridden dumps that they are. Unsurprisingly, the on-line real estate classifieds run by the daily papers use Google Earth extensively. However, when Google announced that it intended to set up its own on-line real estate finding service, the dailies predictably screamed blue murder and of course threatened to stop using Google's platform.

I bet Google aren't exactly quaking in their boots. After all the chances of those idiots coming up with a better global satellite platform than Google Earth are infinitesimal. I hope Google do go ahead and launch a competitor, because chances are the platform they do come up with will be user-friendly, informative and arm its users with the data they need to make an educated real estate decision, instead of just being a glorified advertisements like the other on-line services.

In a world where you can download live streaming of the cricket to your phone and upload footage of your band's performance from a remote location in country Victoria so someone in Canada can watch it 4 hours later, is it any wonder that a 15 year old looks at a newspaper in the same way that people born in the 1960s might look at a horse sulky or a mangle? Change can be scary, but it is also inevitable and in the area of media communication, only someone like Rupert with billions to lose could fail to be excited by it. The fact that the technological advances are also causing the dismantling of the old media oligopoly is also a good thing.

Maybe in time the changes will mean tiresome newspaper hacks like Andrew Bolt, Alan Jury and Kenneth Davidson no longer have an audience, and get called in by their bosses at GoogleNews to get made redundant. Now that would be footage that would be worth watching over and over again.

It's Public Transport so let's try Public Ownership

The announcement some weeks ago by the Brumby government that the Hong Kong-based company MTR would take over the running of Melbourne's train network from Connex in December sent shivers down my spine. Not because Connex have done a stellar job running the network (far from it) but because after years of of overseeing a deteriorating public transport system, the Government still hasn't grasped one incontrovertible fact: in Melbourne, private sector involvement in public transport doesn't work.

As anyone who tried in vain to get home from Oaks Day last year will testify, the latest experiment in private operation via Connex has been an unmitigated disaster. While it might seem premature to say this, I can confidently predict that MTR's time in charge will yield a similar result. Some within the government may realise this, however in the mad rush to save money by privatising all essential services, it is clear that the Government has no political will to do what is patently the right thing and take back control of the system themselves. Which, for commuters, means several more years of misery and for Lynne Kosky the Transport Minister, means a level of job security roughly equal to that of a Richmond Football Club coach.

The reasons why the privatisation of the network has not worked are many and varied. However the root cause is common to most other failed privatisations both locally and internationally - money. Simply put, Melbourne's public transport network has never been profitable and barring an astronomical and politically-impossible increase in fares, it never will be. And that's a brutal fact that MTR are about to find out and more than likely, react badly to.

It is a truism of the capitalist system that capital is, in the end, very efficient and ultimately flows to where it can generate the best returns. The global financial crisis and its aftermath have been a classic example of this. When stock markets around the world started turning turtle, investors fled their share investments in droves and adopted a "safety first" approach to their money by investing in cash or government bonds. Now, however, the global economy is stabilising and cash-based investments are offering a less than stellar 2-3% return on cash products, investors are now re-entering a stock market which is rebounding strongly off its lows.

Investment in assets like power utilities or transport networks is no different. Any company which comes in and buys a used public transport system from the Government is doing so in order to make a reasonable profit having regard to the nature of the business they are engaging in. If in time they don't make that profit, then watch out if you are a customer of that company. Things that cost money like maintenance get severely cut, service standards plummet but at the same time things that are seen to protect or grow revenue proliferate. Putting hordes of neanderthal ticket inspectors at Flinders Street and embarking on cheesy, annoying marketing campaigns are just two examples. Of course, running things like this is unsustainable in the long term and has doubtless contributed to the Government's decision to give Connex the boot. The issue now is, will life under MTR be any different? Unless MTR want to behave like a charity or have thought of some magic money-making formula that lots of other clever people have failed to come up with, then the only logical answer is "no". As MTR is about to find out, Melbourne is a very different city to Hong Kong.

The problem that transport operators face with Melbourne that they don't have to deal with in cities like Hong Kong or London is that it has a relatively low population spread out over a very large area. Running a large network with fewer commuters per square kilometre of the area covered represents a much harder revenue proposition than a network like London's Underground. Furthermore, relative to the cost of catching public transport, driving a car and parking in the City is not too expensive. A CBD carspace can cost as little as $200 per month as opposed to a monthly train pass of $110. There have been train trips I have endured when, wedged in the middle of a cluster of people who clearly don't see the value of deoderant, I have given serious consideration to kissing Connex goodbye, paying the extra $90 per month and driving into town. In this context, the option of putting up fares to make running the network profitable is not an option for the operator based on market forces, even if the Government were to allow it politically.

Another big problem for an operator is that the network requires high levels of maintenance and capital investment. Each train undertakes a huge workload each day carrying hordes of passengers around, and it's unsurprising that trains break down frequently and require regular replacement. Throw in a few mindless acts of vandalism and stupidity from their more brain-dead customers and you can see what a financial drain just keeping the network going can be.

Finally, any essential services such as gas, water and transport which are privatised tend to be heavily regulated by governments, the reasons for which are readily understandable. Left to their own devices, private operators would service only the profitable inner-city routes and leave the uneconomic outer suburban suburbs without trains, trams and buses. It is therefore up to the government to ensure that the needs of all commuters are met as far as possible by imposing certain service obligations upon the operator. Unfortunately in Melbourne's case this has historically presented an insurmountable obstacle to an operator turning a profit and has resulted in the Government having to repeatedly throw more taxpayer money at the network so that basic service standards can be maintained.

The relative merits of essential services being publicly or privately owned can be argued until the cows come home, and there is no answer which neatly fits all circumstances. Each potential privatisation needs to be considered on its own merits and must balance the needs of both the operator and user of the particular service. There are numerous examples of privatisations around the world where the parties have got the balance between service standards and profit right and the privatisation has been an unqualified success. However, here the answer is equally clear. Melbourne's public transport system as a whole is chronically incapable of generating any profit, so why continue to stand by and watch the system get repeatedly run down by a succession of operators who can't get it to work? No one wins, from the government to the operator to the long-suffering commuters.

If the Government were to take back the network, it would probably need to raise state taxes in order to do so, something that is apostasy in this era of low-taxing, small governments. However, the alternative of not stepping is far worse for its constituents in the long run and so the Government should for once show some gumption and leadership and just do the right thing. Who knows? Actually investing some money is something tangible instead of paying it away to spin doctors and consultants might be a vote winner for the Government. As a long-suffering Frankston line passenger, I would certainly be impressed and my nostrils would be more than grateful.

In the meantime, MTR, I wish you good luck on your latest loss-making venture. God knows you are going to need it.

The Dismal Science

Quite an interesting week, last week. Not only did our political leaders completely lose the plot by spending the best part of it arguing about a ute, but both Farrah Fawcett and Michael Jackson dropped off the twig. As is typical in Australia, the first Jackson jokes started circulating within an hour, for example, the undertaker not knowing what to do with the body because plastic recycling night wasn't until next Tuesday, but then deciding to melt it down and turn it into a plastic toy so that Jacko could keep on playing with little boys. Or the one about Jackson's manager having to cancel his upcoming tour dates, ie. the date with Dylan, 7 , from Atlanta and Peter, 9, from St Louis etc etc.

