The Anti‑Forecast: The Reforms Australia Won’t Make but should. 

The Anti‑Forecast: The Reforms Australia Won’t Make but should. 

Dec 23, 2025 | Change, Governance, Strategy

StrategyAudit works with small and medium businesses. That offers a perspective into how things work, and don’t work, across a variety of domains. We are in a season full of forecasts, pundits everywhere are forecasting what tomorrow will bring. Most will be destined for the round bin, as any business knows, unless you address the foundational challenges and problems hindering performance today, building on top of a shaky foundation is a road to failure.

My advice is always to address three headline challenges.

Simplification.

Focus.

Mutual interest.

Each on their own are challenging. However, they are also interdependent, and compound with every small improvement. If we apply the same formula to the ‘Australian condition’ we can come up with a list of priority items that to date have been endlessly deferred by politics, vested interests, and lack of will.

Simplify

We have made governing, investing, and even trading across state lines needlessly complex. Every layer of approval and every bespoke state rule turns a national economy into a bureaucratic obstacle course.

One economy, not eight mini‑regulators

Harmonise licensing, product standards, and safety rules. Default to national templates unless a state can prove a unique public interest, which should then be applied nationally. Every extra bureaucratic form and protection of some politically engaged but fringe vested interest is a tariff disguised as stationery.

Regulation should protect the public, not the loudest lobby. Each new compliance layer should sunset unless proven that there is widespread benefit.

Transparent, fixed cycles for reform

Adopt four‑year fixed federal election cycles. Certainty attracts capital and allows initiatives to gather momentum before being re‑litigated by the next political marketing campaign. Genuine reform takes time to gather momentum. The current adversarial 3 year term is akin to a terminal case of cancer to most genuine reform. 

Legal and regulatory compliance.

The legal and compliance regimes currently in place institutionalise and solidify power. Those with the resources will (almost) always win against those that do not, as the latter do not have the resources to leverage the necessary lawyers, accountants and relevant experts to argue a case. This mismatch represents a gross mismatch of equal opportunity, a foundation of the nation which is now just a cliche.

Focus

We cannot continue to fund everything but achieve little beyond self-congratulatory press releases, and a few happier individuals and enterprises. Choices must be made about where public capital, political effort, and regulatory clarity will deliver compounding national benefit. Choice requires that we actively choose what not to do. This side of the equation is ignored totally in public and political discourse.

Opportunity cost should be a mandatory line item in every budget and policy submission.

Direct capital to national capabilities

Pick a handful of sectors where we can win. Critical minerals, med‑tech, ag‑tech, renewables, and back them with predictable, performance‑based co‑investment. Stop scattering grants like confetti to the most cashed up and politically engaged opportunists. The absence of a clear national strategy inevitably results in disjointed capital allocations, delivering subpar outcomes. We do not have enough depth of capital to allow this to continue.

Build the grid before we build slogans

Power transmission, firming, and storage are the enablers of the renewable transition, which is happening, like it or not. Without them, debate, announcements, and political jockeying are just supercharged brakes on output. Treat the grid as a platform to future productivity and living standards, not as a project.

Tax what’s unearned, reward what’s built

Shift the tax system to favour productive effort over rent‑seeking. Reform land and capital gains taxes, reduce bracket creep, close offshore residency for tax purposes, return artificial domestic tax minimisation structures like trusts back to their original purpose, and simplify compliance. Productivity grows when builders beat speculators.

Tax reform is the most challenging domain, which is an indicator of its most important priority. With a massive majority in the reps, and an opposition fractured and almost irrelevant, there will never be a better chance to generate meaningful and long-term change than right now. Political history demonstrates that once a reform is instituted, subsequent governments might fiddle at the edges, but do not reverse the direction.

Maintain what we own

Ring‑fence funds for maintenance of infrastructure, schools, and hospitals. It’s cheaper to fix a leak than rebuild the roof.

Maintenance is far less politically ‘sexy’ than announcing new things, particularly things that can be opened, and generate lots of press releases and hard-hat photo opportunities. Maintenance over new investment is a choice, which sadly favours the latter to our detriment. Fix what you have before replacing it. At the very least, you get a better price when you sell it.

Mutual Interest

A society works when effort and reward align, and when long‑term collective benefit trumps short‑term political advantage. Education, national security, climate resilience, and competition all belong here. They’re not partisan, they are foundational.

