I worked in the Pilbara for one of the big miners in an 'automated' laboratory for a couple of years after graduating. AMA.
Couple of quick points for anyone tempted to make the move: As an employee you get to interact with some pretty amazing tech, but most of it is created by other firms. Direct employees typically end up operating, maintaining and fixing things when they break. It's a great place to get hands on experience solving problems under time pressure. If you want to work heavily in the code base of automated robots/ trucks / trains, find a firm that does the contracting work to work for.
Secondly, don't do it just for the money, the job becomes your life. The article wasn't really about employee benefits but they did mention a salary without saying exactly what it was for.
Michael, after 35 years earns 145,000 p.a. including superannuation.A typical truck driver on a FIFO (fly in fly out) roster will fly up to the mine and work 7 12.5 hour day shifts, followed by 7 12.5 hour night shifts, and then fly back to the city to recover for a week (6 1/2 days). This is repeated about 17 times a year.
14days * 12.5hour shift * 17 stints = 2975 hours. $145, 000 / 2975 = approx AU$48 dollars per hour, including super.
For that 20 year old on $92,000 it works out about $31 an hour, assuming the same roster. getting that job is not exactly easy either.
The money is not bad, especially since you have nowhere to spend it on while at the mine, but the guys who do this long term have it in their blood and live to work at the mine.
Your social and dating life ( if you have one at all) gets fairly messed up on that roster, and fatigue from night shift can get to you after awhile.
Fun Fact: The mines tend to prefer female truck drivers as they are more gentle on the equipment.
The geopolitics are interesting, of course, but this was really interesting to me:
He now oversees a test project of driverless Komatsu trucks that cart out 300 tons at a time, moving 80,000 tons over two 12-hour shifts. When the drilling is good, he says, they can shift 120,000 tons in 24 hours. Without drivers, the trucks are more reliable, with radar sensors stopping them from crashing. They roll 24 hours a day.
some drill rigs are semiautonomous, with GPS. The control systems were priced around $120k the last time I looked about 10 years ago. Any HN'ers want to disrupt this? I know some drillers out this way.
If you wanted to disrupt this, I suspect you don't want to make it cheaper (the mining companies have plenty of money), but to do a better job somehow.
This is called "Precision agriculture". Tractors and equipment enabled with this can throw the precise amount of fertilizer/seeds at specific points. Probably quite a hot topic in farming... Go to any farming show and you will see this.
The first page of the article uses various journalistic tricks to make the Australians seem like nice homely people, while the Chinese seem like faceless big corporations.
I don't think it's that simple. Consider, for example, that the Australian Prime Minister, Kevin Rudd, lost his leadership largely because mining companies were upset by his plan to tax them further. From the article:
Economic and diplomatic advances, however, have not
fueled a warm national glow. Australia's proposal to
increase taxes on mining became a national issue,
precipitating a three-month barrage of anti-government
campaigns paid for by the mining industry, which in part
led to the removal in June of Prime Minister Kevin Rudd,
a Chinese-speaking former diplomat. In the August federal
election, the ruling center-left Australian Labor Party
lost its majority due in large part to massive swings
against it in the resource-rich states of Western
Australia and Queensland. Supporters of the tax argue
that the resources are not coming back and that Australia
should participate more fully in the outsize profits.
Those against include the mine operators and the many who
work in the mines; mining salaries are, on average,
Australia's highest, according to the Australian Bureau
of Statistics.
There were other factors at work with Rudd's removal. The mining tax was the last act in a long play of dropping promises, reneging on commitments and policy backflips.
The mining tax was a disaster and, in it's original form, was reverse nationalism by stealth. The government was going to tax profits above 6% with a 40% 'super tax' - terminology straight from a Marxist script. They were then going to reimburse Miners for losses on projects. In reality, with the government participating in 40% of the profits and 40% of the losses, it was a part-nationalisation by stealth.
The reason the mining tax was so rejected, particularly by the mining states, was that it was to replace state-based mining royalties with a Federal mining tax. So instead of individual states receiving royalties for mineral wealth - as per the constitution, the tax money would be funnelled to the Federal government, which would then have power over where it was spent. The mineral states stood to lose power over their own revenues, and the non-mining states stood to gain income from activities that took place entirely outside their borders.
The tax was beloved by pro-government tax-raising types and lovers of economic theory and hated by pretty much everyone else.
> The tax was beloved by pro-government tax-raising types and lovers of economic theory and hated by pretty much everyone else.
From a 'web startup' point of view I can tell you it seemed like a lifeline to have some downward pressure on the aussie dollar (as this tax did) as well as a small decrease in tax rates. As mining heats up it becomes more difficult to operate any other export business because of increased exchange rates and pressure on wages. The danger is that we will become over-reliant on mining as it tends to squeeze out other export industries.
