Irish Economy and Budget Watch / / /Emergency Budget Announced for April 7th

Denis O'Brien makes good points. The Government needs to look like it s organised and is doing somethign without looking like it is panicking. TBH I think that is their current strategy in any event.

It is good to see the Sunday Independent's activities being named for what they are in the secondmost popular national newspaper.

The only Irish national newspaper of merit, I would hasten to add .

I like the Sunday Business Post of late. It seems to be up to date on how the banks and businesses are actually carrying on.

To give Morgan Kelly his credit - he doesn't beat about bush and is quite rightly throwing it back in the faces of those who derided him over the last while.

http://www.irishtimes.com/newspaper/opinion/2008/0815/1218747921594.html

Quote :

.....The fundamentals of the Irish housing market point to more sharp falls over the next two to three years, writes MORGAN KELLY

WITH HOUSE prices falling fast and likely, come the autumn, to fall even faster, no sane person would currently even think of buying a house. But this immediately raises the question of how long the crash will last. In other words, how long will it be before you can buy a house and not regret the decision for the rest of your life?
Looking at past collapses in house prices abroad, we can see that they fall into two broad groups. In the first group, that includes Japan and Switzerland, prices suffered a long, slow decline of a few per cent a year for a decade. The second group, that includes the Netherlands and Finland, saw real prices halve in three to four years, and then fall gently for a few more years.
If this second pattern repeats in Ireland, given that we are already one year into the crash, we can expect two to three more years of sharp falls. After that, prices should stabilise and it will be safe for buyers to return to the market.
But between now and then, to paraphrase a former taoiseach, the crash will get even crasher. The reason is that, alongside self-fulfilling expectations of continuing price falls, all of the fundamentals of the Irish housing market - income, population, credit and housing supply - are pointing to sharply lower prices.
The building boom allowed Ireland to enjoy Scandinavian levels of consumption and Government spending despite scarcely better than Mediterranean levels of productivity.................

I love the use of "Fundamentals" - this word has about as much meaning as hearing the word "terrorist" from the US/Russian/Chinese/Israeli Defense spokesperson.

The price of a semidetached house here has gone from 30,000 pounds to 250, 000 euro in the last fifteen years.

We've built a massive housing stock and a substantial consumption-based service sector over the last ten years, paid for mainly by FDI spin off and credit.

I reckon what goes for the construction sector will be reflected against the service sector generally. All "discretionary expenditure" is in for a big cut back.

The only good thing to say about it is that we do have the new building stock and it does have a use value. The bad thing is the amount we will pay for it.

On house prices one key factor should never to be overlooked and that is the cost of building. You can build a house for around 1000 Euro per sq m plus connection charges and external works, and add in the site cost.

If house prices drop below the cost of construction we will be building up a major long term problem that will eventually result to another boom cycle.

Reduction in property and land prices needed but excessive correction brings yet more problems unless we hold to zero population growth and that population does not chose to move from one region to another.

As half of the price of a house in Ireland is tax, shifting some of this onto general taxation would help. There is no reason why new house buyers should be funding the whole country. Going from 25% construction (much to high) to zero (much too low) is not a good thing. If we ever have an upturn, our construction capacities will have to be rebuilt at a cost. The machinery is being sold off to Poland as we sit here and the workers will follow - Irish as well as Polish. There are already very long waiting lists for affordable housing.

Cowen will be afraid to tackle the construction industry as it is unpopular and developers are hate figures. He will be wrong if he doesn't. Government should look at real needs and take measures to have a functioning construction sector, albeit much smaller than in the last four years.

Cactus Flower

Fair point, all industries need stability and construction is no exception. If we want a skilled, efficient construction sector they need stability. Believe it or not developers (at least the sane ones) do not welcome rocketing property and land prices. They prefer predictability.

Edo wrote:

To give Morgan Kelly his credit - he doesn't beat about bush and is quite rightly throwing it back in the faces of those who derided him over the last while.

He's wrong on the productivity point though. In absolute terms, Ireland is the second most productive country in the world and in relative terms the fifth-hardest working. The International Labour Organisation conducted a study late last year which confirmed this. We have seen a slowdown in the growth of productivity, but now that building has cooled, we can see an uptick in productivity growth into the next decade.

Ard-Taoiseach wrote:

Edo wrote:

To give Morgan Kelly his credit - he doesn't beat about bush and is quite rightly throwing it back in the faces of those who derided him over the last while.

He's wrong on the productivity point though. In absolute terms, Ireland is the second most productive country in the world and in relative terms the fifth-hardest working. The International Labour Organisation conducted a study late last year which confirmed this. We have seen a slowdown in the growth of productivity, but now that building has cooled, we can see an uptick in productivity growth into the next decade.

