Sailhack said...
Sorry elmo - way too simplified (and incorrect in terms of the global issue) to use an example, but entertaining none the less!

I think you might have missed the implication that the money passed around was in trade for something else. The simple analogy works for me, in that it shows that money circulates around an economy and if its lost, trade suffers.

|Yes a cloak of invisability. One for the visa account as well.

Issa said...
"
It's hard and I don't have the answers. Small business has the answers.

Let's hope our innovative small business's aren't strangled by red tape and Fair Work Australia (oxymoron). There's a topic for Heavy Weather.

Unfortunately small business dose not have the answers, I have worked for small business owners all my life in high tech high risk manufacturing and have seen them drop like flys because of off shore competition. When we dropped our prices they dropped there's more. And its not the other western countries that we have to compete againt we can do that, its china that is killing us. And some of you may think its only the low skilled production line work that we loose, its also the highly skilled tradesman and engineers that tool up and design the lines.

Cluffy said...

mr love said...
A speech my boss did last year to the National Press Club on the importance of Australian manufacturing. Last word from me on the subject.
Now how do I tell my wife about the new custom board!!!

media.gm.com/content/Pages/news/au/en/2011/Dec/1207_AustralianEconomyNeedsTheCarIndustry/_jcr_content/rightpar/sectioncontainer/par/download_0/file.res/111207%20Press%20Club%20Address.pdf

Bribe her. Figure out something she wants, save up and get it for her. Then buy your board. she'll know what you're up to as women are far more intelligent than us mere males but you got her something special as well so she won't mind.

Get online and buy her something nice from Paris. . . .

Yep, my way of describing it is incredibly basic and not realistic to how things actually happen, but I stand by it that is is still fundamentally correct.

an example

Product x (could be anything) Purchased direct from an overseas source Costs to you $500 landed at your door. Of that cost, lets say the freight company picking it up from the airport and delivering into your eagerly awaiting hands gets paid $50.
The total benefit to the Australian economy is $50 being circulated but $450 disappearing overseas.

Same exact same Product x purchased from an Australian shop for $700 has a $200 cost from overseas manufacturer (similar to the overseas shop). Which then has to be once landed in Aust:
Import tax
Cleared by customs
Transported ($50 same as other item for simplicity)
Middle man?
Shop
The benefit to the Australian economy is $500 which is then recirculated at each stage for various goods and services they require (hence the passing the coins around analogy).

I had my 25th wedding Anniversary with my beloved up in Broome last week where we spent around $2k all up on the hol which was distributed through a shuttle bus company, a car hire firm, 1 very nice hotel accommodation for 5 days, 5 restaurants, 1 jeweler, 2 supermarkets, 1 general store, 1 sports shop, 1 fishing shop and a petrol station. Subtract the $600 for flights, that's $1400 distributed amongst all these Australian businesses, paying wages, the restaurants buy produce which comes predominately from Australian farmers, all of which pay Tax to the Australian Gov fro the greater community. How much benifit to the Australian community would have been derived from my spending if I had gone to Bali apart from departure tax?

Unfortunately for Australia we don't really produce much apart from holes in the ground, we send iron ore out at $150p/tonne and get back as a car (or whatever) at $20k per 1.5tonne.

Tourism only brings in a small part and with the AUS$ so high it is less than before.
Our manufacturing is dieing the death of a thousand cuts Due to the high Aussie dollar and our high wages (reported on JJJ that the Bangladeshi clothing workers get $60 per month).

I work in sales for an (foreign owned Australian Manufacturing, exporting, wholesaling retailing company who actually exports to SE Asia, Japan and China finished engineering products. We get f-all support from the Gov, we are getting crucified by opposition companies who import because the high $ as well as getting beaten up again in the export market due to the high $.

Our company is also exposed to the effects internet purchasing I use an example of a quote for a small item to one of my customers who told me he could get the item for 1/20th of the price from overseas on his credit card and wanted to know why and it was solely down to customs clearance charges and documentation which a company has to do all ALL overseas purchases, which is ok if you are ordering a lot of stuff where you can amortize it over a large value but on small items it's a killer for local business.

To my mind we all have a responsibility to support the Australian economy as a whole as we are all reliant on it for our livelihood.

I also strongly believe that as a minimum everything coming in should be taxed and charged the same way as the government tax's Import duties, custom's clearances and GST. That way the playing field starts to level out some what.