I'm in the same boat as you - the high AUD is killing my profitability - 30% revenue fall in 2 years. However, I don't condone this type of government action just to make my life easier. Continued foreign investment in high risk mining activities is good for the country, and this was going to stop it.
If anything was to be done then the state-based mining royalties should have had some component to adjust with the price of the underlying ore.
> I don't condone this type of government action just to make my life easier
It is certainly easy to have one's opinions shaped by personal circumstances. But do you really think that Australia's long term future will be best served by relying on our minerals rather than our minds? It's like the economy is telling us 'this information economy stuff is all rather nice but the best thing you could be doing now is figuring out how to find and extract minerals from the ground'. I don't happen to agree but could you honestly recommend a comp sci degree over metallurgy to a financially ambitious school leaver?
A heavy reliance on minerals and therefore on our relationship with China seems fraught with danger. Politically speaking, mining requires 'stability' where as the information economy seems to require democracy and freedom. All income is not equal.
> Continued foreign investment in high risk mining activities is good for the country, and this was going to stop it.
It seems to me that the value of the minerals is not in danger of disappearing any time soon. So I don't really see the frantic need for us to sell it as soon as it can be economically extracted. Are we really so badly off that we need the money as soon as we can get it? Unemployment is 5%. To me the danger is that are we becoming so addicted to this revenue source that when our dealer stops supplying we won't be able to cope.
> If anything was to be done then the state-based mining royalties should have had some component to adjust with the price of the underlying ore.
You must be from WA :) Seriously though I'm not sure about the best mechanism but I think this is a situation where the pure free market could become a tragedy of the commons.
No, I'm not from WA and I don't have anything to do with mining.
I do think Australias long term future is best served by minerals at this point. There's no way of knowing what the future holds, best to bank as much now while the price is good. Yes, it holds some risk over the geopolitical situation, but you can't get rid of that.
Digging up minerals and selling them now puts Australia to work. drives down the Current Account deficit, allows us all to enjoy a higher standard of living. Put simply, Australia has comparative advantage in minerals mining so we should maximise this to the benefit of all. Unemployment is 5% because of the mining, not despite the mining.
It's not an either/or question on mining/information technology. There's plenty of room for both. Australia can lead the world in minerals, and mineral extraction technology. Australia has already built up world class mining companies that now invest internationally. Long may that continue - with a stable political climate, well developed capital markets and a home-grown skills and technology base, there's no reason why Australian miners can't be major players in worldwide resource extraction for centuries to come, even if the iron ore in the Pilbara runs out. The world will never stop mining - never has, never will.
> best to bank as much now while the price is good
Possibly true but on the other hand who's to say the price won't go up further in the future? If we are going to consider the possibility of major price drops then shouldn't we model the impact on the economy? Would it make even more sense to make sure we aren't too reliant on that income and that we put some money aside for this eventuality?
> Unemployment is 5% because of the mining, not despite the mining.
I think that this is because the income from mining has allowed additional consumption and that consumption has supported employment.
> There's plenty of room for both. Australia can lead the world in minerals, and mineral extraction technology.
This sounds a pretty bland to me. Like the classic quite from a 'versatile' band "we play both types of music - Country AND Western". A vibrant modern economy requires a lot more than one sector. Beside that it doesn't take advantage of us being a modern westernized English-speaking nation. I've no doubt that China and India can produce highly skilled engineers and they will tend to want to use their own companies in new mining areas such as Africa. But when it comes to developing and designing information products for a western market they at a huge disadvantage.
Given the price rises, the shareholders would be better off if they just sat on their leases and paid a capital gain.
However, there are laws against that too.
I believe government policy needs to consider resources are finite. The tragedy of the commons that is being played out at the moment prices the resouces at $0 for the future generation. Just like the way we are pricing fisheries. It is insane.
There were other factors at work with Rudd's removal. The mining tax was the last act in a long play of dropping promises, reneging on commitments and policy backflips.
I agree with this
The mining tax was a disaster and, in it's original form, was reverse nationalism by stealth. The government was going to tax profits above 6% with a 40% 'super tax' - terminology straight from a Marxist script. They were then going to reimburse Miners for losses on projects. In reality, with the government participating in 40% of the profits and 40% of the losses, it was a part-nationalisation by stealth.
I agree the mining tax was a disaster, but it wasn't as bad as you are making out. The 40% thing was always something that got the headlines, but as you point out it isn't as simple as that because it would have reduced state based royalties.
The reason the mining tax was so rejected, particularly by the mining states, was that it was to replace state-based mining royalties with a Federal mining tax.
This is true.
The mineral states stood to lose power over their own revenues, and the non-mining states stood to gain income from activities that took place entirely outside their borders.
This is also true, but not necessarily a bad thing. Australian urban centres are a long, long way from the mines and some form of distribution probably makes sense.
The tax was beloved by pro-government tax-raising types and lovers of economic theory and hated by pretty much everyone else.
