CPO Forum Special Edition, June 2012

Myth versus reality

For the first time since the GFC, the Asia-Pacific CPO Forum started with an unexpectedly upbeat assessment of the economic climate. 

“There are a lot of fear mongers out there,” acknowledges Phil Ruthven, Director of Ibis World and opening keynote speaker, “The trouble for bearish journalists, however, is that the economic facts simply ruin a good story”.  

“When the GFC bottomed out in 2009, there was a fall in word economic output of 0.7 per cent.  In the last great recession, 1945 – 46, the fall was over six percent and then over ten percent,” explains Ruthven, “Today Australia is carrying just about the lowest debt of any country in the entire developed world.”

On the macro economy

By 2015, Ruthven confirms that China will be the number one global economy, and India will take over from Japan as the second largest in the same year – about ten years ahead of schedule.   “For those who say China can’t possibly continue to grow at over eight per cent, you only have to look at Australia – for a full century between 1800 – 1900, our growth rate was above that of the EU, Ruthven blames excessive socialist policies, a handful of ill fitting members and abysmal leadership for their furious decline. He believes it will take all of this decade for the EU to regain their economic mojo: “A fair amount of socialising is civilising, too much is a cancer. You can see what it’s done to Greece,” notes Ruthven.  

Ruthven is far more optimistic about the USA:  “You can never write off the Americans,” says Ruthven, noting how the New York Stock Exchange has outperformed all others: “Only sentiment and fear is keeping Dow Jones where it is, and that’s not too bad”.  Ruthven believes this is due to the fact that the Dow Jones is dominated by technology and pharmaceutical companies, with only one mining and a few small bank stocks.  “America’s economy is made up of tomorrow’s industries,” says Ruthven, “Not yesterdays.”  

On the micro economy 

While acknowledging the likelihood that some economies will go into a double dip recession, the Euro included, Ruthven holds no such fears for Australia.  

On why blaming recessions on slowed consumer spending is unjustified, Ruthven says: “Consumer spending has never gone negative in the New Age since 1965, not once.” Like Paul Little, former CEO of TOLL Group, who spoke to delegates about the reticence of Boards to embrace risk, Ruthven says its capital expenditure by Boards that goes negative and causes recessions: “This is why Governments have to step into the breach during a slow down and start pump priming to stimulate spending”.  

Ruthven agrees that the Australian dollar is sitting way above its trend value, confirmed by recent weakening.  “The Aussie dollar will, in its own lumpy way, find its way down to around the 83 - 85 cent mark, although it may start to climb again because US will have higher inflation coming out of GFC and this will weaken their dollar.” Good news for Aussie tourists, much less so for exporters.  

And just in case any of the Forum delegates were still unsure of the key message behind this myth-busting presentation, Ruthven rounds out with: “Anyone who gets nervous about the future, forget it, the best is yet to come.”