If in doubt, have a look at the Australian trade deficit figures.
tradingeconomics.com/australia/balance-of-trade

A correction

My maths was wrong on the benefits of locally purchased Product x, forgot to subtract the difference between the two prices which would in theory be spent by the consumer locally which was $200 so Benefit to Aust on the transaction would be $300 circulating not $500

Issa said...

Do engineers working offshore/online carry the indemnity insurance that a local engineering firm would?

Yes they do because they are Aussie companies with offices OS exploiting the cheaper rates of pay.

I worked for a company a couple of years ago & we sent one guy over to Malaysia to set up a complete design office, very low overhead.

I am currently dealing with an engineering company in Manila for a Qld based project.
They have an office on the Terrace but they are using the cheaper labour in the Phils.
That's probably the only way they could win the job

I still think the government should some how control the Australian content in these projects whether it be purchased goods or labour, both design & construction.

A few years back we had an Indian company building something up North, they insisted they built it in India or it wouldn't happen at all.
The local fab shops were empty & crying out for work.
The government caved in & let them but then they wanted to bring in Idian labour to construct it.
At least that didn't happen, I think the unions actually did something useful for a change.
They are here taking our resources to make money (value adding) but that is still not enough

Value adding is the key, that is what we have given up & that's where the big profits are.

"value adding"
Accounting industry has pushed a lot of work offshore, with varying degrees of success. Fortunately for local accountants, no one fully understands the tax act. Least of all the tax office. Accountants working for Chennai Super Kings, struggle with our laws.

My preference is to buy local at every opportunity.

Putting up a great wall to keep the hoards out will not work. It didn't work for the Chinese Middle Kingdom.

We are a small Nation. Economics is brutal and we need our neighbours more than they need us. That said foreign capital (intellectual and financial) loves Aus because, although our rules are mind bendingly complex, they do apply to all.

It's probably no comfort to those who have lost contracts but we have two points of absolute advantage, being blue skies and fair and open government. The value adding tide will turn eventually. Why?
We will never have to suffer public servants knocking on our door, at 3am, demanding cash under threat of detention.

cybersoak said...

There is something seriously wrong when we, on first world wages demand third world prices. I for one will only buy in Australia. People complain about Australian prices but it is keeping people in jobs and our economy going. We are trying to have it both ways and something will give. To people complaining about shops not going online be careful for what you wish for for as once their online business become really profitable they will soon close their physical store. Why wouldn't they. No rent, less wages, phone, light bills etc, just a big shed in their back yard. They can then go to Maui, take their iphone to track sales and get a kid to post items sold.

Bingo!

Running an online business is very different to running a physical store, it requires different skills, resources and knowledge.

Most existing retail businesses do online badly because they do not have the skills, setup, time or resources to do it properly while at the same time trying to run a physical retail store.

Online is cheaper in part because there are a lot less costs but a physical store doing online still has all those costs. Once you're buying online you're probably going to go with the cheapest option so one way or the other in order to compete with online it really means changing your business model, becoming more efficient by closing expensive retail premises and employing less people.

Luckily most windsurfing businesses do it as much out of a love for the sports and the industry as they do to just make a living. It would certainly be easier and probably more profitable at the end of the day just to put all attention into a great online store. However there are social aspects to consider - talking to people, physically seeing the products, testing them, getting advice, sharing experiences of the last great session, the latest move you're working on or the windsurfing holiday you're planning. It's more enjoyable for the person selling the gear as well as the customers to interact in a bricks and mortar setting than online.

The simple fact is that in life there are trade offs and priorities - for surviving bricks and mortar retailers their priority is their bricks and mortar store - this might mean they miss out on potential online sales and it may mean they don't make as much money as they could with a different business model but hopefully it means that the lives of their staff, their customers and their industry is better for it.

There is a generation of small retail businesses who hardly know how to use a computer. It may be a fact that they will all disappear for the likes of online stores such as "The Iconic" but I'm not sure that the world will really be a better place for it.

This has been a very interesting conversation to read - lots of different perspectives and points of view - they are all justifiable depending on how deeply you consider the implications. It's just life that different things are more important to different people - for some it's the short term for others it's the far reaching implications. For me there is no real right or wrong. You can't argue with someone doing what they think is right for them - but it is nice when people consider what is good for others in deciding what is right for themselves.

That's my 2 cents worth - I hope you don't mind me adding it.

See you on the water or at the beach - hopefully they will never take that online