I don't think the tax was loved by anyone except Rudd's kitchen cabinet (and possibly only by 3 out of them too, judging from how quickly Gillard backed off it).
But the goals of the tax are perhaps more broadly backed. The original article touched on the fact that many mining companies avoid investing in the communities (as you'd expect from a profit making entity), and this has caused some issues. From the article:
One of the local councils in the Pilbara, Shire of Ashburton, recently refused permission to Rio Tinto to expand its camp around the Tom Price mine. Instead the company has been asked to invest in facilities that will remain after the mine is closed, to spend $247 million on housing, an air strip, and other infrastructure at the town of Pannawonica. This kind of investment, and the employing of locals, is the only move that is going to convince skeptics like Tony Wiltshire.
"We were at a town meeting the other day when a representative from a mining company said, 'Come on, we're all up here to make a dollar.' The locals in the room looked at each other and thought, 'What?' We live here. We can cope with the hot summers. We're here for the long term. We are actually better for the multinationals than the contractors they fly in and fly out. We just need them to wake up to the fact that they, and we, are all in it for the long haul."
The idea of the tax was to formalize this kind of investment. The way they went about it was probably the worst planned example of domestic politics in Australia since WW2, though!
The tax was a great idea, and only hated by mining companies and people who happened to believe everything they see on TV. Most other big mining countries (Canada, Brazil, etc...) are also thinking about bringing in a mining tax like this.
All Australians deserve returns from the investment, not just the tiny number of miners, who earn ridiculous sums of money.
I think he meant the tiny number of mining companies which make all the money - not the small number of employees who make good but not outrageous money.
If there was some broad-based, phased-in, mineral based price tax/royalty that went into an untouchable, national sovereign wealth fund, then I would agree in-principle to a resources rent tax.
As for the regional areas investment, I broadly think that the royalties-for-regions that has been implemented in WA is the way to increase regional investment.
What I do not agree with, is taxing the profits of one industry to fill up general revenue lost through bad government spending. You might support it now, but once the pattern is established, any industry might be next, just for doing too well. And that's a bad principle, and against all concepts of fairness and equity.
If the government wants more tax money from mining, then they should go to the miners and say 'where can we invest to lower your cost of capital, increase your productivity and increase your competitiveness on the world market'. You'd get double the amount of taxes from a doubling in size of the mining companies, and a lot more employment, to boot.
That's run-of-the-mill politics, corporatism, and special interests. It just means everyone is fighting to dip into profit from China. Prime minister Rudd was the casualty of socialism (sharing the profit wider) vs. corporatism (mining companies wanting to keep more). Replacing the profit from China with another source would have the same argument and same political fight.
The way the tax was presented it made it look like a punitive grab for mining companies profits. In the mining-rich states people started worrying about their jobs, and so the government changed Prime Minister and policy to try and head off the issue.
The fact that the Labor party screwed up pretty badly is kind of irrelevant to the idea that this is pretty straight forward international trade.
There are questions about how and how much of those profits should be spread around the country but I think that's pretty standard when there is an economic boom.
The only 2 options, really. We can trade with our fellows and produce total results that exceed our wildest dreams. Or we can take what we want and eventually be reduced to fighting over scraps.
The original title is best. It conveys the point that China is literally and physically getting Australia.
The country of Australia is an object decreasing in size and mass, due to the super-barge-2mile-long-train-robo-dumpster IV China has paid to stick in it.
It's pretty interesting to see how intertwined China is with Australia.
If you ever want to short China, your best bet is to target Australia which already has a bit of a property bubble, mining companies that are dependent on Chinese demand, and a currency that is buoyed by commodity prices.
If China is indeed a bubble (at least in the medium-term) Australia is going to experience a world of hurt.
If China is indeed a bubble (at least in the medium-term) Australia is going to experience a world of hurt.
Yes, but...
Australian is a commodity exporter. If China is a bubble, then yes, Australia will be hurt unless another country (US/India/Japan/Korea) picks up demand.
Also, it's not a property bubble when there are less houses than people who want them. Because the population growth rate in Australia is (comparatively) high for a developed country we have high intrinsic demand for new housing.
Do you realistically expect the US, Japan, or Korea to somehow fill the gap if China suddenly drops its demand for Australian commodities? India might pick up some of the slack, but I would bet against it.
Household debt / disposable income in Australia is 157% versus 133% for the US shortly before the financial crisis. That level of debt combined with ever increasing home prices should create a pretty volatile situation.
The debt ratios aren't directly comparable, because there are significant differences in the way housing finance is conducted in the two countries.
Unlike the US, Australian house loans are never non-recourse. This means that borrowers tend to continue to pay them off even if the notional value of the asset drops below that of the outstanding debt - they can't just mail the keys back to the bank and get out of the loan.
Most housing finance in Australia is provided through one of the "big 4" very large and heavily regulated banks - small regional banks are not a significant portion of the Australian market. Australian housing loans also tend to be variable-rate, as opposed to the fixed-rate that's the norm in the US.