Education that serves every child

Make needs‑based funding sector‑blind and tied to evidence‑based teaching. Publish learning growth metrics nationally. Equality of educational opportunity, irrespective of geography, socio economic position, and learning style and preference should be a national priority, not a slogan.

Shared national objectives

Matters of strategic importance: energy transition, sovereign capability, defence, and education should be somehow quarantined from the election cycle. A comprehensive national set of strategic priorities as previously noted is essential, requiring non-partisan engagement.

The real deficit is not fiscal, it’s moral. We lack the will to argue transparently, in public, with facts about the past and a clear sense of plausible futures beyond the next poll. Until that changes, reform will always be a press release.

Almost everything in the current adversarial culture of party and individual politics aligns itself against this absolute necessity if we are to leave the place better than we found it. There is really only one cure for the disease: collective leadership, and a leader who inspires followers. It seems we have run out of those!

The reasons these things won’t happen are familiar: politics seeks popularity, not durability; vested interests fund resistance; bureaucracies protect complexity; and the public has been trained to demand benefits without trade‑offs. None of that is inevitable.

The antidote is political courage married to public literacy. Tell the truth about the trade‑offs, publish the facts, and stop pretending that every tough decision can be deferred until after the next election.

This has been the last post for 2025. My thanks to the (very) few people who have stuck to reading the thoughts I have as presented in this blog. Amongst the tsunami of AI generated slop that is increasingly infecting publicly available platforms, it is becoming increasingly challenging to be seen.

Header by Nano Banana. it is an amazing tool!

A marketer’s explanation of the difference between ROE and ROA

A marketer’s explanation of the difference between ROE and ROA

Dec 15, 2025 | Analytics, Governance, Marketing

 

Marketers must understand the jargon of the boardroom if they are to contribute meaningfully to the critical strategic conversation.  Too often they are sidelined by lack of this understanding, resulting in dumb choices being made by those who think strategy development and the deployment of these strategies is some form of hocus pocus.

Return on Assets (ROA) and Return on Equity (ROE) tell different stories about the quality of the management choices being made.

ROA is a measure of how effectively the enterprise is using the assets it has to generate a profit. It is the ratio of net income divided by total assets.

ROE is a measure of how effectively the enterprise is leveraging the use of the equity, capital supplied by the owners, to generate profits. It is the ratio of profits divided by equity.

Together they measure how well a management is doing at managing the enterprise on behalf of the owners. The major difference is the financial leverage delivered by the debt the enterprise uses to generate profits. The greater the distance between these two ratios the greater is the reliance on debt to fund activities. Conversely the closer they are, the less debt is on the balance sheet. In the absence of debt, the ROA and the ROE would be the same.

Every enterprise faces the choice of funding sources: debt or equity. If they choose to take on debt, or ‘financial leverage’ its ROE would be higher than its ROA only if the company earns more on the borrowed funds than the cost of borrowing.

You will often hear the term ‘financial engineering’. In its simplest form, it is the management of the balance between debt and equity, usually in response to interest rates, and expectations of those rates, and the expectations of dividends to be returned to shareholders out of profits.

I found the following example contained in an explanation of the ‘DuPont Identity’

Imagine a fictional company ABC with the following financials:

  • Net Income = $1,000,000
  • Average Total Assets = $4,000,000
  • Average Shareholders’ Equity = $2,000,000

ROA = Net Income / Average Total Assets = $1,000,000 / $4,000,000 = 25%

ROE = Net Income / Average Shareholders’ Equity = $1,000,000 / $2,000,000 = 50%

In this example, ABC generates $0.25 in profit for each dollar of assets and $0.50 in profit for each dollar of shareholders’ equity. ROE is higher than ROA in this example, as it does not account for all assets, including debt. If total assets were equal to shareholder equity, then ROA and ROE would provide the same result.

As noted, while it may sound like accounting jargon, marketers simply must understand the terminology if they are to avoid being sidelined when it really counts.

 

Cockroach subsidies: Why Australia pays multinationals to stay

Cockroach subsidies: Why Australia pays multinationals to stay

Dec 11, 2025 | Change, Governance, Strategy

 

Federal and state governments now face a steady queue of large, tax advantaged Multinational corporations with a simple message: “Subsidise us, or we shut the gates.”

Jamie Dimon, CEO of JP Morgan recently said at an earnings call: “When you see one cockroach, there are probably more.”