Pretty tasteless jokes, those, but at least the whole Jackson episode has got the economy off the front page for the time being. As someone who has to grapple daily with the fallout from the GFC, the last thing I want to do when I come home after another crummy day at the office is read all about it again in the paper. However despite my general aversion to GFC-related press it was hard not to derive a degree of perverse amusement 3 weeks ago from the histrionic media reaction to a supposedly "good" piece of economic news, namely that the economy had avoided recession.

The media reaction was so over the top you might be forgiven for thinking that a cure for cancer had been found, the war in Afghanistan had ended or even better, Alan Jones and Andrew Bolt had disappeared up their own backsides. But no, instead, the cause of the media frenzy was the fact that economy had grown by a paltry 0.4% in the March quarter and as a result, Australia had avoided a technical recession.

I don't want to rain on the media or K-Rudd's parade here, but this was hardly a reason to break out the Bollinger. Under normal conditions, the Australian economy comfortably grows at over 3 per cent per annum, and that's before any artificial government stimulus. When you consider that for the past 5 months, Kevin and Wayne have been doing a fair impression of Imelda Marcos in a shoe shop, an annualised growth rate of 1.6% doesn't exactly suggest that we're firing on all cylinders economically. However, look on the bright side. At least most of us in Australia aren't employed by Chrysler and don't own real estate in Detroit.

Regardless of whether this latest set of economic figures represent good or bad news, the most disturbing thing is the reverential attention paid to them by press and politicians alike. It was almost as if the GDP figure were meant to be a barometer for the national mood. If the figure is positive, then great, K-Rudd is a genius and let's all party like it's 2007. However, give us (gasp) two consecutive quarters of negative growth and we should kick out the government and all reach for a bottle of Prozac.

This attitude, of course, is lunacy. Assuming that the happiness and wellbeing of your citizens is assured provided the country's GDP is heading up is a very narrow view for any government to take, not to mention dangerous. However, in the last 50 years, more and more governments around the world have essentially adopted this approach, often at the expense of important social programs. It is no wonder that the 19th century historian Thomas Carlyle described economics as "the dismal science".

One of the problems with adopting an economist's measure as a proxy for a country's wellbeing is that things that an economist might regard as good because they contribute to economic growth have very poor social outcomes. Similarly, things that in no way contribute to GDP can have very good social outcomes. For example, a disturbed lunatic going into Walmart and buying a gun and ammunition ahead of embarking on a killing spree is considered as contributing to the economy, while someone volunteering their time to assist a charitable organisation is not. We all know whose behaviour is the more socially desirable, however when you focus purely on what is the better economic outcome, you can derive a fairly perverse result.

This is of course an extreme case, however using this sort of logic it is easy to see how the Western world's single-minded pursuit of economic growth at the expense of the other things that make a society tick has led to a some very undesirable consequences. You would have to acknowledge that it has also had the consequence of making us more wealthy, but is more and more wealth necessarily the key to greater contentment? If you take someone like Michael Jackson as an example, the answer is a resounding "no".

Numerous studies have shown that achieving a basic level of wealth definitely contributes to a person's wellbeing. That makes sense, after all - not having to worry about how you are going to afford the mortgage next month or how to fix that annoying rattle in the car would be a big relief to people on the breadline. However, the same studies also show that beyond a certain level of wealth, the effect on happiness is negligible or, to borrow an economist's phrase, there is very little "marginal utility" associated with the surplus cash. What does however show up a strong contributor to happiness is interaction with other people.

Intuitively, we all know this. We all dutifully put in the long hours at work so that we can earn more loot and buy bigger houses, flasher cars and more exotic holidays. However, at the same time we complain incessantly about how work dominates our lives and lament the fact that we've completely lost touch with all the old friends and perverts we spent so much time with at University just goofing off and drinking beer. Yet instead of reacting against this, year after year we line up for more, kidding ourselves that in 5 or so years we can get off the treadmill and afford to do all those fun things we've been putting off for years. Nice idea, but sorry, but the GFC has put paid to that idea for the time being.

Some governments have realised that the single-minded pursuit of economic growth isn't necessarily the best way to ensure the happiness of their citizens and have therefore started looking at other measures. Bhutan, of all places, have recently taken it to the logical extreme and implemented a "National Happiness Index". How this will work exactly is hard to know as an index like this is very subjective and pretty hard to measure, however the Bhutanese are to be commended for at least giving it a try. Even a nation full of notorious whingers such as Britain have toyed with implementing a similar measure to gauge the national mood, and it is probable that in the face of the economic carnage wrought by the GFC other nations will follow suit.

It is to be hoped that they do. If there is one lesson that can be learnt from the events of the last 18 months is that booms never last forever, fortunes can be lost in an instant and that basing your mental wellbeing on the amount of cash in your account is fraught with peril and likely to result in some nasty ulcers. Governments should now recognise this and instead of engaging in ridiculous backslapping over a piddling economic growth figure, redirect their energies at rebuilding the social networks that have been severely run down over the past 60 years in the race to become rich. Who knows? It might just lead to a more happy and contended population and therefore, more years in office for the government bold enough to reject the mantra of economists and strike a new path.

In the end, however, economics is likely to claim us all. It certainly did a number on Jacko, rest his soul. Spending more than he earned for years led to an economic imperative to earn more cash. To do this, he signed up to do 50 concerts in London however the stress associated with the concerts plus the heavy training to get in shape no doubt contributed to his heart attack.

Economics -1. Jackson - nil. How dismal.

Not Happy, Johns

Another footy season is well underway and as is the norm, stories about footballers behaving badly are legion. Generously sprinkled throughout the sports pages of the national dailies are reports of Ben Cousins flipping the bird live on Channel 10, Tim Cahill being booted out of a Sydney nightclub or in the NRL, another debacle occurring at the hapless Cronulla Sharks. As a cricketer, Andrew Symonds had to muck up pretty spectacularly in England in order to get his fair share of column space in amongst all the misbehaving footy players.

When you consider some of the truly newsworthy things going on in the world, the fact that some of these things make the paper is an indictment on both sports journalism as a profession and all of us as readers. Most of the things that sportsmen get up to either on or off the field, for example, losing your temper, drinking to excess and chasing tail are things that all of us are guilty of from time to time. Very few people care when Joe Public engages in this sort of behaviour, however slap a Waratahs or Collingwood guernsey on the offender and suddenly it is front page copy.

The media when confronted with the latest scandal are quick to get on their high horse about footballers being "public figures" and "role models" and needing to set an example for their young fans. Well, bollocks to that. Since when did being a sublimely talented athlete oblige someone to stay at home, read the bible and cook a roast for their grandmother every Sunday when most of their mates are out doing what young people like to do? Ask any high-profile sportsman and you would find that pretty much all of them either intensely resent the media attention paid to their every move, or at best accept it with a weary exasperation. In truth, apart from needing to be more self-aware than the rest of us due to their public profile, the only real behavioural obligations that footballers should have is to ensure that their conduct does not breach their contract of employment with their club nor transgress the other standards expected of the rest of civilised society.