Do you realistically expect the US, Japan, or Korea to somehow fill the gap if China suddenly drops its demand for Australian commodities?
Probably not, but it depends. If you think the "China bubble" is because of Chinese domestic demand (ie, construction in China) then it will be hard to replace. If you think it is because of Chinese exports then it's possible another country could substitute.
Personally I reject the idea of a Chinese bubble altogether.
Household debt / disposable income in Australia is 157% versus 133% for the US shortly before the financial crisis.
It would be great if that was lower, but there are reasons for it. It's mainly because of high house prices. Unlike the US we don't have a housing bubble, because of our increasing population.
Yeah, but if the average Australian owes 1.6 times their annual salary, and house prices are 6X income, and they also have 2 years income locked into superannuation for their retirement (go boomers!), then things could go bad. Ask an American, English, Irish, Greek, Icelandic, or Japanese poster.
I don't understand what you are saying, but it seems to me you are confusing cause and effect.
Yeah, but if the average Australian owes 1.6 times their annual salary, and house prices are 6X income, and they also have 2 years income locked into superannuation for their retirement (go boomers!), then things could go bad
Yes, if you have a high level of debt and things go wrong then it's not a great place to be. But there needs to be something else to make things "go bad", and for it to be a significant problem it needs to happen quickly, before people can adjust their debt levels based on economic signals like an increasing unemployment rate.
A very sudden collapse in commodity demand from China could cause a crisis like that, but a sudden drop like that seems unlikely to me. (If you disagree, explain what you think happens in China to cause such a rapid change)
A more likely scenario seems to be a slow decrease in demand, occurring over many years. A slow slowdown in demand allows people to change their debt levels, and while individuals may have problems it is unlikely to cause a huge crisis beyond a higher unemployment rate.
Given Australia got through the biggest financial crisis since the 1920's in pretty good shape I think automatic pessimism is unfounded.
The two things that could cause Chinese demand to collapse is war, or a people's revolution. Both will be very very bloody, and you would worry about other things than just property value or annual salaries.
Be afraid for your life, no matter where on the globe you live.
As a Taiwanese, I always feel that tension on the bead, that possibility that either World War 3 or the world's largest and bloodiest popular uprising would erupt before my eyes, perhaps on the back of some trivial issue, like denying China the ore that it wants.
The two things that could cause Chinese demand to collapse is war, or a people's revolution. Both will be very very bloody, and you would worry about other things than just property value or annual salaries.
Yes, that's my view too.
I don't think it's possible to hedge against the collapse of China. The effects are just so unpredictable.
For example, the traditional hedge in times of crisis is to move money into some kind of physical reserve, eg gold. Increasingly people try and hedge at a macro level by buying into gold producing companies instead of the physical object itself. Ironically, that would mean increased demand for Australia's Gold companies - so money might be reallocated from Australian iron ore companies like BHP Billion & Rio Tinto to Australian gold mining companies like umm..... BHP Billion & Rio Tinto.
Now I'm not saying this would happen - just making the point that it's difficult to predict exactly what would occur.
The claim Australia has a housing shortage is not backed up by any decent data (only by very weak / spurious data provided by the property industry itself), and represents a continuing effort by the property industry to explain away all the signs that clearly indicate Australia is in the midst of a massive asset bubble.
This is a presentation from Christopher Joye of Rismark, who has gained a lot of notoriety in Australia for being so bullish on Australian property.
Rismark sells an innovative shared-equity mortgage product. Shared-equity products require a rising housing market (as consistently advocated by Robertson) to be able to sell what is essentially a wholesale investment in residential property to investors.
So I wouldn't state he has a different view, rather his view is the view of the real estate industry, and as he has a vested interest in rationalizing away any bubble he wouldn't be the first analyst to turn to for unbiased, independent opinion.
People bearish on property would call him one of the leading property 'spruikers'. That he is continuing to claim there is a housing shortage in a recent presentation really confirms this.
Also, providing 'Source: Rismark' shouldn't really cut it for anyone wanting to get a clear picture of the Australian property bubble.
> While the asset prices (ie houses) keep increasing that level of debt remains serviceable.
Isn't this just another way of saying that the bubble is fine until it bursts?
You mentioned our increasing population but I thought both of our potential governments where now committed to a 'sustainable Australia' (A.K.A. reduced immigration).
The problem with commodities like iron is they mean-revert.
Iron ore traditionally sells for under 40 cents. It's over 160. There is a big price bubble, because there was such a large spike in demand (thus a shortage, so customers bid the price up).
But if demand drops, those mining trucks can't just sit idle. They run 24 hours a day, whether they are raking in money or just eking out a profit. The same goes for the 2 mile trains, container ships, loaders, and so on. Quantities won't drop a lot, so price will, right down to the cost of production. Once it hits the cost of production, companies will start scrapping trucks, but that's a very bad way to lower quantities.
