a word from jeff our soft underbelly

Our soft underbelly
Article from: Herald Sun


Jeff Kennett

February 05, 2009 12:00am

THE challenges facing the Federal Government today are those of acting responsibly and encouraging the corporate world and individuals to do the same.

It seems responsibility has become unfashionable.

My comments here may not be read as politically correct, but they are politically based.

Throughout my life I've been taught about the need for individuals to take responsibility.

One of the lessons I was taught as a young boy, from a father who lived through the Depression, was to respect cash and avoid debt ... but where debt was thought necessary, to ensure I was never ruled by it.

My commercial career started when I was a child, setting up a trestle and selling soft drinks on a Frankston beach on a hot day.

To establish my first larger business, an advertising agency, I went to the National Bank and borrowed $1700 understanding the responsibility associated with borrowing an amount of money that was more than my total assets.

I was taught to manage that debt, meet the repayments on time and to repay the debt.

The advertising agency had one desk in which there were three drawers.

The top draw was for bills to clients, the middle for invoices received from suppliers and a third for those matters that I did not understand - those things that had to be learned.

Our first home came from my savings during my army service, sending home money to put towards a block of land.

There was no large assistance from governments, no baby bonuses - you had to accept responsibility for the development of your own life.

How the world has changed.

We've now enjoyed a long period of easy loans and easy credit and increasing cash handouts from government at federal and state level.

There is little respect for cash and reducing debt, let alone living within our means.

When I look at the actions of government in recent times, I feel as though I live in on a different planet.

The government decision late last year to guarantee bank deposits was excellent, given that it encouraged confidence in the community during a difficult and confusing time for us all.

But it has a downside.

It strengthens the power of the four banks, reduces competition in the marketplace and could prove costly to us all in the future.

Then, the amount handed out by the Federal Government in December - about $10 billion - was in my opinion a breach of the fundamental value of respecting cash and individual responsibility.

It effectively threw a very valuable $10 billion of our cash into the air.

There was never a chance of this kick-starting the economy - some went to pay off debt, some went overseas, some went into savings, some spent locally.

Never has throwing money at a problem, in my 60 years, solved the cause of the problem.

I question the support for the motor industry, when the Government stepped in to assist, because so many of its credit providers withdrew.

In particular, the funding to assist research and production of smaller, greener cars flies in the face of reality.

If those companies had not seen fit to develop, as Toyota and BMW has, cars that were more efficient and greener, why should they now be funded by the public purse?

We also have Ruddbank, aimed at supporting the commercial construction sector, as overseas credit providers withdraw.

If there is any money left in Australia by overseas credit providers for the construction industry, why would they now not withdraw given the Government has said: "Go, we'll fill your shoes."

It just isn't the philosophy of a country that has grown on the enterprise of riding on the sheep's back, the miners' endeavour and the manufacturers' toil.

The Western world and Australia is in a precarious position because it has allowed greed to drive the economy.

This has based our prosperity on the unsustainable growth in credit.

If all that's not bad enough, we have now had our Government saying we will throw even more money at the community - a whopping $42 billion.

The training and values of the past have been replaced by a dependency philosophy of individuals, corporates and governments.

The more we weaken the value system, the longer we throw inappropriate measures around in a crisis, the longer we delay genuine recovery.

And the more we put at risk the strength of individual and industry initiative.

We have been living beyond our means and there needs to be a correction, whether it's popular or not, in order that appropriate values return.

Not only asset values, but human values.

We have a situation where individuals are recipients of more government support than any generation before.

If, as I fear, the current approach being applied to address this crisis does not change, then the number of people requiring government assistance in the future will be even greater than it is today.

A S Australians, we have been developing a most unattractive soft underbelly, for some decades.

We are simply today increasing that sense of dependency - that softness - because we are not prepared to accept what we have collectively been part of has been based on that unsustainable greed.

It totally ignores the values upon which this great country have been built.

This is not the spirit of Gallipoli and Kokoda we remember on Anzac Day, of doing the tough yards to secure genuine peace and opportunity. What does it say about the resolution of individuals that is essential to building and creating a prosperous society?

I am not criticising the concept of deficit spending on long-term infrastructure projects - properly planned and properly managed they are vital to the nation's future.

But it must be through the wise investment of our cash, not associated with the flipping of billions of dollars in the air without it being targeted.

If the Government really did want to encourage initiative and recovery, I'd argue for:

TAX cuts that would lead to sustainable investment and increased private expenditure.

MAJOR infrastructure projects of national and state importance, correctly tendered, managed and delivered leading to a more efficient society, greater growth in jobs.

REDUCTION in the write-off time of depreciation on productive equipment purchased by industry to stimulate new investment growth and employment.

We do now have to go through a period of correction and hardship as a result of the past over-reliance on credit.

But we've done it before.

We did it more recently after the recession of the early '90s, here in Victoria. In Victoria we built a strong state through the 1990s.

It's time to build a strong country, but that can only take place if we accept the relevance of the right values.

* Jeff Kennett is a former premier of Victoria and is chairman of beyondblue