Author: johng57

In recent decades we have focused on how we, as a society engage with the environment.

Firstly, I would like to say, eventually we need to source energy from other than fossil fuel, as it is a finite resource, and secondly, what is the correlation between CO² and temperature change.

For example, out of curiosity, back in 2016 I did a regression on CO² levels and temperature using two time frames 1972 to 2002, and 2002 to 2015. The correlation between the two in the first instance was .69, fairly assured that the modelling was ok, not 100% , but within range. However, when I regressed the later time frame, the correlation was .19. Why the difference, and therefore, there must be different temperature drivers other than CO².

This brings me to the current energy debate, and the significant recognition now (with the conflict in the Ukraine) that renewables are not able to provide the energy needs of an advanced society when we need reliable dispatchable power (I read an article last week that the current battery storage in Europe will only keep the lights on for a few minutes). So, why are we driving headlong into this abys in Australia when we have seen the consequences in Europe?

Is it because the driving forces are rent seekers that see an opportunity to extract excessive profits out of those sections of the community that can’t pay? I have said in the past that the drive to renewable energy is that largest transfer of wealth from the poor (lower socio-economic demographic) to the rich since the industrial revolution in the 1800’s.

Why do I say this, as energy gets more expensive (we have seen in Europe that energy costs increase by up to 30-40%) where renewables have replaced dispatchable power generation it impacts mostly on the lower income brackets? Therefore, it is a short jump to the Australian situation where those who are well off are investing in renewable energy and everyone has to pay the price.

As energy is an essential service and all australians have to pay to use. Therefore, it stands to reason that these investors are not doing it from the goodness of their heart, they want a return on their investment. These investors do not mind paying higher energy prices, because they are generally in the hier income brackets or alternatively, they are institutional investors that can afford to pay the additional cost of power or are only interested in profit.

But, what about those families who earn less than the average wage do not own a home, have a second-hand car and are not in the high double income bracket. By the time they pay their rent, car, groceries (depending on family size), school and education, all other taxes and charges, there is not much left over to spend as discretionary expenditure. If we follow Europe’s example and get between 30 to 40% increase in energy a current household spending between $2,000 and $3,000 annually will see their power prices rise upwards of $900 annually. This does not take into consideration the increase in food, utilities, and other products and services where the energy increase is included in the sale price. If this cost in included, total household expenses could rise from between 25% to 35% based on suppliers carrying some of the cost.

This also does not factor in the cost in jobs in our traditional manufacturing and processing industries going offshore. As well as the considerable subsidies provided by government to transition to renewable energy and electric cars.

My question, when will we have a rational debate about energy that is not blinkered by dogma or idology?

I believe that the current western nations focus on climate policies is the biggest transfer of wealth from the poor to the wealthy since the industrial revolution.

I will state up front, I believe in climate change, as a past agriculturist, climate (in the form of rain on no rain, heat and frost) was critical to our business, and to this end, I focused on historical fluctuations in climate to try to predict future events (I was not so successful in this matter). However, it gave me an insight into how climate (the heating and cooling of our planet) changes over time and the earth’s climate has been hotter and colder than it is today

With reference to my opening statement, think about it, who can afford electric vehicles at 2 or three times the price of a small 4 cyl petrol, or energy prices increasing at up to 37% annually (note the current serious problems in Europe where they still have not reached 50%). Who can install solar panels or batteries on their homes and then afford to replace them every 10 to 15 years as they reach their use by date?

Certainly not families on $70K to $100K gross income when they have to pay $700 to $800 per week in rent, put food on the table and pay for their children’s “free” education and then try to factor in a couple of weeks annual holiday. This does not include the financial impost of childcare if they have to have double incomes to meet their financial needs and running a car.

The other factor is western countries are exporting their carbon footprint. There have been a number of journalists (who are more expert in research than me) who have rightly pointed out that while western countries have reduced their internal carbon footprint, they have in actual fact significantly increase their carbon output by exporting the manufacture of their consumer goods to countries like China and India.

What this has done is exported our manufacturing industries to these countries. This has greatly exasperated the recent supply-chain issues. This has caused a manufacturing sovereign risk that will further accelerate the exporting of our manufacturing industries, as we press headlong to renewables.

So, my question is, where are the jobs going to come from as we import more and more of our consumer goods; what happens if we have more supply chain interruptions that last longer, who will manufacture the parts to replace our solar panels wind turbines or lithium batteries.

The people who are champions for net zero policies (and here I will generalise) are a demographic that have incomes that are well in excess of the average income, live in central large urban centres such as capital cities and are not reliant on the manufacturing of a product or exporting. They probably are employed in financial or professional services (not associated with manufacturing or exporting), employed in industries that have a history of Rent Seeking or employed by big business that want to be seen to be socially responsible.