The second point is highly relevant when you consider the recent expose concerning Matthew Johns in New Zealand in 2002. In this case, the behaviour exhibited by Johns and his teammates as represented on the 4 Corners report was so repellent and bizarre that it would be newsworthy in its own right even if the participants weren't members of an NRL team. It would certainly have featured prominently in the Adelaide Advertiser where serial killings, indecent exposures and perverse sexual acts are the order of the day. Yet strangely given a media which usually dines out on stories of this nature, this particular scandal took 7 years to come to light, and was uncovered by the ABC, of all organisations. Yes, the boring fuddy-duddy, pinko-lefto ABC, who couldn't normally distinguish a crossbar from a point post, somehow managed to scoop the sporting scandal of the year.

How did this happen, or not happen, as the case may be? It's hard to believe that Johns' employer Channel 9 and the press in general weren't aware of what happened that fateful night in Auckland. In fact, Channel 9 journalist Danny Weidler has admitted that had known about what happened for years but "didn't consider reporting it". One can only speculate why he chose not to do so. Based on the media storm over the past few weeks, it can't have been because the story wasn't newsworthy. The cynical but most logical solution is that Channel 9 deliberately hushed the incident up.

If there has indeed been media a cover up, then it doesn't take much of an imagination to work out why. The simple fact is that despite their recent retirements and various misdeanours during and after their careers, Johns and his brother Andrew are Rugby League royalty. Andrew is regularly bracketed with Wally Lewis as the greatest player to have played the game in the last 30 years, while Matthew was a more than serviceable 5/8 for Newcastle and until his fracas came to light, a rising media star on the Sydney Footy Show. Given the clearly explosive nature of the story, Channel 9 would have been hoping like anything that the woman involved kept her mouth shut and that the whole thing got quietly put in the "what goes on on tour, stays on tour" category. Unfortunately for both Johns and Channel 9, this ultimately didn't happen. And as is usually the case when this sort of transgression came to light, the consequences for Johns, his family, the NRL and the media have been quite severe.

But then, so the conseqences ought to be. Given the circumstances, the argument about whether high profile sportpeople should be subjected to more scrutiny than the rest of us is irrelevant. So too is any hand wringing about the effect this is having on Matthew Johns's family and the fact that the sport of Rugby League has been brought into disrepute. What is most important, and what has been lost in all the column space written on the subject, is the effect Johns' and his teammates actions had on the victim.

Picture this. You are a young girl, 19 years old, newly sexually aware and heading off to footy match. You wangle your way into the players' inner sanctum after the game for a few drinks, one thing leads to another and then suddenly you are back at the away team's hotel for the after party and more than likely, a bit of a one-on-one tumble with one of the players. However, the atmosphere very quickly turns ugly and all of a sudden it's not one but several players taking turns on you while a number of their teammates stand round laughing and joking and calling you every derogatory name under the sun.

The position of a woman in this type of situation is very awkward. Apart from the immediate issue of the physical and sexual abuse she is being subjected to, there are more consequences if she complains. Because she willingly went back to the hotel with probable intent to have sex, she runs the risk of being dismissed as a slut and having the blame for what happened shunted back on her, even though no woman in their right mind would have gone back to the team hotel knowing what was in store for her. The law in this area is quite tricky too. Rape is a very difficult charge to make stick, one of the reasons being that the question of consent is quite a blurry one. In this situation, an accused can quite easily argue the point that if the victim didn't consent to have sex, then what was she doing back at the team hotel? Further, the only witnesses in this case would be Johns' co-accused, who would hardly support her version of events.

According to reports, there was nonetheless a complaint made shortly after the incident and a police investigation which failed to result in any charges being laid. Johns and his Cronulla teammates doubtless heaved a huge collective sigh of relief, dismissed the whole thing as just another day in the life of an NRL footy player and went back to sticking their fat heads in scrums. However, clearly that was not the end of the matter as far as the victim was concerned. She has carried the incident round with her for 7 years and has only now found out the courage to speak out and tell her story. Despite some ignoramuses claiming she was only doing this to big note herself and get her 15 minutes of fame, this can't have been an easy decision for her to make. In telling her story, she would have to revisit afresh the mental anguish of reliving the incident and risked being judged in the court of public opinion, not knowing which way it would fall. Would she be seen as a naive but nonetheless innocent young girl who was taken advantage of by a bunch of boorish louts, or would she be seen as a filthy tart who asked for everything she got?

As it turns out, though, her role in the whole media story has been very secondary, with everyone instead focussing on the effect on Matthew Johns and his family and the damage the incident has done to the NRL. Surprisingly, the one notable exception to this came on "A Current Affair" when Tracy Grimshaw interviewed Johns and his wife shortly after the story broke. I didn't see the interview but it was widely reported the next day how Grimshaw had repeatedly tried to get the Johns' to stop focussing on how this had affected them and instead to see the incident through the eyes of the true victim of the piece. Needless to say, neither Johns nor his wife Trish got the point, with Trish saying the greatest crime committed was infidelity to her - the clear implication being that the trauma to the victim was secondary to the trauma suffered to their marriage.

Similarly, the NRL has come out and made its usual banal statements about these sorts of incidents needing to be stamped out as they bring the game into disrepute. What they completely fail to see is that these sorts of incidents will NEVER be stamped out until footballers stop behaving like oversexed gorillas, start exercising a modicum of self-control and understanding the pain and hurt that their actions are likely to cause the victim. One simple question they should ask themselves when confronted with this sort of situation is : "Would I be pleased if this was happening to my girlfriend or my sister?", or even "Would I like to read about this in the paper tomorrow?" . The answer to both questions would of course be an unequivocal "no".

Because these things keep happening, the NRL should take the initiative and start educating its players better in this area. While elite sportmen live in a heady and sometimes surreal world, and while they should not have their every move scrutinised, they do need to have regard to the moral and social codes that the rest of us in society live by. Whatever the NRL are currently doing in this area to educate the players is clearly not getting through the large layers of meat around their brains.

A good way for the NRL to start would be to publicly name the rest of the anonymous and gutless Cronulla players who were involved in the incident and have them publicly apologise to the victim. I don't, however, think that will happen. Apologising might be the noble thing to do, but it would probably adversely affect the players' marriages, not to mention bring the game into disrepute. And we all know those considerations are far more important than what has happened to the victim.

Is Democracy working?

The former British Prime Minister Winston Churchill once quipped that democracy was the worst system of government in the world - except for all the other forms of government that had been tried.

Churchill retired from public life in the 1950s and died in 1965 so it perhaps unfair to consider his words in the context of the modern world. It is also true that democracy in its current form remains a lot better form of government than that practised in places like Zimbabwe, North Korea and New South Wales. However, when you look at the problems in the world's leading democracies and what is needed to fix them, you have to seriously ask, has democracy really been working and is it the best way forward?

