Wayne Swan and the Red Book

Submitted by Share Trading on 1 February, 2008 - 11:11

Wayne Swan and Chairman Mao's Red Book

The "Red Book" is a confidential document that is designed to bring a newly elected government up to speed with current conditions. The document was obtained by Channel Seven through Freedom of Information (FOI) laws, and it is the first time that it has been made public.. The document reveals that treasury officials recommend that the Australian Government should start a new wave of economic reform similar in ambition to that exercised by the previous Labor government during the 1980s and early 1990s. The Red Book identifies climate change as "the single most pressing environmental, economic and social challenge this country faces", officials also urge the Government to tackle the challenge of the ageing population and the shift in power to emerging economies like India and China. "You have been elected at a pivotal economic juncture." "You have inherited an economy that is experiencing its longest period of uninterrupted growth since Federation, but which faces a number of short- and medium-term challenges that are becoming increasingly acute. "The economic policy directions struck in the coming 12 months will be critical."

"We do need an ambitious reform program to deal with that inflation problem," Wayne Swan, the Australian Treasurer said. ""We do need an ambitious reform program to deal with that inflation problem." Treasury's advice said Australia's economic growth was likely to remain strong over the coming two years, despite the slowdown in the US. "Inflationary pressures are building, however, reflecting an economy close to capacity with strong underlying demand," the Red Book said. High prices for Australia's exports had given the economy a boost of about $70 billion this financial year, and commodity prices were forecast to remain high "for some time yet".

After all, the first stroke

After all, the first stroke of Kevin Rudd's pen after being inaugurated was to sign Australia onto the Kyoto Protocol, the landmark emissions-reduction pact initiated at the turn of the 21st century.

The Red Book says that for Kyoto and other emissions targets to be met, "the energy profile of the economy will have to be fundamentally changed."

This means business for Ormat Technologies (NYSE:ORA), a geothermal energy giant that has tapped resources from Nevada to the Outback. Ormat has slumped along with the broader market this month, but as our green energy guru Jeff Siegel will tell you, many alternative power plays like Ormat are trading at a heavy discount.

That goes doubly for industries like geothermal where heavy state subsidies can pad a company's top-line during exploration. The risk is low, and the potential is colossal.

Across the board, Australia is set to keep its growth going. While companies like Melbourne-based BHP Billiton Ltd. (NYSE:BHP) are busy shipping minerals, oil, and gas over to China and other big developing countries, Rudd and his counterparts in the Treasury want a stable base that makes best use of Australia's current "demographic sweet spot," as Australia has a higher percentage of the population at working age (15-64) than any time in more than a generation.

For plays on Australia's smart economic policy moving forward, I like the iShares MSCI Australia Index Fund ETF (NYSE:EWA), which has consistently doubled the Dow and logged nearly a 200% gain in the past five years. This ETF doesn't just cherry-pick energy and commodity plays. Instead, banks and retail stocks make up the bulk of EWA's key holdings, leaving the volatility of commodities behind.

And for a pure play on the Aussie dollar, check out the CurrencyShares Australian Dollar Trust (AMEX:FXA), an ETF that makes it easy for you to benefit from Australia's national financial health as the U.S. dollar gets pummeled.

However you play it, the Red Book makes it clear that you can't afford to stay out of Australia's ongoing growth story.

From: http://seekingalpha.com/article/63112-australian-anti-inflation-stocks