Mannkal Economic Education Foundation


Paying compound interest on a bad investment?

Ron Manners

3 February 2014

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The SPC Ardmona and General Motors Holden decisions are important turning points in Australia’s economic history.

In their hearts, everyone who has a grasp of how the world really works, must know that our Government has made the correct decision in bringing to an end this ‘bandaid’ solution of ‘corporate welfare’ where the Australian taxpayer is called on to pick up the tab for weak management.

So the equipment at the SPC Ardmona fruit canning factory is antiquated?

Where has management been hiding all these years?

If I put my hand up to explain that in our business, in 2014, “We are running our business using typewriters and would like to buy some computers so can we please have a taxpayer handout to purchase them?” I would be laughed out of the room.

As hard-hearted, as it may sound, Australia has one of the best business-restructuring systems in the world.

The remedy is already there when businesses are in trouble with profitability, they just simply call in one of the highly qualified Administrator businesses who proceeds with ‘remedial surgery’ and then after suitable restructuring the company is brought back to life and able to proudly participate in contributing to our nation’s economic health.

This is a far better solution than what has so far extracted $1.8 billion from Australia’s long-suffering taxpayers to keep the Australian automotive industry afloat.

So, how does a Government decide who to ‘help’ and who not to ‘help’?

Simply by asking the question whether it is the Government’s legitimate role to make cars or process and can fruit? If it’s not the Government’s legitimate role the answer is simply to step back and allow market forces to restructure that which is damaged.

Our nation will be better for this ‘hands-off’ approach, irrespective of how unpopular this may appear at the time to politicians who are primarily driven by votes rather than brains.

Future generations, in particular, will appreciate a return to sanity as they are becoming concerned at the debt they are inheriting from the so-called ‘leaders’ of the present generation.

They are aware that any ‘bailout’ money needs to be borrowed and their concern is justified as I describe the current situation as ‘paying compound interest on a bad investment’.

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