Take out the Multi-Nationals and a few of our own export companies - ie less than 5% of the overall workforce - and our productivity plummets - stands to reason - the Multis are 90% of our exports and they have a workethic,standards and managment system takes leaves our domestic sector in the dark ages - I've worked for both and the difference is night and day ARD - my current firm is irish - but the workforce and managment are ex-Irish Multinational , returned Emigrants and foreigners and ethos is most definitely International American with a serious Asian influence.

We arent the worst and we are slowly getting better- but lets stop deluding ourselves that we are world class - there is a dangerous notion in this country that the longer hours you work - the more productive you are - total and utter bollox - thats why our civil and public service is dysfunctional and a lot of our businesses are going bust

Work short and smart - not long and hard.

Edo wrote:

Ard-Taoiseach wrote:

Edo wrote:

To give Morgan Kelly his credit - he doesn't beat about bush and is quite rightly throwing it back in the faces of those who derided him over the last while.

He's wrong on the productivity point though. In absolute terms, Ireland is the second most productive country in the world and in relative terms the fifth-hardest working. The International Labour Organisation conducted a study late last year which confirmed this. We have seen a slowdown in the growth of productivity, but now that building has cooled, we can see an uptick in productivity growth into the next decade.

Take out the Multi-Nationals and a few of our own export companies - ie less than 5% of the overall workforce - and our productivity plummets - stands to reason - the Multis are 90% of our exports and they have a workethic,standards and managment system takes leaves our domestic sector in the dark ages - I've worked for both and the difference is night and day ARD - my current firm is irish - but the workforce and managment are ex-Irish Multinational , returned Emigrants and foreigners and ethos is most definitely International American with a serious Asian influence.

We arent the worst and we are slowly getting better- but lets stop deluding ourselves that we are world class - there is a dangerous notion in this country that the longer hours you work - the more productive you are - total and utter bollox - thats why our civil and public service is dysfunctional and a lot of our businesses are going bust

Work short and smart - not long and hard.

This is true and is a real problem. There is no management training, no interdepartmental co-ordination and in a lot of cases no proper chains of command.

Edo I've been looking for your posts on P.ie where you give out about management but I can't seem to put my hand on them. I'll keep trying though...

Real good management is so rare - people who are effective people people and process people all at once. Very very rare. Do you think it would make a difference to our economy and productivity if there was better management? The assumption is that management over here is shite and I don't think that's unreasonable although I have worked for excellent managers - so I know they exist ..

maybe cloning ...

Ed Demming, the godfather of modern statistical production methods and quality control systems, (the Japanese actually have an industrial award in his name), Warren Buffet, the granddaddy of investing, and many other top flight professionals all point out that the buck stops with management. If the product is good, the methodolgy sound and in any given economy, it is up to the managers to produce the results. These are the people paid the top money. If you come across a company whose managers are blaming the workers, the economy or anything else for poor financial results, run a country mile.

Edo wrote:

Work short and smart - not long and hard.

Whilst I agree, it is easily said and a lot harder to do. Often people do not have the contacts or financial backing to be 'smart'.

As for really good management, that is an interesting one. Can it be taught or is it something innate in some?

rockyracoon wrote:

If you come across a company whose managers are blaming the workers, the economy or anything else for poor financial results, run a country mile.

Totally agree, but for one aspect. I have seen really good people fail due simply to bad luck.

Squire wrote:

Edo wrote:

Work short and smart - not long and hard.

Whilst I agree, it is easily said and a lot harder to do. Often people do not have the contacts or financial backing to be 'smart'.

As for really good management, that is an interesting one. Can it be taught or is it something innate in some?

rockyracoon wrote:

If you come across a company whose managers are blaming the workers, the economy or anything else for poor financial results, run a country mile.

Totally agree, but for one aspect. I have seen really good people fail due simply to bad luck.

I seen really bad people succeed because they are interested in success.

cactus flower wrote:

I seen really bad people succeed because they are interested in success.

Oh yeah, something for the "I hate ...." thread if I haven't posted it there already.

We lack managers and people with vision and it is a given that it is difficult to find great visionaries - I'm thinking of the Apple Dude now - but shouldn't there be more of a focus on how management operates and an emphasis on the quality side of management. There is some award out now for Top Companies that are Great to Work For and I'd love to see and hear more about that on tv radio the internet but especially in the place I'm working, whereever it be at that time. You're often getting out of bed, drinking your sweat and locking yourself in a cubicle for these guys and it's all too often they show workers no respect.

Squire wrote:

rockyracoon wrote:

If you come across a company whose managers are blaming the workers, the economy or anything else for poor financial results, run a country mile.

