When a 22 hectare area on Sydney's foreshore was named Barangaroo in 2006, a name selected from over 1,600 entries submitted to a State-wide naming competition, Paul Keating described it as “aboriginal kitsch”. The urban renewal project has attracted controversy ever since.

The Barangaroo Action Group (BAG) has been particularly vocal, expressing misgivings about the planning process, the relationship between sole developer Lend Lease and the NSW Government and the role of Paul Keating himself. But despite the development is proceeding and in December the NSW Government approved the amended concept plan. The project is expected to support 3,000 construction jobs and will apparently be one of the first CBD districts in the world to be climate positive, a state defined as being carbon neutral, water positive and zero waste.

But what of the woman whose name has been attached to the development, the process that so appalled Paul Keating? Indeed, what a woman! A powerful woman of presence and authority and an exemplar of  the Eora tribe’s legendary fisher-women,  Barangaroo was fiercely independent and deeply unhappy about her second husband, Bennelong’s, consorting with the white man. As Grace Karskens, an associate professor in the school of history and philosophy at the University of NSW noted,

“Other Eora women politely agreed to put on clothes, Barangaroo refused. All she ever wore, even at the governor's table, was a slim bone through her nose.”

Unprepared to bow to either the dominion of the white man or the directives of her husband she remained a woman of independent mind until the day she died.

Whether the proposed development does justice to the memory of an extraordinary indigenous woman perhaps remains to be seen but if nothing else it has caused some, like this writer, to better appreciate the qualities of the people who were such effective custodians of this great southern land for so many thousands of years.

It's been a tough six months for Bank of Queensland (BoQ) shareholders. So, at the bank’s Annual General Meeting David Liddy continued the drive to differentiate BoQ from the conservative approach of the big four, by offering shareholders the opportunity to “check under their seats” for a $250 lucky door prize. Four shareholders won, apparently as a reward for their loyalty, while most had to be content with a 6% slide in the share price as the bank announced a profit warning.

It’s not too hard to imagine the reaction of professional investors to this sort of prank, coinciding with the decision to launch a new term deposit product paying low interest but giving depositors a chance to win a monthly cash prize of up to $20,000. Rather than distract shareholders, customers and itself with such gimmickry, perhaps the bank would be better placed refining its business model and optimising its lending portfolio. In addition to its ill fated excursion with Storm Financial, the bank’s commercial loans into South east Queensland have been disastrous.

BoQ has ramped up its bad debt provisioning just at the time that its bigger rivals are seeing bad debt reversals. The bank now has a $97 million exposure to impaired commercial loans and is cautious about the prospect of any short term recovery in property valuations.

Perhaps the time for punting and giveaways is over. Whether BoQ shareholders should forsake the chance to find cash under their seat and instead stick share sale proceeds under their bed is another question altogether.

It’s been more than ten years since the dotcom boom ended in inevitable bust. Those peddling dubious business models and predicting wholesale economic change disappeared in a cloud of ether, their virtual billions evaporating as quickly as they had accumulated.

But like many game changing human innovations – railways, the internal combustion engine and powered flight – the change is rarely as sudden as first imagined but when it comes, the world is forever different. Ian Verrender, in the SMH, highlights a number of industries for which the internet revolution has radically changed the way in which business is conducted, including media, music, gambling and travel.

As he points out, a couple of self made billionaires have been loudly proclaiming recently that the retail industry is also experiencing radical internet induced change, with consumers retreating to their PCs to search on-line for store items at bargain prices. Whether the rise of on-line shopping really threatens traditional bricks and mortar retail remains to be seen, but clearly consumers are revelling in increased price transparency and choice.

As Michael Evans points out in the SMH (15-16 January, 2011), the interesting question from a commercial property perspective is whether these changing patterns of consumer behaviour will trigger structural change in shopping centre leasehold markets. Not oblivious to the threat is Frank Lowy's Westfield group, which has launched a retail tenant portal in an attempt to protect its own large slice of the pie. Notably, Westfield charges its business rents based on store turnover, a strategy that has contributed to Sydney being the second most expensive retail city on the planet.

It’s unclear if retail will ever go the same way as other industries that have been refashioned by the internet, but the rules are patently changing. Game on, as they say.

Last December the Federal Government released a paper titled “A sustainable population strategy for Australia”. It was advised by three panels, including the Productivity and Prosperity Advisory Panel (PPAP) chaired by the head of the Australian Industry Group Heather Ridout. The panel argued population growth was essential to sustaining economic growth. It said certain critical elements were typically excluded from “economic models” such as the “economies of scale associated with a larger economy”.

