A meeting of minds
There was a deluge of views on the global economy in Sydney last month at the annual Forbes Global CEO Conference.
The conference, held in Sydney for the first time since 2005, attracted the best and brightest business minds from across the world.
Overall, the tone was upbeat, with majority of speakers optimistic about the global economy thanks to the strength of the BRIC economies, which include Brazil, Russia, India and China.
Forbes chairman and chief executive Steve Forbes opened the conference with a call for Australia to lower its top tax rate.
Forbes said the top tax rate of 47% was too high.
“I have also advocated that Australia should adopt a flat tax,” said the billionaire publisher, who has previously proposed a flat tax rate of 17% in the US.
Turning to the US economy, Forbes said while the country faced some difficult headwinds, it was setting up for a strong recovery.
“The kind of turmoil you see [in the US] is setting the stage for a fantastic recovery,” he added.
Forbes said as the US restructures after 2007 credit crisis, entrepreneurs would have the opportunity to take advantage of the current conditions and drive a new boom that could surpass the growth seen beforethe global financial crisis.
On the local front, Forbes weighed in on the National Broadband Network (NBN) debate. While he admitted he didn’t have the full details, he said governments needed to be careful because technology could change very quickly. Forbes noted that what is current today could well be out of date in five years time.
Another person with a unique view on the NBN debate was Mexican telecommunications and construction billionaire Carlos Slim Helu, who reclaimed the mantle of “world’s richest man” at the start of the year.
Helu, who is worth US$55 billion, said the current cost of NBN equated to about $7000 a household. Helu said that was too expensive and didn’t take into account the fact that internet and phone services were now delivered through a multitude of mediums, including wireless.
Helu was presented with the Forbes Lifetime Achievement Award at the conference and used the platform to call for a carbon tax. He said while many of the world’s most polluting countries did not want a tax, a compromise could be produced if those countries used the proceeds of the tax to help their poorest citizens.
One speaker who certainly wasn’t calling for new taxes was Fortescue Metals’ chief executive Andrew Forrest.
Forrest used his speech to (unsurprisingly) rail against the mineral resources rent tax.
Forrest’s major concern with the new tax was that it favoured larger miners with established infrastructure. He argued this was because while the tax granted concessions for mine operations, it did not for associated infrastructure.
Forrest also said this advantage was why the big three miners were happy to agree to the new terms.
“I now have a better understanding of why the tax was designed the way it is and why it has got the warm support of BHP Billiton, Rio Tinto and Xstrata,” he said.
There was also plenty of speculation about the future direction of commodity and stock markets.
The speakers tended to agree with the premise that an expanding middle class in developing countries would drive higher commodity prices, especially soft commodities such as corn, wheat, cocoa and sugar.
JP Morgan managing director of China equities and commodities, Jing Urlich, said the strong growth of the BRIC economies, which is close to twice that of the world average, was likely to be the driver of gains in stocks and commodities markets in the near term.
The BRIC economies are growing at an average rate of 6.9% per annum, while the world’s current growth rate is 3.6%.
Urlich said the rise of the middle class in emerging markets would continue to put pressure on soft commodities.
“In China, you have an emerging middle class that can now afford a higher quality diet. Instead of rice, they are now eating steak, and steak requires seven pounds of grain,” he explained.
Fisher Investments chief executive Ken Fisher was particularly scathing about the doom and gloom mongers, saying the current recession is no different to the recessions we have experienced in the past. Using the kind of language that has helped him become an investment legend, Fisher said: “We are chimpanzees with no memory. The problem in this current environment is that we think we are so different, so new, and so unique. It’s the same old stupid normal we’ve always had. We have a great future.”
Fisher said the caution and fear many investors and business owners were experiencing was usual for this time in the economic cycle.
“We can quibble about details, but right now we’ve got the world snarky, sceptical and pessimistic, which is normal a year-and-a-half after the bottom of a big bear market,” he said.
Fisher was one of the most optimistic speakers at the conference. He said the next decade would be positive for investors and could be as good as the boom years of the 1990s.
Let's hope so.