Totally agree, but for one aspect. I have seen really good people fail due simply to bad luck.

Yep, luck is a factor. The top managers are ones who're often the best at balancing risk and reward but even the best laid plans of mice and men oft gang angly (or some such thing). But its hard to keep a good man or woman down for long.

Auditor #9 wrote:

cactus flower wrote:

I seen really bad people succeed because they are interested in success.

Oh yeah, something for the "I hate ...." thread if I haven't posted it there already.

We lack managers and people with vision and it is a given that it is difficult to find great visionaries - I'm thinking of the Apple Dude now - but shouldn't there be more of a focus on how management operates and an emphasis on the quality side of management. There is some award out now for Top Companies that are Great to Work For and I'd love to see and hear more about that on tv radio the internet but especially in the place I'm working, whereever it be at that time. You're often getting out of bed, drinking your sweat and locking yourself in a cubicle for these guys and it's all too often they show workers no respect.

I'm writing a short synopsis economic paper for a political party. Merely flying some ideas across the bow and hoping some ideas might peak interest. I've recently read an article where the very idea of grading your employer might produce some good results for both the employer and employees. While money (wages, bonuses, etc) is the primary motivating factor for all employment contracts (implicit or explicit), it is not the only factor which can bind the employer and employee in a more mutually beneficial coexistence.

By grading, I don't mean highlighting fluffy wee things like free coffee or comfy seats, although these have their place. I mean grading companies on their management skills. Are employees recognised for their contributions? Is communication a two way street? Is the company business plan communicated and how it is to be implemented by various departments and individuals? How are grievances handled by management?

Wouldn't it be nice to know on an objective basis how employees feel about the managment and company before they hired their labour to the company? Employees have to jump through hoops to satisfy a prospective employer that they have the skills and experience to fulfill a job. Why shouldn't companies be held accountable for their prior performance before a prospective employee accepts a job offer?

rockyracoon wrote:

Wouldn't it be nice to know on an objective basis how employees feel about the managment and company before they hired their labour to the company? Employees have to jump through hoops to satisfy a prospective employer that they have the skills and experience to fulfill a job. Why shouldn't companies be held accountable for their prior performance before a prospective employee accepts a job offer?

That's the spirit. It's simply to often assumed that any job is precious no matter who you are working for or what they're like. I sincerely doubt this culture of passive subservience without question is either good for employee morale or production.

I've worked in a good few places over the past twenty years and have enough experience of rude, petulant and ineffective management. Lots of places send around emails and questionnaires which take half a day to fill in asking you are finding the company and what can be done to improve it. All too often it's a HR form-filling exercise with management lip service thrown in. Too often the results of the questionnaires showed morale was low yet the company seemed to be doing everything right. And as far as I'm concerned a lot of the reason for that boiled down to not listening to professional, educated and responsible employees and not giving the employee more responsibility and at times, autonomy. And the worst thing is, the management often portray themselves as employee feedback-based but it's bollox most of the time.

It's an indignity to be expected to want a job you could very well despise because it's managed incompetently and it's another shame that companies or organisations are democratic in name only and when it gets to the floor you might as well be talking to the wall as to be listened to. Companies can lose out big style by not listening to employees and I don't mean by losing the employees.

Edo wrote:

We arent the worst and we are slowly getting better- but lets stop deluding ourselves that we are world class - there is a dangerous notion in this country that the longer hours you work - the more productive you are - total and utter bollox - thats why our civil and public service is dysfunctional and a lot of our businesses are going bust

Work short and smart - not long and hard.

I'm not deluding myself. The ILO did a study and they found that we were one of the most productive nations in the world. Even if you look at GDP per person employed, we rank very well. Granted, MNCs and exporting companies, especially exporting companies flatter the figures but they still stand. Italy, Greece, France, Britain and Spain all have a soggy unproductive domestic economy as well, but they don't have the scale of highly-productive MNC sector like we do. That is the difference and that is why we come out tops.

The improvement in productivity in the domestic economy will be boosted by our increase in education standards and the downturn in the building industry.

Ard-Taoiseach wrote:

Edo wrote:

We arent the worst and we are slowly getting better- but lets stop deluding ourselves that we are world class - there is a dangerous notion in this country that the longer hours you work - the more productive you are - total and utter bollox - thats why our civil and public service is dysfunctional and a lot of our businesses are going bust

Work short and smart - not long and hard.

I'm not deluding myself. The ILO did a study and they found that we were one of the most productive nations in the world. Even if you look at GDP per person employed, we rank very well. Granted, MNCs and exporting companies, especially exporting companies flatter the figures but they still stand. Italy, Greece, France, Britain and Spain all have a soggy unproductive domestic economy as well, but they don't have the scale of highly-productive MNC sector like we do. That is the difference and that is why we come out tops.