But I don't think the demand is going to stop (for a significant period of time anyway).
While the Chinese standard of living keeps increasing their domestic demand is going to keep increasing.
If their standard of living stops increasing then you'd have to question the stability of their government. If that happens then the world economy is probably screwed anyway.
Also, it's not a property bubble when there are less houses than people who want them. Because the population growth rate in Australia is (comparatively) high for a developed country we have high intrinsic demand for new housing.
It is quite simply a myth that there is a housing shortage in Australia.
This idea has been conceived and perpetuated by vested interests in the property market in Australia, particularly the Housing Industry Association (HIA). A recent article does a good job of exposing this:"Housing industry's missing persons report pure fiction" http://is.gd/eXZT5
It's not the first time this kind of tactic has been applied either: in the lead up to the property crashes of the US and UK the press ran numerous stories about housing shortages. These quickly turned to stories of housing gluts after the bubble popped.
Look to the Australian census data of 2001 and 2006 and you'll see we've been building at an increased rate, and have an increasing number of empty houses on the books (around 800 000 in 2006).
I don't see how China's demand for commodities could be a bubble.
They are building in huge volumes, but they have a huge volume of people. There is a middle class developing. Check out Hans Rosling's talks about it.
There may be a temporary bubble in the stock market, but China is undergoing an incredible shift towards becoming North American in every way. Beijing is the best example of this - the entire city has been bulldozed and redeveloped in a North American big box way. Shanghai is even further 'ahead'.
Traditionally Chinese have been very conservative with spending, preventing quick economic growth. Credit cards are almost non-existent. You pre-pay your bills, even electricity! But for some reason - perhaps the Internets media influence, perhaps the one child policy, people are now spending money quickly. Starbucks is extremely popular and more expensive than in Toronto, NYC or SF! For the price of a coffee you could easily get a great meal with a few drinks, yet coffee shops are filled.
If all of it is a bubble - it is so firmly entrenched at ground level that the momentum of this bubble will burst through and last for decades. New industries are developing rapidly. The insurance industry was almost non-existent a decade ago, and is growing quickly in different ways there.
One thing is part of what is fuels the growth is international companies spending a lot of money trying to establish new business in China. These companies are risking money and bringing expertise into a really unknown market and often losing money. China in the end benefits as they just sit their with their vast market and allow foreign companies to try to create new industries. If anything starts doing really well, the government could always regulate that industry and take it over themselves.
I don't see anything stopping both China and India both developing a large middle class. That will snowball growth for decades. Premium brands will likely dominate - these folks want iPhones and Mercedes.
I think this Australian iron ore example is just the beginning of the scale at which we will see commodities shifting to China. I expect timber to happen at an enormous scale as their foresting practices seem quite unsustainable.
The first problem that China has right now is that government policy has made it easier to bring money in than to take it out. This has caused a significant asset bubble. If that asset bubble pops, it will be painful. That's exactly what happened to the Japanese juggernaut that everyone was scared about 20 years ago.
The longer term problems are demographic. The one-child policy means that the upcoming generation is smaller than the previous. Their work-force will soon be shrinking. Furthermore many parents chose to abort girls to make their one child a son. But a generation with a significant surplus of men is bound to have interesting social problems.
If I had to bet, I'd bet that 30 years out we'll be hearing more about India than China.
30 years out we'll be hearing more about India than China
I have that bet on, and in good size
Everything we know about top-down vs. bottom-up design says that China is supposed to appear to be doing better than India, until eventually it suddenly becomes clear that it is not.
Most of what you are writing was true, like a year ago. Never forget that China develops at internet speeds. Here's an update as far as I can tell.
Credit-cards are very much existent right now, to the extent that I know people who got into nasty trouble with them. That's a thing of the last year or so.
Overall credit is a lot easier to get now, which makes the real estate market feel pretty bubbly, but there does seem to be a never-ending demand for new property. First reason is that in the cities you don't marry without an appartment. Second reason is that people are still moving in from the countryside & those that get lucky end up in a position to buy after a few years.
I thought Starbucks was 'out' and the Coffee Bean was 'in' last time I visited. Same story that happened with McDonalds a few years ago: a western brand gets popular just because it is 'new', then people realize that they are eating/drinking crap & come up with their own alternative. Ever noticed how western fast-food joints sinicize (is that a word) their menus? That's not about concessions to the chinese tastes, it's about survival.
You're totally right on the copycat factor though & I actually think that's a great asset of chinese entrepreneurialism. It's a cut-throat world with lots of competition & they know how to stack the cards to their benefit. And why should they not? Unlike the western world they have a massive internal market to develop and cherry-picking 'the best from the west', then copying is a very valid strategy.