We now see the same thing with corporate subsidies.

Once one bailout appears, a small army of “essential” projects scuttles out from behind the skirting board.

Think about a few recent examples.

Whyalla Liberty Steel receives a multi‑billion dollar rescue package.

Glencore secures support for its Mount Isa zinc smelter and Townsville refinery.

Nyrstar’s lead‑zinc smelter attracts funding.

Arnott’s receives a 45 million grant to ‘shore up their balance sheet’

On top of that you have the fuel tax credit scheme running at around ten billion a year, and a series of Petroleum Resource Rent Tax concessions.

Not every one of these choices fails a hard‑headed test. Some, probably many, will stack up when you count jobs, regional impact, supply chain risks and national sovereignty. However, that does not diminish the simple fact that the only ‘policy’ we have is to be selectively tactical in our response. Little integrated, coherent policy aligned with the long term best interests of the country, that has bi-partisan support.

The problem sits with the ongoing failure of the adversarial nature of our political system, and successive governments to provide a stable and reliable long term investment environment.

Taken together the tactical responses do not look like strategy, but they do look like frantic pest control in a kitchen nobody bothered to design properly.

The cockroaches are running wild, demanding sustenance.

There is a common thread.

Most calls for subsidies exploit the absence of a coherent energy policy, and restrictive, time consuming approval processes, combined with a small domestic market.

Governments then reach for subsidies to keep often extremely wealthy, tax‑advantaged multinationals from walking away with their capital, seeking the best risk adjusted returns elsewhere.

It pits national governments against one another in a global options game, that filters down to regional governments.

In contrast to our ad hoc playbook, China has played a long and highly strategic game with subsidies. For example, they have spent years locking down global supply of rare earth minerals, and Chinese firms now dominate large parts of the EV supply chain. The same playbook has been applied to batteries, solar panels, and increasingly AI.

It is a giant international poker game, and we are a minor player with a few good cards if played well.

We supply resources, are stable politically and economically (despite the problems) and have an educated workforce. However, we have shallow and short term oriented capital markets, so need investment to leverage our natural assets, while rabbiting on about sovereign capability.

For Australian governments to attract mobile capital on sensible terms, we need a different offer.

Subsidies and favourable tax treatment can play a role, but they do not carry the game when they are subject to management by press release, and the loading of investment in marginal seats.

Serious investors look for something more valuable: reliable educated workers, technical capabilities, and reliable institutions, all of which contribute to the certainty that encourages investment.

The strategic dilemma is that competitive countries have a different set of foundational assumptions that deliver competitive advantage.

On one side sit the cheques written to keep multinational operations in place.

On the other side sit the losses in productive capacity, skilled jobs, capability building, and tax revenue if those operations close.

Do our governments, bureaucracies, and political culture have the capability and courage to wrestle with that complexity?

Because until they do, the cockroach subsidies will keep multiplying under the fridge.

 

 

 

 

Opportunity Cost: The hidden thief of success. 

Opportunity Cost: The hidden thief of success. 

Aug 11, 2025 | Governance, Management

Opportunity cost is everything you could have done with the money, time, and focus you’re about to expend on a different course.

In a small business it’s never theoretical: it’s overtime you can’t afford, stock you can’t reorder, family weekends you skip, fancy software that never delivers what was promised. The list seems endless.

Opportunity cost is tough to calculate. It assumes that future benefit from something you did or did not do can be calculated. However, it is often obvious in hindsight, so learning from past misjudgements will assist future choices.

Opportunity cost steals from three of your pockets:

  • Cash. Dollars used on ‘X’ would have been better spent on ‘Y’
  • Time. The time spent Learning how to use ‘X’ would have been better spent deploying ‘Y’.
  • Focus. Our Mental bandwidth is finite. More than one priority at any given time dilutes the return on the time we invest, as well as the quality of the output from that time. Nobody ever went into a ‘flow state’ thinking about two tasks. 

For example, deploying a CRM is one of the great hidden generators of opportunity cost, particularly for SME’s. Customers will never thank you for not responding quickly to their enquiry. Failure to do so will erode hard won leads and brand credibility, while the lead evaporates.

Those hits don’t show up in the accounts this month, or quarter. Usually, they do not show up at all, but they quietly compound.

A responsible management asks themselves two seemingly simple yet very complex questions when considering the deployment of any of its limited resources.