A bigger population ultimately leads to a bigger economy, there is no question about that, but according to Ross Gittins of the SMH whether population growth leads to higher per capita real income is much more problematic.

Among the business community the fear has been that Australia’s population will grow too slowly and that economic growth (as measured by GDP) will stagnate. 

But according to the Productivity Commission in its recent publication, Population and Migration: Understanding the Numbers, the more relevant measure is per capita income and on that measure the evidence is at best mixed. The Commission notes that ultimately 'community wellbeing' (however defined) is the most important criteria for assessing the benefits and costs of population growth.

The Commission draws two interesting conclusions, namely that “The impacts of immigration growth on GDP and GNI per head of the existing resident population are ambiguous…” and that the impacts are likely to be unevenly distributed, that is, there will be both winners and losers.

Let's hope that as the Government consults with those who stand to benefit from a bigger population... that it does not diregard the plight of those who may not be so fortunate.

The rhetoric from the Federal Government – and indeed the Federal Opposition – has been clarion like. We will sort out those arrogant banks who are abusing their market power and restore competition to the industry.

On 13 December 2010 Wayne Swan’s 13 point plan for the reform of the banking sector was released. The result was a rally in the share price of the four majors and a slump in the prices of regional lenders as investment markets delivered their verdict on the winners and losers.

While the reforms included commitments to outlaw exit fees and measures to facilitate the transition of mutuals to banks, they also included a permanent deposit guarantee scheme and the restoration of covered bonds as a legal funding source.

More significant measures like an immediate prohibition on exit fees, account number portability and a super profits tax were conveniently ignored or deferred, raising legitimate concerns that the government had once again been paying lip service to reform but baulking when the big decisions needed to be made.

As Michael West declared so succinctly: “In the end it was all talk and not much action”

As every undergraduate economics student knows one of the impediments to competitive markets is the existence of barriers to entry. In the Australian industry there are unquestionably regulatory barriers to entry. The country’s financial services regulator, the Australian Prudential Regulatory Authority (APRA) oversees the issue of banking licences, but is funded by the big banks. To get a licence you’ll need $50 million in Tier 1 capital, that is cash, and you may need to demonstrate a distribution capability, that is, a branch network! And even then you’ll run smack into four large operators whose prices move in unison and who have government backed balance sheets more than sufficient to run you out of town.

Back in 2004 then State Planning Minister, Craig Knowles commissioned a review of the NSW port freight strategy to be conducted by the Freight Infrastructure Advisory Board. One of the aims of the review was to examine ways to increase the use of rail freight and therefore reduce the number of trucks transporting goods on our roads.

It made sense to look at ways to reduce heavy vehicle traffic and congestion on our roads, which was only to become worse as the NSW population increased.

The review contained 23 recommendations and among them was a call for urgent additions to the city’s “intermodal” capacity, which would involve building train lines to link the port to a large container terminal on the fringe of Sydney. Freight would then be loaded off the trains and onto trucks, avoiding the need for the trucks to journey through congested suburban roads.

Almost seven years later an intermodal terminal at Moorebank is still only in the planning phase and over that time the share of freight rail movements has fallen away from 22 per cent down to 18 per cent, according to Jacob Saulwick writing in the SMH.

The Federal Government does want to see a terminal at Moorebank but have only commissioned a scoping study to date, a consortium comprising Stockland, Qube Logistics (Chris Corrigan) and Queensland Rail has completed a development proposal and the NSW government is pondering the requisite approvals.

If Sydney is to continue to grow in population, infrastructure must be put in place to support that growth. Here is another clear example that it is not enough to have an idea, we need to see Governments take brave decisions and show political will in order to make these ideas a reality.

It was breathtaking stuff – two of the most highly paid chief executives in Australian corporate history, both running organisations in the same industry, together with the Chairman of a third, complaining about the extreme level of competition in their sector.

“Brutal” was how ANZ CEO Mike Smith described competition between the banks, while CBA chief, Ralph Norris argued there had never been more competition in the sector.

So, let’s get this straight. Four banks controlling around 90% of the mortgage market, reporting collective profits of $24 billion (far in excess of their cost of capital) and who enjoy government funding and deposit guarantees as well as the security of the new Reserve Bank liquidity fund are now complaining in a Senate Inquiry of too much competition!? And apparently too much competition is now compromising the country's financial stability.

Banks are essentially service infrastructure providers facilitating real commerce and supporting the efficient operation of the economy. As Michael West pointed out in his SMH column (Weekend edition, 18-19 December),

“Banks don’t create wealth, they clip the ticket of those who do”

It raises the concerning question… to what extent is the remorseless profit drive of these service infrastructure firms in a manifestly uncompetitive sector damaging the productive economy… i.e.  those firms that DO create real wealth.