Before embarking on an analysis on where democracy could improve, it's important to understand where it has come from and how it got to where it is today. It is a common misconception that democracy has always been about one vote, one value and that the population as a whole has always been able to have their say in the election and running of government. In fact, nothing could be further from the truth.

Democracy is widely acknowledged as having arisen in ancient Greece. In fact, the word itself derives from the Greek words "demos" (for 'people') and "kratos" (for 'rule'). However Greek society was far from the egalitarian paradise that misty-eyed historians might imagine. As with a lot of primitive societies, slavery was broadly practiced and women were regarded very much as second-class citizens. Needless to say, women and slaves weren't allowed to vote and the election of public officials was very much left to the elites of society.

Fast forward to England, also considered a longstanding bastion of democracy. However, after the Norman Conquest of 1066 when England finally became politically unified, it took nearly 600 years for the seeds of a functioning democracy to take hold. Even then, it took until 1928 for women to be given the vote on equal terms with men, so "democracy" as we understand it today is only a relatively recent development in what is regarded as one of the world's most open and free countries.

Finally, let's consider the USA, the self-proclaimed leader of the free world and champion of democracy. Many wise men lauded as great patriots and protagonists of freedom sat down to write the US consititution in the late 1700s - one of whom, Thomas Jefferson, openly supported slavery. The Constitution was indeed a ground-breaking document in many ways but it fell a long way short of giving everyone an equal say in the election of the government. Slavery was practised in the US until after the Civil War in the 1840s and similarly to England, the rights of women to vote were only codified in the Consitution 1920 and even then, only after persistent protest from the suffrage movement over many years.

It's clear therefore that the concept of everyone having a vote is a relatively new one in the major democracies. Also while the idea is admirable in the sense of giving everyone an equal say (at least notionally), I'm not sure that this system is ideal either. Just because a person has a right to do something doesn't mean it's a good thing for them to actually exercise that right. This is particularly relevant when you consider some of the people who vote.

American people who think that the 9/11 attacks happened in November last year and were instigated by Saddam Hussein, they vote.

People who oppose migration because they seriously believe a migrant is going to come and take their job, they vote.

People who put bumper stickers on the back of their trucks which say "I shoot and I vote", they vote. If you don't believe me, then read their bumper stickers. The people who print those bumper stickers also vote. They probably also employ the sorts of people who are worried about migrants taking their jobs.

Americans who think Elvis is still alive and who think that aliens are prepared to travel hundreds of thousands of light years across the galaxy merely for the purpose of giving them an anal probe or making a cow explode, they vote.

People who got themselves pregnant because they would get the baby bonus and not because they genuinely wanted to bring a child into the world and then spend the baby bonus on a new plasma TV, they vote. Even worse, they breed.

While Churchill was a staunch defender of democracy, he was also once quoted as saying that the best argument against democracy was a 5 minute conversation with the average voter. One can just imagine what he would make of this lot.

I'm conscious of sounding somewhat elitist here, so let me make it clear that when I say it's not necessarily the best thing for everyone to vote, I don't consider myself or most of my friends or colleagues appropriately equipped to make an informed voting choice either. While most people I know generally try to keep abreast of what is going on in the world and can recognise in general terms when a government is performing badly or when an opposition presents a credible alternative, it's very difficult for someone to access the same level of information when choosing a government as you would say when you are assessing an investment opportunity, choosing a school for your children or applying for a job. We might suspect someone putting themselves up for election is a halfwit or a crook, but the average voter doesn't typically get the opportunity to grill the politician one-on-one to confirm or dismiss their suspicions.

Even if it was possible to conduct the requisite level of due diligence, most people including myself have got other priorities and don't pay attention to much other than a few key points like tax, health and education. Kevin Rudd's policy on pig quotas for China - honestly who cares? The mortgage is due, the market's down 10 per cent this week and both the kids need braces. Arrgh! Bring me my heart pills and a double espresso.

While it is fair, giving everyone the vote instead of just an engaged, intelligent elite does have a downside. Being one of 20 million voters feels pretty disempowering, and this leads to voter disengagement. Disengaged voters are problematic because they allow governments to become complacent and develop bad practices which aren't in the country's long term interest. They also allow certain insidious elements of society like special interest groups who don't directly vote to get in the government's ear and distract it from what it should be doing. When you combine the activities of these groups with a media that is increasingly more interested pushing the political agenda of their owners and in running tabloid headlines instead of reporting facts, then it's little wonder that democracies around the world are performing in a sub-optimal fashion.

Let's take Australia as an example, because if I start on the USA I will still be going on in 70 pages time. We're fortunate relative to most other countries, but look at the significant problems we are currently facing. In Queensland, the health system is an under-funded mess, while Brisbane's road and transport network is woefully inadequate despite the government acknowledging openly that Queensland is a high growth state and infrastructure needs to be built to cope with that growth. Victoria and South Australia are just about out of water, and the Murray-Darling system is close to collapse. Melbourne's suburban rail network would be an embarrassment to any self-respecting third world city, let alone one that sells itself as one of the world's most liveable. And as for New South Wales - well, I just repeat my comment above about not wanting to go on for 70 pages. The federal government should have long ago stepped up and helped fix some of these problems however it now has other pressing priorities courtesy of the global financial crisis.

Why has this happened? In my opinion it's because governments both state and federal have for too long been making decisions based on the following criteria:

• Decisions that are politically expedient trump the right long-term decisions: the reason for our appalling under-investment in infrastructure in this country is plain and simple. No government is going to commit surplus money to a 10-15 year project like a train network or a desalination plant when there is an election looming and the money can instead be applied to populist uses. A classic example is Howard and Costello blowing the windfalls of the mining boom on unnecessary things like income tax cuts and George W's war on terror. Infrastructure and other long-term investments only become popular when the need for them is urgent and unfortunately, long-term projects aren't the sort of things that can be delivered overnight.
• Don't under any circumstances act without covering your backside: sadly, politicians have become so enfeebled by a combination of media scrutiny and good old fashioned spinelessness that a whole new industry has arisen of firms who do nothing else than consult to government. Gone are the days of leaders like Hawke and Kennett unilaterally making bold and potentially unpopular decisions. If a new Government initiative gets announced today, you can almost guarantee it's been sanitised and watered down by a succession of spin doctors, ex-investment bankers and lobbyists so that it won't cause a media circus and affect polling. Unfortunately chances are that after this process, what was potentially a good initiative has been reduced to nothing more than a token gesture.
• If you "gaffe", you're gone: the party machines have become so terrified of negative media coverage that they are prepared to instantly marginalise their better people merely because they might let something slip in front of the microphone. Honestly, there is something seriously wrong with a system that allows such a charismatic and passionate environmental advocate like Peter Garrett to get shunted aside in favour of the terminally bland Penny Wong. Who out of these two do we honestly think is going to present our country's interests better or more eloquently on the world stage? Until however the media stop taking cheap shots and instead report constructively on what a politician has to say, we are going to get more and more of these harmful knee-jerk reactions.
• The squeaky wheel gets the oil: if you have contacts within the government and use them, chances are you will benefit. As we have seen time and again both America and here, governments do not do what the voters want, they do what lobbyists and their financial supporters want. For example, most Australians would like to see a shift from a polluting, fossil fuel energy system to a clean energy system. After all, in the long term it makes perfect sense to do just that. Yet apart from the token act of ratifying the Kyoto protocol and getting a professor with an impressive resume to write a report (see comments above about consultants), the Rudd government has done essentially nothing in this area since its election. Why? Well, aside from the problem of Penny Wong putting anyone she meets with to sleep, it's basically because the energy lobby has got in the ear of Martin Ferguson and called for a "go slow". Meanwhile, those of us who live in Victoria sit and watch as the never-ending drought drains our rivers, dries up our gardens and makes us feel guilty about taking a 10 minute shower.
• Stuff the voters but get the media onside: around every election you will get a TV shot of the incumbent Prime Minister or leader of the opposition making a pilgrimage to see Rupert Murdoch over in New York. Hello? Does anybody else see something wrong with this picture? The motives of an arch-conservative media tycoon who renounced his Australian citizenship long ago are hardly going to be in the interests of most Australians who actually vote. Yet there is no more powerful symbol than this of the influence big media has over our supposedly democratically elected government.