The improvement in productivity in the domestic economy will be boosted by our increase in education standards and the downturn in the building industry.

mmm - taking GDP for a country like ours that so dependent on Multi-national and companies that do nothing here except have their headquarters here and thus post their profits here - is very very deceptive and because of the low population here - gives the impression that per person we are super productive - unfortunately its an illusion - somebody in the "branch office" in Germany,France or elsewhere has actually done the producing for the company and his/her profitability is exported here to avail of our low corporate taxes.

Sorry to shatter the illusion Ard - but that is all it is

I dont like talking down the country - but our heads have been so far up our posterior for the past while - that a reality check is badly needed and to start looking at how other people do things .

We do a feck lot of talking about learning from others - but we seem to have a habit of going to the usual suspects - the USA and Britain and taking failed ideas from them - maybe its too much like hard work to try and develop a system more like Germany and the Scandanavians - especially Finland who we should be busting a gut to try and copy.

Edo wrote:

Ard-Taoiseach wrote:

Edo wrote:

We arent the worst and we are slowly getting better- but lets stop deluding ourselves that we are world class - there is a dangerous notion in this country that the longer hours you work - the more productive you are - total and utter bollox - thats why our civil and public service is dysfunctional and a lot of our businesses are going bust

Work short and smart - not long and hard.

I'm not deluding myself. The ILO did a study and they found that we were one of the most productive nations in the world. Even if you look at GDP per person employed, we rank very well. Granted, MNCs and exporting companies, especially exporting companies flatter the figures but they still stand. Italy, Greece, France, Britain and Spain all have a soggy unproductive domestic economy as well, but they don't have the scale of highly-productive MNC sector like we do. That is the difference and that is why we come out tops.

The improvement in productivity in the domestic economy will be boosted by our increase in education standards and the downturn in the building industry.

mmm - taking GDP for a country like ours that so dependent on Multi-national and companies that do nothing here except have their headquarters here and thus post their profits here - is very very deceptive and because of the low population here - gives the impression that per person we are super productive - unfortunately its an illusion - somebody in the "branch office" in Germany,France or elsewhere has actually done the producing for the company and his/her profitability is exported here to avail of our low corporate taxes.

Sorry to shatter the illusion Ard - but that is all it is

I dont like talking down the country - but our heads have been so far up our posterior for the past while - that a reality check is badly needed and to start looking at how other people do things .

We do a feck lot of talking about learning from others - but we seem to have a habit of going to the usual suspects - the USA and Britain and taking failed ideas from them - maybe its too much like hard work to try and develop a system more like Germany and the Scandanavians - especially Finland who we should be busting a gut to try and copy.

I have to agree with you, Edo. I moved to a small, open economy from Ireland a few years back and I compare it with Ireland on many criteria. I, too, do not get any pleasure in talking Ireland down but when I do these comparisons, I don't need to. I try to find world-class indigineous companies in Ireland and there is a serious lack of them. Here, however, there are quite a few. So, by that yardstick alone, I find Ireland lacking. Your comment on us aping the failed ideas of the US and the UK is so right. We seem to take their mistakes and compound them into something worse. We really need to take on board some european ideas quickly, otherwise we are condemned to go from boom to bust over and over again.

There is no property crash here. Because there was no bubble. We need to go cold turkey on property.

Is GNP a fair representation of Irish production, Edo, or is it distorted by the presence of the US firms ?

cactus flower wrote:

Is GNP a fair representation of Irish production, Edo, or is it distorted by the presence of the US firms ?

GNP is a fair representation - because its a figure of the Irish economy that is in Irish hands - Gross National Product.

GDP on the other hand - is the economy as a whole - including all the foreign owned,exported or transferred wealth - we are a massive GDP figure - but so much of it is repatriated after its been taxed and doesnt enter the domestic market place.

I'll be very interested to see the GNP figures for this year - as I predict it will be substantially down and the difference between GNP and GDP will pointed different as its been the mulitnationals exports plus a little help from our own indigineous exporters that have kept the economy from going into total tailspin.

Hold onto your hats lads and lasses, the Quarterly National Household Survey is out! It's broadly encouraging in this time of economic retrenchment...

• Unemployment is still restrained at 5.1%-up from 4.8%

• The labour market continues to expand when the US market is contracting

• Most unemployment is still short-term

• Many sectors still seeing good jobs growth

It's not great, but good considering the external and internal pressures we're experiencing. We can anticipate about 6% unemployment by year end based on these trends before peaking at about 7% next year.