Despite compelling evidence that the investment market commentators and analysts across all asset classes rarely make accurate predictions and almost never do so consistently, the property pundits have been lining up to give us their outlook for 2011.

Stephen Nicholls of Domain notes the February/March “motivated buyer” effect and has suggested that vendors list early in the new year. By contrast, Rich Harvey of Property Buyer declares that there will be great buying opportunities in the first two quarters of 2011. I’m not sure they can both be right, but almost certainly one of them is...

Presumably the first half will prove to be either a good time to buy or a good time to sell.

The RBA, historically among the best of economic forecasters, has indicated that interest rate settings are well positioned going into a year it considers will be one of solid growth, with inflation pressures not emerging until 2012.

Some property pundits clearly consider their economic credentials to be superior to the RBA though, and have forecast that interest rate rises will continue in 2011. I guess that means that vendors should get in early before further interest rates rises depress house prices. When you’re making asset price predictions it’s important to provide an incentive for the mug punter to trade!

Meantime the IMF recently weighed into the property market bubble controversy with a research report which finds the Australian residential property to be overvalued by 5 to 10%, but predicting an orderly correction over time.

I’m dusting off the tarot cards and that shiny spherical thing in the attic to try to get a clearer picture. I suspect they’ll prove as prescient as anything or anybody else.

Our world is abound with abbreviations and acronyms like never before, but one that has arguably passed its use by date is the once vaunted Public-Private Partnership or PPP.

Seen as a model for outsourcing the risk, ownership and management of significant infrastructure projects the PPP is increasingly coming under scrutiny for distorting public policy priorities and failing to deliver the efficiencies once promised.

In an earlier blog I raised concerns about the current national obsession with government budget surpluses. Nicholas Gruen of Lateral Economics called it “fiscal populism” in an article in Inside Story on 23 November:

“The glories of unburdened balance sheets have been purchased - at the cost of growing deficits in precisely the thing that higher government debt might have funded – infrastructure.”

Ross Gittens picked up the theme in his SMH article November 27-28 The government identifies the need for spending on infrastructure and therefore the need to borrow, it guarantees the borrowing either explicitly or indirectly and then ensures the debt finds its way on to someone else’s balance sheet.

The real problem comes in when that “other” person has to pay borrowing costs well in excess of those the government would have incurred had it raised the debt itself. And there are other hidden costs like the inevitablility of some guarantee from government to support revenue growth by, for instance, securing traffic flows for toll road operators by closing out competing transport options.

So a hapless electorate, having fallen for the public-debt-is-evil rhetoric, foots the bill for the political advantage that comes from hiding public debt by parking it on someone else’s balance sheet in exchange for overpriced user charges.

All this means that infrastructure spending becomes needlessly complex, mired in bureaucratic process and difficult to undertake.

“One must have some sort of occupation nowadays. If I hadn't my debts I shouldn't have anything to think about.” – Oscar Wilde, from A Woman of No Importance

Irrespective of how history judges the Howard government overall, it will surely condemn the single most enduring legacy of its Treasurer – the demonising of public debt. As the country labours under the twin burdens of stalled productivity growth and chronic under-investment in infrastructure, politicians continue to rant and rave about deficits and government debt. Lest I be accused of political bias let me hasten to add that the anti-debt mantra has been well and truly embraced by the Labor side of the political divide also.

The emergence of the national obsession with budget surpluses has led directly to a number of questionable economic policy outcomes of which the following three are stark examples:

• The floating of Telstra as a single entity rather than a de-merged infrastructure provider and retailer
• The rise of the increasingly discredited public private partnership model (the so called PPP)
• The failure to adequately invest in infrastructure

According to the mantra popularised by Peter Costello, debt is an evil of government to be avoided at all costs notwithstanding that both households and corporations routinely and efficiently employ debt to grow economic value. Certain politicians lampoon government profligacy by contrasting it with the fiscal rectitude of average Australians balancing the household budget. Yet the Australian government currently runs a debt to GDP ratio of just 6% while the average debt to income level of households in this country is in excess of 150%! Indeed a typical home buyer borrows 200% to 300% of their annual income and pays off their mortgage at these levels without undue stress. Furthermore, prior to the GFC corporations running debt levels at anything below 30% (or much higher, depending on industry sector) would have seen their share price savaged by investment markets on the basis of having “lazy” balance sheets.

No-one argues with the need to balance recurrent revenues and expenditure over the medium term, but the issue of capital investment is another matter altogether. The reason that the demonization of public debt is important is because it has contributed to dangerously low levels of infrastructure funding which is a pre-requisite to restoring productivity growth and securing our economic future.