There's lots of cash to be made in luxury products I think. Just like the Japanese developed a taste for expensive watches 2 decades ago, I see the same happening in China. Over here in Switzerland jewellers / watchmakers are now openly catering to the asian market. I was in Luzern last weekend and just for fun started looking at the customers in the watch shops: almost all asian faces. And that makes sense, because most of my Chinese relatives will smuggle back a multiple of the allowed $10K worth of watches/jewellery every single time they visit europe. And those people are by no means 'fuck-you' rich in the Chinese sense of the word.
Credit cards are in existence now, but what percentage of people own one and use it regularly? The credit limits they give you are laughable - like 80$ US. Like everything else you need to prepay to use it.
I think you are discussing the fringe edge of China. Don't forget that there are a billion people there. A few rich folks are starting to get credit cards over the last YEAR. But imagine if 200 million middle class new customers get them this decade.
The difficulty moving money out of the country is an interesting problem. It is no doubt feeding the bubble, as you suggest almost everyone of modest means manages to get a substantial amount of money out of the country regularly.
It is also interesting to see the speed at which China develops. They build entire blocks of condo towers at once. They moved the steel factory of how many hundred thousand workers completely out of the city. Nowhere else has the liberty of wiping the old out and moving forward in the same way they do. It does seem that it does come with the perils of moving too fast and wiping out historical and natural progressions.
In building http://Newsley.com, I've been reading a lot about the Chinese economy, and the potential bubble there over the last 9 months.
No hard numbers, I just know this must be true, because my gut tells me it is true. #tongue_in_cheek
My gut tells me that 10% GDP growth year on year is simply not sustainable over the long term for any country. There will be an economic contraction at some point. I'm also very leery of the lack of transparency in the economic numbers that are coming out of China. It's hard to build a capitalistic society without financial transparency. Perhaps China will pull it off, I have my doubts.
I'm building results pages for Newsley, before I have the search piece of the site built out. But, as I eat my own dog food, I find these results pages to be rather interesting for drilling down into specific topics.
The key issue for me here is that Australia's not getting the same infrastructure projects that China's African resource partners are getting (eg roads, schools, hospitals.) Australia's probably getting more money instead.
For example: "Abuja — The Chinese government has concluded arrangements to spend about $50 billion on development of infrastructure in Nigeria through SINOSURE, the Export Credit Guarantee Agency of China." http://allafrica.com/stories/200803310705.html
Why would you think that Australia would have the same demand for basic infrastructure that Africa does, considering the relative economic positions of the vendors in each instance?
Unpredictability brings anxiety and hope in equal measure to the 8,000 Aborigines in the Pilbara, who hope their third-world living conditions might be raised by the China boom. Tony Wiltshire, an indigenous mechanic who runs a guild of Aboriginal businesses and tradesmen in the Pilbara, says the mining boom's benefits could sidestep the local population.
I know this is not exactly a new phenomenon for those who live in mining areas (northwestern Canada, Australia, etc.) but I found it interesting when going on a trip in the Outback that 3 of the men with us were miners (one from Canada, one from the UK, one from Australia) who do the tough mining tour of duty for part of the year and then travel for fun the rest of the year, rinse repeat.
It's split across 5 pages (more page views anyone?) and meanders through largely meaningless anecdotes without ever really getting to the point.
The whole stream of anecdotes style of journalism is one I abhor. It's lazy, can easily be abused (you can use anecdotes to prove anything) and is often just cheap theatre to try and humanize something otherwise without substance.
Blame Malcolm Gladwell and Chris Anderson. Those guys sold a ton of their books (airport books) and now their style is creeping into journalism.
The stories are not used as supporting evidence, references or as facts to build an overall conclusion to some new idea - but rather as infotainment, where the anecdotes are the whole point of the story and there is no real firm conclusion or over-arching theme that is proven.
The anecdotes are easy to digest and repeat, which helps not smart people sound smart when they tell the same stories to a group of people.
I'm not sure of what the point this article is trying to raise? Is it that Australia is not in recession? Is it some sort of suggestion of xenophobia on the part of Australians?
Australians have all seen this before in the 1980's when the Japanese were buying real estate, companies and generally splashing cash around. I think this time around most people are more relaxed about it, and a feeling of 'make hay while the sun shines' is probably the most prevalent.
While the imagery of large parts of Australia being dug up forever are evocative, it's not very realistic for anyone who has visited this part of the world to think it's all going to run out soon. It's a massive, virtually uninhabited area and the ground you walk on is literally red from iron ore.
If only we were actually making some hay, or put some of what we do make in the barn instead of gorging on it. I think a better analogy is "let's party while the champagne is flowing".
Instead of long term investments in permanent infrastructure and educating our citizens we are largely just padding out the middle class with spurious welfare benefits. That's almost worse than just throwing the money away because it is creating an enormous future liability and false expectation among average folks.