As you can see, the sort of strong, decisive and foresighted leadership we need is unlikely to emerge until governments shed this timid, butt-covering mentality. Needless to say, these sorts of problems don't happen in a place like China where people like Murdoch would have long ago been shot and lobbyists as we know them are non-existent. However anyone would acknowledge that China's government is far from ideal either, so how do we improve what we've got?

Like most people, I am more adept at complaining about problems as opposed to solving them, however at the risk of sounding entirely negative, let me propose some initiatives:

• Give governments longer terms: I know and understand the arguments against this but it's unrealistic to expect governments to make solid long-term decisions when they constantly have one eye on the polls. My view is to give them 8 years. After all, we gave Brian Harradine, Steve Fielding and all of the Democrats 6 years. Surely that's reason enough to give someone vaguely sensible a bit longer?
• Heavily regulate lobbyists: the government is starting to wake up to this by forcing all lobbyists to register, but things need to go a lot further than that. As people who are entitled to vote, we should be entitled to know if an organisation who isn't entitled to vote is trying to a manipulate our elected officials. It might be a bit extreme, but I would suggest as a start that they be forced to wear a nice big tattoo across their forehead saying "Beware ! Lobbyist Approaching !"
• Ban corporations from making political donations: we've all witnessed the disasters that this has created in America where governments have effectively become the puppets of large corporations. There's demonstrably no good that can come of it, so just ban it. If companies want to make a contribution to the government that badly, then they should instead volunteer to pay their fair share of tax. Ohh, that's so funny. I crack myself up sometimes.
• Set up an Australian sovereign fund to invest in infrastructure: if governments consider long-term infrastructure investment political suicide, then let's depoliticise it and set up a specific fund outside the control of the government for that purpose and capitalise it with windfall taxation gains. We've all seen the clear benefits of taking the politics out of things like the currency exchange rate and settings of monetary policy, so why not extend that to this area?
• Educate the voters: if we can't stop politicians, big media or lobbyists misbehaving, then at least we should be wise to them and educate people as to the barrow they are trying to push. This is needed because credulity is a fairly prevalent human characteristic and we tend to believe what we see and hear at face value. Of course, we all know now that statements like "Saddam Hussein has weapons of mass destruction", "Never, ever will we have a GST" and "I did not have sexual relations with that woman" were blatant lies. The trick is to recognise that up front and call the liars to account before the lies wreak havoc.

So, to sum up this diatribe, is democracy really working, or should we exhume Brezhnev or Mussolini in order to better take care of business? My view is that it clearly is in some sense, but there is no doubt it could be working a lot better. I'm glad I enjoy the freedom to chew gum at will and write things like this blog, but equally there are some facets of dictatorships around the world which appeal in times like these when governments need to make important decisions. Ultimately, dictators can just make those decisions without too much fear of reprisal while democratic governments require courage, vision and no small amount of salesmanship in order to do what is right instead of what is politically expedient.

Perhaps to assist this what we need to do as voters is foster an environment whereby doing the right thing becomes also the politically expedient thing and those leaders who make the bold, long term decisions get appropriately rewarded. Then, and only then, can we prove Churchill wrong on both counts.

As it stands today, I have to say that Churchill was being harsh when he made his statements, but he was probably also being fair.

Non-Jobs

The novels of the late great science fiction writer and humorist Douglas Adams contain many amusing anecdotes however one of my personal favourites occurs in the second book of the "Hitchhikers Guide to the Galaxy" series.

After an encounter with a dodgy teleport device, two of the book's protagonists are sent back in time 2 million years and re-materialise on a spaceship piloted by race of humans called the Golgafrinchams. The bemusement our heroes express at the various idiosyncrasies of their hosts quickly turns to alarm when they discover the true purpose of the ship's voyage.

It turned out that society on the Golgafrincham home planet had developed to the point where approximately 1/3rd of its population had become engaged in occupations which were essentially useless. To remedy this, the planet's leaders came up with an innovative solution. They fabricated a looming cosmic catastrophe and told the people that their entire race would need to evacuate the planet. They also proposed that the evacuation would take place in 3 stages. The first fleet, or "A" Ark would contain all the scientists, business leaders and intellectuals. The "C" Ark would contain all the "doers" of Golgafrincham society such as builders, tradespeople and all the other blue collar workers. The first to leave however would be the "B" Ark who would transport all the hairdressers, telephone sanitisers, middle managers and marketing executives - basically everyone engaged in useless occupations.

Of course, however, the idea of establishing a new Golgafrincham colony on a distant planet was simply a ruse and the people assigned to the notional "A" and "C" Arks stayed at home and celebrated long and hard that they had managed to rid themselves of a whole useless third of their population - until, ironically the population was wiped out by a pandemic originating from a dirty telephone. The "B" Ark meanwhile did what it was programmed to do and crash-landed on a remote, prehistoric planet, which by coincidence happened to be the Earth.

The scenario as presented by Adams was of course meant to be satirical however looking at society today, you sometimes wonder after all whether there isn't something more to what he said and that we are in fact descendants of the Golgafrinchams and not the apes. The proliferation in the last 20 years of what are best termed "non-jobs" similar to those undertaken by the passengers on the "B" fleet is staggering. What's worse, it seems to be those people who work at meaningful, productive jobs that are more at risk in the current recession than those people whose jobs could disappear and society could be none the wiser.

I have cited below some key examples of "non-jobs" as I see them and would be interested in hearing from anybody in case I have missed some obvious candidates:

(a) Management consultants: Guys, having an MBA doesn't mask the fact that you are probably under 30, have no industry experience and are uniquely unqualified to fix a company's problems. If you really want to make a difference, then take the honest approach of working for the company as a paid employee and not as a rapacious consultant. You might also learn something of value in the course of doing so.

