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Wednesday, 12 October 2011


In my view our Australian elected dictators have made a serious policy error by introducing the carbon tax. Their new policy will have many negative effects which will help increase unemployment in the Australian manufacturing sector which will be bad for those losing their jobs but good for borrowers with jobs if the RBA decreases official interest rates. Australian Manufacturers will find life harder with Asian countries getting an extra pricing advantage and probably tip more firms to close down,  others gradually as they realise that anything they make in Australia can also be made in China or India at much lower costs as those foreign firms do not have Super levy of 9-12% , carbon tax issues and other relatively higher imposts. Other firms will close abruptly with workers entitlement lost in bankruptcies.
Manufacturing businesses will find it harder to sell their businesses or get bank funding as banks by now have worked out that unless the manufacturers are producing something which cannot be made cheaper overseas, then those businesses will close down sooner or later and have no value to lend against, unless those businesses start replacing more stocks from overseas and reduce employment liabilities in Australia.

One might ask, why don't all the manufacturer's I refer to just close down now? Well, those who own the companies are locked in and just cant sell out as no one will want to buy them out and banks won't lend to any potential buyers. They are stuck and their assets may be encumbered by the business which has no value. If the businesses employ members of their own families or friends, they may feel obliged to continue providing them with the employment and hope that they can take over a viable business when the original owners retire or die. If they have obsolete but still working equipment...they can continue till they break down or can be replaced by cheaper alternative equipment from overseas or from liquidation sales.

Some businesses which deal in manufacturing one offs or special non mass production components are likely to be able to continue to survive, but others will just slowly close down voluntarily or forced to close unless they start importing replacement products by mainly becoming importers. This is a general statement as there are many businesses where my views are not applicable. Mind you, anyone trying to sell their business wont agree me as they try convince a new unsuspecting investors to buy them out. Some companies may be able to diversify or merge with other businesses to get economies of scale.  and this is seen happening. Many businesses just cant wind down and close, the only way to close down is to go broke. Maybe you can prove me wrong.

Those of you who have followed the Carbon Tax debate would have noticed a Merchant banker supporting the tax in silence. Why?  In my view this is because there is money in trading these non tangible carbon credits and there is BIG MONEY to be made by the traders and politicians who have a say on how they will be traded and bought and sold. Many retiring politicians will end up on Boards of Directors to advise on the schemes and trading elements. It is going to be big business for ex-politicians and the solar industries who will be attempting all manner of scams and projects to profits from destroying other businesses. Luckily, it wont be too obviously a disaster and many employers will adjust their prices if required and try to tough it out with few noticeable retrenchments. But the inevitable cannot be avoided in the musical chair business. Such is our political system in our country... everyone of our politicians wanting to live in an ideal world which does not exist, but making their supporters think they doing it for their benefit. EVERYONE LIVING IN A FANTASY DREAM WORLD

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