I mostly agree with this. While I don't think we should increase mining profit taxes, I do think some of the mineral wealth should be locked away into a sovereign wealth fund - the type that can't be gotten at by sticky fingered politicians of any persuasion. The wealth fund could be used for apolitical purposes, like education funding (scholarships?), national dual lane freeway construction, large-scale water projects. But only after it reached critical mass and was throwing off a couple of billion per year in investment returns.
Actually wasn't the it called mining 'super' tax becuase it was to fund superannuation? I know there was to be some increase in funding but I'm actually not 100% sure because the govt did such a poor job of selling it.
Anyway I think this may be one of those cases where the XX cents we typically get back from each dollar the govt taxes could be worth it to slow the party down.
It was called the MSPT or Mining Super Profits Tax.
Super Profits is a Marxist term (don't know if Marx coined it, or it just became part of the canon) to reflect anything above a 'reasonable' rate of return. In this case it was set at the government bond rate. Which makes you question why any rational investor would invest money into a highly risky mining venture when they coudl get the same returns from government bonds. I suspect they thought they could kick off a nasty class war - which people seem to have forgotten now that Swan was muzzled by Gillard and Rudd deposed. But at the time Swan and Rudd were talking about 'evil foreign rich miners'. But it backfired with some good PR from the mining companies, and a higher level of awareness among the Australian people when someone is being deliberately obtuse.
It was sleight of hand to link super profits tax with superannuation. In reality the two have nothing to do with each other because employers pay for employee superannuation out of their bottom line. The only superannuation the government pays is for public service employees. The reason they did a poor job in selling it was because if you actually looked at the details, the tax and the superannuation actually had nothing to do with each other. Lindsay Tanner actually quoted as much before changing his tune to the party line.
>slow the party down.
Imagine how much you would be upset if they decided to start taxing you extra because they thought you were doing too well. It's the ultimate definition of unfair. The miners struggled for decades - have a period of prosperity and are whacked with extra taxes. That is not only unfair, it raises sovereign risk and ultimately reduces foreign investment. You don't improve the economy by knobbling your best performer.
> Imagine how much you would be upset if they decided to start taxing you extra because they thought you were doing too well. It's the ultimate definition of unfair.
Umm, have you ever noticed how people are actually taxed? It's called a "marginal" tax rate and it's a feature of just about every tax system in the world, precisely because it is considered a "fairer" system to have people who can afford to pay more share more of the tax burden.
One might even argue that the "super profits" tax is fairer than marginal tax rates because it takes account of the amount of capital you have deployed to achieve the result (to relate it back to people, if I have a family of 10 people to support I don't get a lower tax rate ... but a company with 10,000 people to achieve the same profit as one with 1000 people will get that taken into account).
I take it by those comments you've never actually invested any money? The number of people employed has zero to do with making decisions about investment returns. But that's been the problem all along - people with very little idea about how capital markets and mining investment works deciding they want some of the pie, and coming up with all types of justifications for it.
I'm not talking about marginal rates - I'm talking about - hey you! You're making too much money, I want some of that! Here's an extra 40% tax for you - no consultation, no transition period, no questions asked. Would you defend this tax if it was applied to technology startups because they made too much money?
> It was called the MSPT or Mining Super Profits Tax.
Fair enough
> It's the ultimate definition of unfair.
When you are using a non-renewable resource then what is 'fair' has to be balanced with the changing value of that resource.
> You don't improve the economy by knobbling your best performer.
You need to measure their performance with regards to the inherent value of the asset. If we started selling huge tracts of our land to another country then you could also say that 'land selling' was the best performing part of our economy but that would not be accounting for the capital loss involved.
> Actually wasn't the it called mining 'super' tax becuase it was to fund superannuation?
Hah! No. It was a "super profits" tax because it did not kick in unless a project was making a rate of return above 5 or 6 percent or so. So it only taxes "bonanza" profits and has no effect on companies that are making a "normal" rate of return.
As for superannuation - there was some sleight of hand as well. The increased super was to be paid by companies. This was then to be partially (but not fully) offset by dropping the company tax rate, which in turn was funded by the super profits tax. So yes, they were linked, but not nearly as directly as they wanted you to believe.
It's not an editorial, it's a well written news article. It's goal was to cover multiple points of view of a massive event without explicitly endorsing one of them as canon.
I have to agree with you. The title itself feels like the author's taking a biast stand that s/he wants to vent. But the article itself is completely indecisive. Almost as if the author wants to speak ill of Chinese hands in Australian soil, but can't.
Either way, I found the article's facts interesting. I don't think many people know the scale of these operations, not the history of similar events with the Japanese. Both of these were news to me.
In short, it was a plan to build a high-tech city in order to better integrate Australian-Japan relations. In the end, a complete farce, but at the time regular front-page news. It did expose an ugly side to foreign investment in Australia, but things are very much different now - probably as a direct result of nothing very much at all occuring from all the Japanese investment. Mostly the Japanese did their dough, went bankrupt and left behind some big shopping centres, resorts and golf courses which Australians of all colours continue to use and enjoy to this day.