(b) CEOs and COOs who hire management consultants: it's your job, so do it. Outsourcing to a management consultant is a cop out.

(c) Equities analysts: see my earlier column "De-list and De-louse". QED.

(d) The "traffic management" neanderthals at the airport cab rank: dudes, we passengers all managed to dress ourselves this morning, pack our bags and catch our planes. I think we're all quite capable of getting into a taxi by ourselves without having someone with the brains of a duck trying to herd us.

(e) Six Sigma Black Belts: three words here - what the .... ? I challenge anyone to work out what these fuzzballs actually do apart from endlessly recycling management mumbo-jumbo buzzwords and stealing oxygen from the rest of us. I have some advice for anyone who works at a company that hires one of these muppets. Resign. And once you've resigned, sell your shares. The company is doomed.

(f) 10 Tasmianian senators, 8 SA senators, 6 WA senators, 4 Qld senators and 1 Victorian senator (ideally Steve Fielding). See my column above titled "Unrepresentative Swill". The prosecution rests.

(g) At least 100 accredited AFL journalists. I know I made the choice to live in Melbourne and I enjoy a good game of footy as much as the next person, however, I do NOT want to read endless stories about inconsequential things like umpires and players touching each other. Let's confine that sort of thing to the locker room after the game.

(h) The 10 niggardly ticket inspectors who bust people at Parliament Station each morning for failing to validate their tickets. 50 train cancellations a day and you have the hide to harangue someone for something as petty as this? Where's your humanity?

(i) Anyone other than people covered in (a) and (e) whose job requires them to use expressions like "paradigm shift" and "change management" other than as part of a comedy routine.

(j) Airport Citigroup credit card hawkers: this one is so blatantly ridiculous that I actually feel deep sympathy for the people who have to do this job. If a share price under $1 wasn't enough indication, then the fact that Citigroup actually employs people to do this job is clear evidence that the company is finished.

Anyone who flies semi-regularly will know what I am talking about. You have either caught the red-eye home from Perth or overseas and are desperate to get home, or alternatively you have been caught in a jam on the Tullamarine Freeway and are racing to catch your 7am plane to Sydney. Under either scenario, stopping to sign up for a new credit card is hardly going to be at the top of your priority list. However Citigroup seemed to think that pulling people up in the midst of their rush and thrusting a card application at them is a winning marketing strategy. For heaven's sake, I reckon you would have better sales prospects setting up a pork sausage sizzle outside a synagogue or mosque. Mercifully for rushed passengers Citigroup now seem to have made a "strategic withdrawal" from this line of business. It must be hard to convince Barack Obama to prop up your company when you engage in acts of such flagrant stupidity.


By far the most frustrating thing about most non-jobs is that the people doing them doubtless have some useful skills that could be deployed for good instead of evil. For example, instead of writing about umpire fiddling, the surplus AFL journalists could be re-assigned to more newsworthy areas, and the ticket inspectors COULD be re-trained as desperately needed locomotive mechanics.

However until employers recognise this and start rewarding only those people who make a meaningful contribution, then non-jobs will continue to expand and grow like a malignant tumour. Let's hope that the global economic crisis gets people to focus on what really matters and creates the necessary "paradigm shift" to make non-jobs a thing of the past.

Keeping a lid on it, but ...

... fellow Saints fans, we are definitely flag contenders this year.

I know what you're all thinking, and normally I would think exactly the same. We've had flying starts to a season before, but by the time the business end of the season rolls around it all turns to excrement and we lose in the preliminary final to some objectionable team like Port Adelaide. However, it's not the fact that we are 3-0 after 3 rounds with a thumping percentage that's got my juices flowing; it's been more the manner of those wins and the type of football they are playing. Because it's the style of football that wins finals.

Even the most critical and paranoid St Kilda fan couldn't fail to notice a certain steely resolve in the team that hasn't been there in seasons past. Even in 2004 when we used to blow the mediocre teams off the park you couldn't help but get this gnawing feeling in the pit of your stomach that when we came up against a genuine contender like Brisbane or Port on their own patch that their constant and sustained pressure might make the team's game plan fall apart. So it proved at the Gabba in two late season matches where the physical intimidation of a Lions team led by Voss, Brown and the Scott brothers led to two debilitating losses.

Now think back last week to Round 2 in Adelaide. The Crows were flying high after knocking off Collingwood at the MCG and were expected to win reasonably comfortably. However the Saints got the jump on them, withstood a 3rd quarter challenge that they would have wilted under in years past, and then kicked away again in the last to win by over 5 goals. The fact that they got away with the win wasn't completely surprising, however what WAS odd was the feeling I got watching that the result was never really in doubt. Until I thought about it and understood why.

It's largely because the pressure applied by the Saints in their 3 matches this year has been relentless and nigh on impossible to counter for the whole match. Teams might be able to string a few good passages together against this type of harassment but it makes it hard for them to kick a winning score. The fact that no team has managed to kick more than 70 points against us so far is testament to this, a situation that's unlikely to change next week against the Fremantle Shockers. In fact, there is a fair prospect that we might actually keep them from scoring.

Don't be fooled by the fact that until today, we hadn't annihilated any teams. Dominant teams in years past like West Coast in 1994, Brisbane in 2001 and Carlton in 1995 didn't always bury sides during the regular season. However the sustained pressure they used to bring to bear on their opponents generally meant they won more matches than they lost and ensured a high ladder placing at the end of the season. It was in the finals that they started to thrash sides, as their game plans were ideally suited to the heat of finals football.

So what's gone right this year, and how can we keep it going to ensure we are right in contention come September? Well, assuming for once a decent run with injuries, the list finally looks up to the task. Unlike years past, there are plenty of hard nuts and no obvious weaknesses. As I mentioned earlier, no team has managed yet to kick more than 10 goals against us and this is despite the backline missing two of its stalwarts in Matt Maguire and Max Hudghton. Sam Fisher has been a revelation and Sam Gilbert an emerging star, however you wouldn't seriously put these two in the same category as say Matthew Scarlett and Tom Harley. It just goes to show how decent efforts up the ground can make the defenders' jobs much easier.

The midfield has struggled a bit in recent years against the quicker sides like the Bulldogs, but we now seem to have found the right mix of ball-winning grunt and fleet-footed disposal. Luke Ball looks properly fit for the first time in years and seems to have managed to find a way of extracting the ball from the bottom of packs without getting his head rearranged in the process. Leigh Montagna, Brendon Goddard and Farren Ray have added much needed zip while Nick Dal Santo would have to be the clubhouse leader for the Brownlow after 3 rounds after dishing out about 150 disposals. His demotion last year for not putting in enough now seems a distant memory.

The ruck division has finally got some real depth to it as well. Michael Gardiner seems to have shaken off the nigging injuries that ruined his first two years at St Kilda and is ready to recapture some of his career-best form. If he and Steven King can manage say 35 games between them and not force Justin Koschitzke or Jason Blake to have to step in too much, then this area should be a real strength this year. To make things even better, Ben McEvoy is waiting in the wings and the wraps on this kid are huge.