This is why I believe we need to consider all the costs and benefits that will result from changing our energy mix before other countries even start on reducing their reliance on fossil fuel energy production, and explore all potential energy sources such as nuclear, bio-fuels (neither of which are mentioned in the current government energy development roadmaps).

How can we assist in change? A topic for another blog!

It is interesting the current push by governments and individuals requesting that the unvaccinated pay more for health care.

Health care in most western democracies is generally free or low cost (there are exceptions).

My comments on this topic refer to health services in Australia, and I am reading a number of commentary from individuals, professionals and politicians that are supporting the concept that if a person is unvaccinated, they have to pay their health bill. I believe this is discrimination on a number of equity issues.

My reasoning is this, if we are requesting that unvaccinated people must pay for their health services, why then are not a number of other individuals that elect to voluntary participate in activities that risk hospitalisation or are in a specific demographic are not also required to pay for their health services. On an equal footing, we are not required to have a flu vaccination, yet thousands are hospitalised and in fact succumb to the common flu (in extreme flu years more than 2,000 annually). So, why are we not also required to pay for health services?

Other activities and demographics that result in hospitalisation such as:

• Footballers
•  under 25 male motorbike and car drivers
• Over 60’s activity participants
• Smoking
• Alcohol consumption
• Other sport activities that are risky

Why are we not requesting these people also pay their way?

We do not ask these individuals to contribute to their medical services if they require medical services, so why are we asking those individuals who do not wish to be vaccinated to pay for theirs. It is all about choice, regardless of extreme sporting activities or vaccination status.

I believe that the current western nations focus on climate policies is the biggest transfer of wealth from the poor to the wealthy since the industrial revolution.

I will state up front, I believe in climate change, as a past agriculturist, climate (in the form of rain on no rain, heat and frost) was critical to our business, and to this end, I focused on historical fluctuations in climate to try to predict future events (I was not so successful in this matter). However, it gave me an insight into how climate (the heating and cooling of our planet) changes over time and the earth’s climate has been hotter and colder than it is today

With reference to my opening statement, think about it, who can afford electric vehicles at 2 or three times the price of a small 4 cyl petrol, or energy prices increasing at up to 37% annually (note the current serious problems in Europe where they still have not reached 50%). Who can install solar panels or batteries on their homes and then afford to replace them every 10 to 15 years as they reach their use by date?

Certainly not families on $70K to $100K gross income when they have to pay $700 to $800 per week in rent, put food on the table and pay for their children’s “free” education and then try to factor in a couple of weeks annual holiday. This does not include the financial impost of childcare if they have to have double incomes to meet their financial needs and running a car.

The other factor is western countries are exporting their carbon footprint. There have been a number of journalists (who are more expert in research than me) who have rightly pointed out that while western countries have reduced their internal carbon footprint, they have in actual fact significantly increase their carbon output by exporting the manufacture of their consumer goods to countries like China and India.

What this has done is exported our manufacturing industries to these countries. This has greatly exasperated the recent supply-chain issues. This has caused a manufacturing sovereign risk that will further accelerate the exporting of our manufacturing industries, as we press headlong to renewables.

So, my question is, where are the jobs going to come from as we import more and more of our consumer goods; what happens if we have more supply chain interruptions that last longer, who will manufacture the parts to replace our solar panels wind turbines or lithium batteries.

The people who are champions for net zero policies (and here I will generalise) are a demographic that have incomes that are well in excess of the average income, live in central large urban centres such as capital cities and are not reliant the manufacturing of a product or exporting. They probably are employed in financial or professional services (not associated with manufacturing or exporting), employed in industries that have a history of Rent Seeking or employed by big business that want to be seen to be socially responsible.

This is why I believe we need to consider all the costs and benefits that will result from changing our energy mix before other countries even start on reducing their reliance on fossil fuel energy production, and explore all potential energy sources such as nuclear, bio-fuels (neither of which are mentioned in the current government energy development roadmaps).

How can we assist in change? A topic for another blog!

I have always believed that the current global and national pandemic impact has always been a combination of health and economic.

While saving lives will always be paramount, I think we have forgotten the impact that lockdowns are having on current and future economic and psychological consequences to business and people.

I have done some work within the hospitality industry, and this sector and tourism have been the ones that have born the brunt of some of the severe lockdown actions by state government. The rolling lockdowns have impacted on these sectors in a way that has resulted in each bounce-back after each government decree being slower and lower. I have read that this can be caused by an erosion in confidence by the general public as a result of the scare campaign by health and government officials to reduce the potential of virus transmission.