A good companion would be the re-reading of the Micheal Crichton novel "Rising Sun" - written at the peak of the 'Japan to take over the world' thought bubble, before the Japan bubble popped.
They are in the middle of nowhere (unless you've been there you have no idea how isolated the Pilbara is), and the climate is less than ideal:
The climate of the Pilbara is semi-arid and arid, with high temperatures and low irregular rainfall that follows the summer cyclones. During the summer months, maximum temperatures exceed 32°C (90°F) almost every day, and temperatures in excess of 45°C (113°F) are not uncommon. The Pilbara town of Marble Bar set a world record of most consecutive days of maximum temperatures of 100 degrees Fahrenheit (37.8 degrees Celsius) or more, during a period of 160 such days from 31 October 1923 to 7 April 1924.[5]http://en.wikipedia.org/wiki/Pilbara
In the non-open cut mines, many jobs are underground and a lot of people don't seem to cope well with being 1km underground.
A few well-paid jobs don't create inflation on their own. The inflation rate remains a steady 3%.
Between the start of the mining boom to the onset of the global financial crisis:
annual price inflation in Perth averaged 4.0 per cent, compared to the national annual average of 3.3 per cent;
Perth rents increased by two-thirds more than the national average;
and Perth house prices grew by 14 per cent a year, almost triple the national average growth rate.http://www.pm.gov.au/node/6884
I'm not saying they're easy jobs but two weeks on one off with no expenses for the two weeks on makes for a lot of disposable income even without those salaries.
Inflation remains a steady 3% with a cash rate of 4.5% way above comparable economies, with a high chance of further raises. People not in the mining industry can't expect to compete with the salaries they're earning and the high interest rates and Australian dollar are hurting households and other exports.
Regarding the house price graph, I think you are being misled slightly by the scale.
If you magnified the 1978-1993 graph it would look very similar - a HUGE ramp up in the prices in the late 1980's, and then stagnant in the early 1990's.
Compare that to how the current graph looks: HUGE ramp up in 2003-2007, and then stagnant.
I agree with what you are saying about the inequalities of mining salaries and the problems with the crowding out effect. I think that contributes more to the stratification of society rather than inflation, though.
It's a free market for jobs. Anyone can choose to do it. There's plenty of people in IT making good salaries, but you don't hear about anyone trying to stop that. The age of the recipient is unrelated.
It might hurt for some, but worse would be some kind of intervention to prevent what you see as a problem. That would end up hurting all.
You see inflation, I see strength in the job market, a strong economy, a prosperous nation.
There is far more risk of inflation from continued government borrowings than from some people making good money in the mines.
The worst outcome would be to try and rein in the mining industry somehow. That would create all types of unintended consequences, all bad.
I was struck by this quote (in regards to Rio Tinto): Until last year, China was trying to buy more of the company
As far as I know "China" does not buy things. Their government, maybe. I'd like to know if a Chinese government entity or connected company was truly involved in this. If not, the reporter is speaking carelessly...
Exporting all your resources, particularly a staple like iron, seems like a bad plan for Australia in the long run. Particularly because it is a raw material.
"My total salary and superannuation is A$145,000 a year, and when I'm in the Pilbara I don't have to put my hand in my pocket. I have a house in the city and an investment property and a 1972 Falcon pickup. I couldn't have had this life without mining."
and devastating the environment (and human and animal health) with all the land-clearing, power consumption, water consumption, massive pollution and toxic waste that comes with this and connected industries.
Couple of quick points for anyone tempted to make the move: As an employee you get to interact with some pretty amazing tech, but most of it is created by other firms. Direct employees typically end up operating, maintaining and fixing things when they break. It's a great place to get hands on experience solving problems under time pressure. If you want to work heavily in the code base of automated robots/ trucks / trains, find a firm that does the contracting work to work for.
Secondly, don't do it just for the money, the job becomes your life. The article wasn't really about employee benefits but they did mention a salary without saying exactly what it was for.
Michael, after 35 years earns 145,000 p.a. including superannuation.A typical truck driver on a FIFO (fly in fly out) roster will fly up to the mine and work 7 12.5 hour day shifts, followed by 7 12.5 hour night shifts, and then fly back to the city to recover for a week (6 1/2 days). This is repeated about 17 times a year.
14days * 12.5hour shift * 17 stints = 2975 hours. $145, 000 / 2975 = approx AU$48 dollars per hour, including super. For that 20 year old on $92,000 it works out about $31 an hour, assuming the same roster. getting that job is not exactly easy either. The money is not bad, especially since you have nowhere to spend it on while at the mine, but the guys who do this long term have it in their blood and live to work at the mine.
Your social and dating life ( if you have one at all) gets fairly messed up on that roster, and fatigue from night shift can get to you after awhile.
Fun Fact: The mines tend to prefer female truck drivers as they are more gentle on the equipment.