One player who was sorely missed last year was Stevie Baker. If Robert Harvey represented St Kilda's heart and Riewoldt and Fisher its spine, then Baker is definitely the club's underbelly. Week after week he goes to the opposition's best midfielder and makes sure they have a miserable time. If he could just learn to kick as well as he administers nipple-cripples and Chinese burns, then he would be an out and out star. He has been ably supported in this area by Clint Jones, who has the looks of a surfer but the mindset of a terrier. The fix-up job he did today on Daniel Kerr was nothing short of outstanding.

Unusually for a forward line with a spearhead like Nick Riewoldt and a crumber like Stephen Milne, the forward line could be our Achilles heel this year. Fraser Gehrig at his peak was a menacing prospect for any backman, and as an added bonus he got on the park most weeks and was a pretty accurate shot for goal. These are big shoes to fill and while Koschitzke has started the year impressively, given his history of injuries and non-existent peripheral vision, it will be a big ask for him to play the whole year and sustain this form. Without a second big marking target in the goalsquare there is the risk that the midfielders will look for Riewoldt too often and make things too easily predictable for the defenders. That said, if Gardiner or King are able to push down often enough, that should at least create enough contests for the two bottom fishers in Milne and Schneider to pick up the scraps and manufacture some goals.

The other thing working in our favour this year is the draw. After Carlton's stumble tonight, we will head into round 4 on top of the ladder, chock full of confidence and facing a sick and sorry Dockers outfit at home. After another percentage-bloating affair we head back to Bogan Park in Adelaide to face bogey team Port. Even if we stumble at that hurdle, we have a run of 6 winnable matches in the Dogs, Pies, Bombers and Brisbane (all at Docklands) then Melbourne (Gold Coast) and North (Docklands). Given this draw we could find ourselves 10-1 or 9-2; much better than the 4-7 or 5-6 of recent years. It's hard to see even St Kilda mucking things up from there and a top 2 finish beckons.

I'm taking it one week at a time, and I don't want to get ahead of myself, but in a year when so many other things are turning to crap, the football gods look like smiling. Go the Saints !

Unrepresentative Swill

The former Prime Minister Paul Keating has a lot of detractors, but one quality that was respected on both side of politics was his acerbic wit and his use of pithy quips to either make a point or heap scorn on his opponents. John Hewson was the target of many a Keating barb ("debating him is like being bashed with a warm lettuce"), while other political opponents like Howard ("the desiccated coconut") and Peter Costello ("all tip and no iceberg") drew some of his fire during the last election.

My favourite however is his description of the Senate as "unrepresentative swill". At a time where the fate of several important pieces of legislation rest in the hands of the dangerously naive Family First Senator Steve Fielding and the quirky South Australian Nick Xenophon, the expression has never been more apt. The vast majority of Australians did not vote for these people, so how did they land themselves such influential positions? Also after the numerous examples of oddball senators having undue influence on the country's affairs (eg Albert Field in Whitlam's time and more recently, Brian Harradine), why do we continue to tolerate the way the Senate is elected?

The problem essentially stems from the way the nation was formed back in 1901 and our reluctance as a country to change the Constitution so that it better reflects the circumstances of the 21st century. Similar to the USA, the Australian Government was formed when the separate colonies of the states agreed to join together to break away from England and form a Commonwealth. Prior to this, each of the States each ran their own affairs independently of the others and had much more diverging priorities than what they do now. The bizarre fact that each state had its own rail gauge rendering interstate rail travel either impossible or impractical is testament to this. Similarly, while a lot of matters that it makes clear sense for a central government to control (for example: income tax and company regulation) now fall within the responsibility of the Federal Government, the states were generally very slow and reluctant to cede powers to the new central government. It was for this reason that the Senate was conceived as the legislative house designed to represent the interests of the States and with equal representation for each State.

The problem now however is that with modern methods of travel and communication making the world a much smaller place and with the interests of the States much more aligned than what they once were, the idea of determining Senate representation based on lines on a map drawn over 150 years ago is hopelessly outdated. However, because of the way the Constitution was drawn and the extreme difficulties faced in changing it, we are likely to be stuck with this anachronistic system for the foreseeable future. Which unfortunately for everyone means a future full of more Senators like Harradine and Fielding.

I generally agree with the idea of an upper house. Consitituted properly, it can act as an effective house of review and both improve and where necessary, temper legislation conceived by the lower house. When one party controls both houses of Parliament, there is nothing to filter the excesses of Government policy and you wind up with odious laws like Workchoices being passed without their harsh edges being knocked off. However, when the Government is forced to make undesirable changes to laws to satisfy the capricious whims of an independent senator, then the upper house is clearly not serving its purpose. This is especially when an overwhelming number of people did not vote for these senators, nor for their policies - if in fact they have any and aren't just making them up on the run.

To illustrate just how disproportionate the representation is, take a look at the results from the last Federal Election. Because Senators serve 6 year terms, only 6 Senate seats were up for grabs in each state. Under the Senate quota system, a senator needed just under 600,000 votes in New South Wales to secure a seat. In Victoria, the number needed was 450,000 but in South Australia it was closer to 145,000 and in Tasmania a paltry 47,000. This means that 47,000 Tasmanians have the same Senate representation as 12 times that many New South Welshmen and 10 times as many Victorians. When you consider this it's small wonder that Keating started calling the Senate all sorts of names.

What this voting system does however is make it a relatively easy proposition for a maverick senator to make his way into the Upper House in one of the smaller states, which is why the independents tend to come from either Tasmania or South Australia. Getting hold of either 47,000 or even 145,000 votes after distribution of preferences is fairly achievable but 450,000 or 600,000 is a whole different proposition. While it's true that the smaller states need a decent degree of representation and the proportion should not be solely based on population, equally it's not fair on the rest of the country that an individual elected by 47,000 Tasmanians has the power to frustrate or cripple laws that are of critical importance.

Which brings me back to Steve Fielding, who unusually for an independent senator comes from Victoria. The story of his election in 2004 is certainly an interesting story. Of the primary vote , Fielding received just 56,000 votes, less than 1/8th of what he needed to secure a seat. However, because of a sleazy preference deal struck by Labor to try and dud the Greens and swing themselves a 3rd senate seat, Fielding somehow after distribution of preferences leapfrogged not only the Democrats and the DLP but also the Greens (260,000) votes.

As a result of Labor's misconceived deal, we now have a situation where this gormless twit and his homespun policies are going to potentially determine whether several pieces of hugely important legislation get through the Senate. Kevin Rudd must cursing Mark Latham to high heaven right now, because the early signs are not encouraging.

Witness Fielding's attitude to the Alcopops legislation. This could hardly be considered a law of groundbreaking or nation-building importance, however in order to pass it, Fielding wanted to impose an immediate ban on ALL alcohol related sports advertising. Yep, great idea, let's drop that one in overnight in the middle of a recession and see what happens to all sporting codes in the country.