  • Where else could we spend this resource?
  • What are the financial, cultural, and operational consequences of the choice we are making?

Opportunity cost never sends an invoice. It quietly drains the financial accounts, bleeds stakeholder trust, and erodes the energy and commitment of employees.  These are significant hidden costs that the best enterprises minimise.

Stop chasing that new shiny object by counting what it will steal.

 image by Sora

Fiscal discipline, political theatre, and the ‘unintended’ leak.

Fiscal discipline, political theatre, and the ‘unintended’ leak.

Jul 23, 2025 | Governance, rant

 

 

Last week’s “unintended” Treasury leak about the unsustainable state of the budget fooled nobody who’s been around the block. It is an old trick: float a policy balloon, wait for the howls, then retreat or advance, depending on which way the wind is blowing.

Fiscal discipline? We all cheer for it as long as it doesn’t hit our own slice of the pie.

The Treasurer’s challenge is less about balancing numbers, and more about navigating the swamp of human psychology. We feel the pain of losing a perk much more strongly than the pleasure of gaining it.

Daniel Kahneman called it “Loss Aversion”.

Hand out a benefit to appease a small group, and you’ve just set a trap for your future self. Try clawing it back, and the noise will make a toddler’s tantrum look civil. Ever tried taking a birthday present from a six-year-old? Good luck.

That’s how government spending grows. Drip by drip, group by group. Give out enough trinkets and nobody notices until it’s time to start collecting them back. Suddenly, the losers organise, mobilise, and scream bloody murder, while the rest of us just mutter, shake our heads at the stupidity of it all, and pay the bill.

Take the latest fuss over super accounts above $3 million. Only a handful are affected, but the outrage is theatrical. Why? Because the few that are in line to benefit do not want that benefit stripped away. Meanwhile the vast majority of us will not be affected, but do tend to be caught up in the emotion of being rorted by the government, again, without understanding the facts.

Nobody wants their treat taken away, but most are perfectly happy to see cuts, as long as it’s not their treat on the chopping block.

Maybe we’re just a nation of optimists who secretly believe we’ll all be in the $3 million club one day. Dream on.

The real leak here? Not Treasury’s numbers, but the enduring political tactic: float a “mistake,” watch the reaction, then call it consultation. Mr. Chalmers is no stranger to policy trial balloons.

 

Header courtesy of DALL-E

 

 

Is Australia about to see its ‘Minsky moment’?

Is Australia about to see its ‘Minsky moment’?

Jul 21, 2025 | Change, Governance

 

 

Few readers will have heard of Hyman Minsky. However, given the Australian parliament reconvenes in its post-election form tomorrow, it may be time.

Minsky was a prominent economist whose theories, labelled ‘Financial Instability Hypothesis’ were largely ignored until the financial crisis in 2008.

The dominating financial theory before the wake-up of 2008 was that financial markets were generally efficient, reflecting the best information available at any one time.

The financial crisis killed that idea.

Suddenly Minsky’s theory was that markets are driven not by just the available information, but by cycles of greed, fear, and the pursuit of power. (I feel certain that Daniel Kahneman would have agreed)

I wondered if the same cycle could be applied to the Australian body politic and economy.

It seemed an appropriate time for such thoughts, heading as we are into a term of government where the incumbent has a huge majority, and no effective opposition.

So how appropriate is the Minsky cycle to the current political and economic environment the Albanese government faces?

In the aftermath of the election, aware sentiment can change quickly, the Government surprises, and turns risk averse. After all, they now believe they have several terms to ‘get stuff done’, and do not control the Senate. This starts to create frustration in the electorate, as it seems obvious that genuine change is more possible now than for the last 30 years. Only vocal interest groups are scaring the government into inaction. The presence of such hoarding of political capital provides the catalyst for a renewed opposition to effectively attack the inaction on pressing issues.

The cynic in me assumes that none of the challenges we face as a country will be adequately addressed. Politics has devolved into a Ponzi scheme of elaborate lies, misdirects, and inaction. The focus is on gaining and keeping political power for the sake of the power, not for the long-term betterment of the country.

The optimist in me is tempted to listen to the practiced rhetoric of the two leading Labor figures and think: ‘perhaps this time’.

The header is my adaptation of the Minsky cycle reproduced below.

With apologies to Hyman Minsky.HET: Hyman P. Minsky