As a result, businesses in these sectors and those that are part of the supply chain have been severely impacted. Having worked for a short time in a field where dealing with financial stress was part of my job, I have real concern for business owners in these sectors coming out of the lockdowns. We have been so focused on controlling the virus, that we have forgotten about people and their livelihood, as well as who is going to pay off the future debt.

There are current articles about how we will bounce out of the economic trough once restrictions are lifted, but my concern is that the past 18 month of disastrous cashflows will restrict businesses investing in capability to take advantage of this bounce. In addition, we have not seen the economic impacts that will flow from the restraint financial institutions and regulatory bodies as these restraints are lifted.

Not only will it be economic, but as we know, a significant number of small businesses finance their business through mortgaging their home and personal assets, and if these are exposed to risk, the impact will shift from the business world to peoples lives. My experience that financial crises at the personal level will disrupt relationships and families, and can lead to depression and suicides.

So far, I have not seen any support at any significant level to address this issue, and I believe that government should be setting up support structures now, not next year, as the potential crisis evolves.

At another level, all three government sectors have brough forward infrastructure spending, as well as homeowner grant assistance. This has and will hide the economic impact resulting from lockdown induced reduction in trading on those sectors not funded through government largess. In addition, this increase in infrastructure expenditure will cause a significant drop in expenditure once these projects have been completed, this will be exasperated by the level of government debt.

So, my article heading, I have a real interest in the outcomes from NSW and what will be the response in economic terms as they open up their businesses to relatively normal trading.

I hope that I am proven wrong in my comments and the next 3 to 5 years do not see a significant increase in Australian businesses and business owners go to the wall

We all read about commentators referrencing business cycles.

There are a number of economic commentators looking nervously into the future crystal ball and seeing things that are starting to give them the serious concerns.We have USA indulging in massive monetary expansion partly in response to the economic shock caused by the pandemic, but also in response to a government social agenda, we have China currently in an economic  re-structure in the infrastructure sector, and all this coupled with the fact the developed world is indulging in a rapid expansion of renewable energy without the investment in energy storage, causing a spikes in energy costs.

All of these activities taken in isolation might not cause concern. However, taken as a collective, there is serious potential for significant global economic disruption. Thinking back to when I was in short pants, and the world has stagflation, this is a scary thought.

So, my question to business, are we prepared? What are we doing from a business perspective to develop strategies that improve our balance sheet, reduce supply chain stress and risk, improve the regional skills base and prepare for a changing world?

To assist with this strategy, businesses should be conducting internal analysis of business performance to improve resource use efficiency, improve profit margins, diversify both supplier and customer markets, and finally conduct a serious risk analysis to identify potential risk exposure and to establish a risk mitigation strategy.

There are a number of ways to do this analysis. Firstly, conduct a situation analysis, where is the business now, and how is it performing, commence a strategy of product, customer and supplier diversification, and finally if appropriate, draft a ISO31001 risk management planning document.

Capping this off, a business should have a strategic plan that doesn’t just look 3 to 5 years into the future. Asian economies have a far longer horizon for their strategic planning (I remember reading a book about 30 years ago on business planning, and Japanese businesses were then looking to develop a 50-year strategic plan). If Australian businesses are to compete, we also need to look at these horizons.       

I chose this because over 20 years in supporting business development and crisis management and from my personal experience, we did not make a decision in our mid-teens “I will be a business manager”, then go to university and study management.

We generally start our working life thinking I want to be a farmer, a builder, a mechanic, an economist, a doctor, or an accountant. All these professions and trades require a significant level of study and trade skill development to achieve the skills required to be great at our job. In my experience, because we are good at our job, we become managers in the business. If we work in the corporate sector or in a field where we are able to take time out to study, we can enrol in a Master of Business Administration to gain some of these skills. However, if we are in a trader (metal fabrication, carpentry, electrical etc), and we are good at our job, we tend to through encouragement from family, friends and customers we decide to start our own business this avenue can be limited.

As we work to develop our business, we generally do not have time to study at university to get our MBA, so we continue to develop our managerial skills in an ad hoc by the seat of our pants basis. This tends to result in some failures and some great outcomes, but it is inefficient. This is because as we operate by trial and error, this takes time and takes us away from our core business, that is satisfying our customers by delivering a quality product within a budget and a specific time frame.

This is what I mean by accidental managers, we do not make a deliberate decision to be a manager but happen to fall into the role by accident (the accident is by choice, but not planned years before hand so we can develop the management skills over a period of time).