It was announced in the press the other day that Labor are looking to reverse some of the idiotic and unnecessary middle-class welfare measures introduced by Howard and Costello, the most pertinent of these being the elimination of the baby bonus. In the driest, most forbidding continent on Earth, who in their right mind wants to encourage INCREASING our population? If it's true then this is a great piece of policy by Labor and should be rushed into law so that money can be applied to solving more pressing issues in the economy. However, with Steve Fielding calling the shots in the Senate, don't expect this legislation to get through without significant amendment or perhaps at all. For him, it's Families First and the national interest a very distant second.

Unrepresentative swill? They're much worse than that. I think for once Keating was being too kind.

Enjoy your Walk, Dr Keen

While surfing the net during a particularly asphyxiating Melbourne train trip, I came across an Sunday Telegraph article on the housing market which cited comments from the Sydney economist, Dr Steve Keen.

As usual, Dr Keen's comments were laden with predictions of economic doom, tanking house prices and warnings that first home buyers would be turfed out of their homes as they struggled under a pile of crippling debt. To reinforce his point of view, the paper sought a quote from the legendary market bear Gerard Minack, who obliged by forecasting halving of values on the Gold Coast and value drops of 20% in some cities.

To anyone who knows anything about real estate markets (and I happen to know quite a lot having worked in this area for almost 20 years), in the context of Australia's current circumstances these predictions are simply asinine, not to mention irresponsible. As with any downturn there will be individual horror stories but falls of this magnitude just aren't going to happen across the board. However, in an environment where newspapers are actively looking to run bad news stories, they will eagerly publish all manner of rubbish from all manner of idiots as long as it supports their editorial direction.

To illustrate my point, try typing "Dr Steve Keen" into Google. I did, and I gave up navigating after about 10 screens as the media references were unending. The man is so addicted to publicity you have to wonder whether he ever gets time to lecture at his university. He hoovers column space like Shane Macgowan of the Pogues hoovers whisky. The plethora of media references evoke a recent quote made by an eminent Melbourne investment banker about the American business analyst, Jim Chanos: "He's full of sh!t, but he gets an audience."

Of course it's inevitable you will get in the paper when you go and pull publicity stunts like the bet Keen entered into late last year with the Macquarie Group economist, Rory Robertson. Under the terms of the bet, if house prices drop less than 20% from their 2008 peak level, Dr Keen is required to walk from Canberra to the top of Mt Kosciusko. As Dr Keen has openly predicted a 40% drop, he presumably felt he was fairly safe in agreeing to 20%.

However, by the looks of things, he should be investing in some decent hiking boots fairly soon. The peak-to-trough looks like being closer to 8% than 20% and early signs in some capital cities are that median prices are heading up again - even BEFORE we hit the bottom of the interest rate cycle. No wonder Dr Keen is so motivated to talk things down. He can obviously see some nasty blisters in his immediate future.

Why are Keen's predictions set to fall so wide of the mark? After all, everyone has seen the horror stories in the press about US and UK house values, which seem hopelessly caught in a dangerous downward spiral. When housing in the big economies is floundering so badly, what hope does a small country like Australia have?

The answers can be found first in the fundamentals of the Australian market, which are completely different to those in the US and UK and secondly, through a basic understanding of how those fundamentals correlate and determine price movements.

House prices are predominantly driven by 4 things: supply, demand, credit availability and the big one -affordability. In fact if you were to create any chart depicting movements in house prices and overlay affordability, apart from a slight lag the correlation between the two is as close as you can get. This helps explain the dramatic collapse in prices at the start of the 1990s. In Sydney, it took approximately 80% of the average wage to pay the average Sydney mortgage - a crippling figure if there ever was one and it's hardly surprising prices plummeted when the economic bubble burst.

In most cities, prices tend to fall where 40% or more of the average salary is required to service the average mortgage, while they tend to rise when the figure drops below 30%. Despite the economic boom, with the exception of Perth prices in the capital cities didn't rise enough to reduce affordability to dangerous levels. Now thanks to a succession of huge interest rate cuts, this key figure is hovering in the mid 30% range and continuing to head down. If, and this is a big "if", unemployment doesn't rise too much then more rate cuts will give a further kick to affordability and set the scene for a return to growth in values. Contrast this to the US and UK, where even after substantial price drops, affordability is still relatively low by historic standards and further price drops will need to take place before these markets hit bottom.

In addition to being relatively affordable, the Australian market is also in the happy position of being undersupplied rather than oversupplied. A lot of the US housing market's problems can be traced to the huge amount of overbuilding that took place earlier in the decade, fuelled by a seemingly endless supply of cheap credit and price rises that ultimately proved unsustainable. Before the US can recover, it needs to work through the large volume of unsold housing stock generated by the construction boom. This will take some time but given affordability has risen substantially in the last year, the bottom now is clearly in sight. In Australia however we have been underbuilding now for a few years and vacancy rates for rental properties are around 1% in most capital cities. Given banks are reluctant to lend money to property developers at the moment to build housing, this situation is unlikely to change, even though strong migration levels into Australia would suggest a fairly urgent need for more housing.

Finally, while credit markets for commercial property markets are in the toilet, in Australia housing loans are still readily available at reasonable rates due to the strong position of our banking system relative to the UK and US. Unlike their offshore counterparts, Australian banks maintained reasonably sound credit practices through the economic boom and as a result, aren't suffering from crippled balance sheets and the consequent flow on effect to liquidity. The fact that US and UK banks just don't have money to lend to homebuyers is a cruel kick in the teeth that those markets just didn't need.

What all this means is that median prices should start to stabilise about now and start trending up towards the end of 2009. The one thing that might save Dr Keen from a rather lengthy walk is if there is a dramatic spike in unemployment, as nothing affects affordability more than not having an income. However, when unemployment rises the Reserve Bank generally counters with even lower official interest rates, which should help offset some of the negative effects of unemployment. Further, the Government are spending money like drunken sailors in order to ward off a recession and a lot of their largesse is directed towards propping up housing. Therefore in these circumstances further major price drops are unlikely.

A quick read of Dr Keen's soundbites reveal a lot of scary sounding statistics like high historic debt levels and high house prices relative to salaries. However any economist worth their salt knows that in order to be meaningful, the statistics or trends you are spruiking MUST correlate with the trend you are trying to establish. Otherwise the contentions made based on those statistics are not economics, they're histrionics. Unfortunately for Dr Keen, all of the dreadful numbers he cites have little to no correlation to the way house prices behave and this is why in a few months he will start looking like a rather large goose. Not to mention a fairly exhausted one after he makes his trek to the top of Kosciusko.

So, to all homeowners out there, I would just disregard the rubbish in the press from these so-called experts and just hang in there. Even if you don't want to delve deeply into the statistics to make yourself feel better, just take some schadenfreude from this - in anticipation of his predictions coming true, Dr Keen sold his Sydney property last year at a point which is now shaping as close to the bottom of the market.

Doh ! A lung-busting walk, a substantial capital loss and sizeable embarassment in few months time when he is exposed as yet another economic "Chicken Little". I wouldn't be too keen to be in Dr Keen's shoes right now.