No peace-time Prime Minister in Australia’s history has faced the challenge now facing Tony Abbott.
I do not think the Australian nation, treasury or the cabinet understands the magnitude of what is going to happen. The share and currency markets are just starting to get a whiff of what is ahead.
Until now, Australia has seen developments in China and the US as the key to our future, and while that remains partly true, we are about to undergo a domestic upheaval of unprecedented proportions.
Four enormous tidal waves are coming towards us not so much in calendar 2014 but in 2015 and especially in 2016 (the election year).
The biggest wave is the decline in the mining investment boom. Leaving aside maintenance and normal capital expenditure mining investment rose from around 2 to 3 per cent of GDP to around 7 per cent. It looks like falling back to its traditional levels as the election approaches. We are looking at 70 per cent size reductions in a countless number of contractors. Many will disappear. Remember this will not be apparent in the 2014 economic figures because there is still a lot of mining investment work to do.
At the same time as the mining investment collapse – 2015 and 2016 – we are going to see a second wave. Higher gas and power costs. The price of gas will double in eastern states – if it is available. Because the raw material is only part of the cost in the retail sector, the rise to consumers will be much less. But in industry, where the gas raw material is a bigger slice of the cost, the effect will be to shut many plants.
And it looks like there are more power price rises in the pipeline.
The abolition of the carbon tax, assuming it can get through the Senate, will help and is a clear positive and sensible reaction to these energy developments in our second tidal wave.
But given the total magnitude of what is taking place, carbon tax abolition will not have the stimulus that would have normally followed.
Our third tidal wave is the rise in retail shift allowances and penalty rates, which will slash employment in our second largest employment industry (Australia faces a humiliating retail calamity, November 12).
Our fourth wave is the proposed public service reductions.
These are enormous developments in any economy, and they will all happen in the same two years. Abbott has developed two clear plans to respond to them.
The first plan is to boost infrastructure and lower government regulation – both of which will boost employment and are good moves.
But the second plan has no precedent in any country facing the power of these four tidal waves.
Festering within the Coalition for decades is the deep belief that the motor industry should be shut, given that the only way in can be competitive when the Australian dollar is above 80 to 85 US cents is government subsidies.
That was certainly a correct policy as we headed into the mining investment boom. And once we have adjusted the economy for the end of the mining investment boom and the four other tidal waves it also represents correct policy.
But in 2013 it becomes a fifth tidal wave equal in power to both mining investment and retail. And the motor industry tidal wave hits Australia at the same time as the other four.
But we have a majority in cabinet that believe, with a passion, that 2016 is just the time to hit the economy, that Australia needs to be taught a lesson and the labour force requires a good cleansing. So as a deliberate policy they are determined to abandon the previous government’s deal to save the motor industry at least until 2022.
So in 2015 and 2016 we will see at least 350,000 jobs lost in mining investment, motor, retail and the public service. My guess it that job losses will go close to 500,000.
In fairness, there is no doubt that the minister for industry, Ian Macfarlane, fully understands the implications of the five tidal waves and is working feverishly to stop cabinet's motor carnage coming at the same time as the other blows (Macfarlane's plan to save the car industry, November 28).
But clearly the more cavalier cabinet members can see the chance to shut down the industry and do not care about the timing or any other consequences.
Because most of the myriad of companies involved in the motor industry will not be able to pay retrenchment, the decision to shut down motor will cost the government more than $1 billion. Then add that to that the economic costs of the other four tidal waves.
I think Tony Abbott could have been a really great Australian prime minister but Australia has never before seen a prime minister act this way towards employment. It is good to see Bill Shorten will mix with world leaders at the Nelson Mandela memorial service.
I think Tony Abbott could have been a really great Australian prime minister but Australia has never before seen a prime minister act this way towards employment. It is good to see Bill Shorten will mix with world leaders at the Nelson Mandela memorial service.
Poor Tony got in at the worst time possible. I like him for being funny, but his head is really in a cloud.
Australia will not survive "free trade". It is facing economies which are much larger than it and they will gain the upper hand.
The next trick of our glorious banks will be to charge us a fee for using net bank!!! You are no longer customer, you are property!!!
I agree about no longer propping companies losing billions ie. motor industry. Okay it's going to be hard for some but he money should be spent On new sectors, research and training the young Aussies for the future.
the tidal wave is going to be more of a ripple, in the ocean.
Just keep telling yourself that.
Australia is different.
Boom without end.
Property acquisition as a topic was almost a national obsession. You couldn't even call it speculation as the buyers all presumed the price of property could only go up. That’s why we use the word obsession. Ordinary people were buying properties for their young children who had not even left school assuming they would not be able to afford property of their own when they left college- Klaus Regling on Ireland. Sound familiar?
The evidence of nearly 40 cycles in house prices for 17 OECD economies since 1970 shows that real house prices typically give up about 70 per cent of their rise in the subsequent fall, and that these falls occur slowly. Morgan Kelly:On the Likely Extent of Falls in Irish House Prices, 2007
the tidal wave is going to be more of a ripple, in the ocean.
500k job losses? That's like 1/10 of the work force. That's pretty damned big.
Quote:
I think Tony Abbott could have been a really great Australian prime minister but Australia has never before seen a prime minister act this way towards employment. It is good to see Bill Shorten will mix with world leaders at the Nelson Mandela memorial service.
Fark, everyone wants to write of Abbott straight away. He's only been in for 3 months.
stinkbug omosessuale Frank Castle is a liar and a criminal. He will often deliberately take people out of context and use straw man arguments. Frank finally and unintentionally gives it up and admits he got where he is, primarily via dumb luck! See here Property will be 50-70% off by 2016.
500k job losses? That's like 1/10 of the work force. That's pretty damned big.
Total workforce size is 11-12M, so 1/25th more like. Still a huge hit though if it were to occur. Of course, they get years of notice, redundancy etc, so lots just retire, others have time to re skill etc. so I doubt direct impact would be 500k.
Total workforce size is 11-12M, so 1/25th more like. Still a huge hit though if it were to occur. Of course, they get years of notice, redundancy etc, so lots just retire, others have time to re skill etc. so I doubt direct impact would be 500k.
Not exactly, about 7 million full time employee's and another 4 million part time casual.
2 million of the full time work for the government.
The next trick of our glorious banks will be to charge us a fee for using net bank!!! You are no longer customer, you are property!!!
Total workforce size is 11-12M, so 1/25th more like. Still a huge hit though if it were to occur. Of course, they get years of notice, redundancy etc, so lots just retire, others have time to re skill etc. so I doubt direct impact would be 500k.
Woops, maths fail. But it will be worse than that, because 500k unemployed leads to more unemployed because the unemployed don't spend so much.
Looks like there's going to be some massive tax rises in the near future. Aging population plus spastic dutch diseased economy. Not good.
Count du Monet
9 Dec 2013, 08:37 PM
2 million of the full time work for the government.
No shit, and probably the other 5 million work for the housing ponzi.
stinkbug omosessuale Frank Castle is a liar and a criminal. He will often deliberately take people out of context and use straw man arguments. Frank finally and unintentionally gives it up and admits he got where he is, primarily via dumb luck! See here Property will be 50-70% off by 2016.
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