To address the gap in skills, and we all have skills gaps regardless of our training background, there area number of pathways a manager can take, we can enrol in an MBA university or education institution, this can be time consuming and expensive, we can take up reading management text books and journals, this can be a bit dry and boring, we can enrol in short modular courses again run by a number of education institutions, we can attend management forums or workshops (these include online presentations, ted talks and youtube videos) and we can become part of a management network to share experiences. There are other ways, but these are probably the most common.

From my experience each development activity has their pros and cons. My own personal experience has been a combination of the above. I studied agri-business management when I left school, but there were elements of the management skill sets missing. I have read extensively, both management textbooks and management journals, I have completed 2 degrees in economics, attended workshops, participated in management network groups. I have not done an MBA, because I felt at the time that enhancing my analytical skills with a master’s in economics was more important than what I would have achieved by completing an MBA.

The pros and cons:

• MBA, comprehensive outline of management tools and techniques, the ability to have peer to peer discussions, still needs some experience in application and can be expensive
• Reading, boring, time consuming, difficult to have peer to peer discussion on topics, it is cheap, and we can get a variety of opinions and techniques, but it can be difficult to sift the wheat from the chaff if we do not have some experience
• Short workshops, these can be great (if some management tools are provided as part of the program), as there is opportunity to have peer to peer discussion, and we can select specific topics. The quality of the content will be determined by the capability and experience of the presenter (outcomes from workshops can be time wasting rubbish or gaining a great understanding of specific management practices and tools). Generally suitable for time poor business owners, and prices can vary
• Online presentations, like workshops are great, but again suffer from the same faults of workshops. The great thing about online material is that it can be accesses whenever.
• Management network is the last outlined and is a great way to share experiences and solve problems, it is also a platform to bring in expert advice to assist in developing specific skill sets. Depending on the model, pricing will vary

The important thing to takeaway is that great managers have a skill set that understands the balance between people, money and resources and can maximise the outcome potential of these three parts of the business

As small business owners, we tend to be so focuses on the day-to-day operations we can forget that the world around us has a real impact on how our business performs. What other countries political decisions, economic drivers, supply chain interruptions, trade decision have a real impact on our business. These forces drive global business cycles up or down. The force behind the ebbs and flows of the business cycles is in economic terms a result of supply and demand imbalance.

Take for example the recent shift in housing construction completion times and construction costs. These are directly related to two things, firstly, the decision of governments in Australia to subsidise various forms of construction such as new homes, and renovations. Secondly, this caused an increase in the demand for builders and materials. Under normal circumstances, the supply of builders and materials is in relative balance, as the industry generally has forward projections of material requirements and the necessary material to complete the projects.

By providing generous subsidies, prospective homeowners and renovators brought the decision forward to meet the program requirements relating to completion time. This increased the demand for both building tradies and building materials. This threw out the industries supply/demand framework (increasing the demand for building tradies required to complete the projects in time).

Under normal supply/demand movement, a lack of supply, increases the price of the service/product consumers are willing to pay. Those that can’t pay will delay purchasing, and those that can pay the increased price to continue with the purchase.

Couple with this problem, is the supply chain interruptions caused by the covid-19 pandemic causing building materials to also be in short supply, causing the price of materials to increase for the same reason. Therefore, the cost of construction over the last 8 to 10 months has increased.

From a small business perspective, this increase will place pressure on small construction companies profit margins, as they grapple with locked in building contracts and escalating material and employee costs.

From a strategic planning perspective understanding the way supply and demand works will reduce financial risk by a considerable margin, as a well structured risk management plan (mitigation stategy) could have identified an opportunity to lock in supply contract both for labour and materials prior to the forced escalation caused by government driven demand and material supply shocks.

A way to assist in reducing this risk is to conduct a comprehensive analysis of the business identifying potential financial and performance risks, assess the current financial situation and plan mitigation strategies to reduce risk exposure.

A good takeaway is look to the global and local political environment to understand future potential risks. Good luck.

I would just like to introduce my self and why I have started this blog.

I have worked in business for about 30 years and worked for government for over 15 years, and I have a passion for small to medium businesses and their success. Over this time, I have seen great businesses struggle for success.

On leaving school, I completed a Associate Diploma in Agribusiness before spending 30 years on the land owning and managing livestock and cropping properties. When you are in the livestock game, and you keep having more dead stock due to drought, it is probably worth a career change, so we left the land and I went and completed an undergraduate and masters degree in economics.

Over these years, we also operated a range of businesses, including earthmoving contracting, contract business administration, bookkeeping services, financial counselling, light engineering and ag-services.

I have started this blog, because I want to assist business decision making better understand the role information and business analytics play in business management and the resulting success. I hope this blog helps