Don't you think it would be nice if more of what you are talking about actually stayed here, to be spent into the local economy instead of being funneled into the pockets of fat cats in foreign places.
Norway's resources are owned by Norway and they are so lucrative that large sums have to be stashed away in a sovereign wealth fund - not because a fully sovereign government actually needs the money but because if everything it made went into the economy, inflation would probably spiral out of control.
But this will never happen here, it's just wishful thinking on my part
It would be interesting to sit down and try and work it out Mike.
How many years is it likely to take for our LNG plants here at Gladstone for example, to have generated a net number of jobs in their operational life that exceeds the 10 000 taken to build it? How much of the profits will be re-invested back into the Australian economy against how much will be siphoned away?
My concern is this: Mining has for a very long time been a small contributer to jobs and the general economy. But over the past 10 years this has changed and it has become a significant player, especially when you take into account just how many jobs likely exist because of the flow-on through the economy rather than just those that are counted as directly employed by the sector.
Once mining goes back to making something more like it's normal contribution, what will be the main growth drivers that will take over? The ones we have long run on are either flat with not a huge amount more ammo left to stimulate them (maybe one last good burst) or are politically out of vogue.
Of course it is better if we get more money to stay in this nation, but due to politics and voters this will not happen at least for awhile.
As for construction yes it has its benefits but it is limited. Short time span, much of the items bought for construction are purchased over seas. The RBA even admitted recently it over estimated the impact of the mining construction boom and made mistakes raising interest rates to high in 2010/11. We just don't get the economic benefit flow through as much as we thought we would. The data proves this which you can find at the RBA, ABS.
The high wage jobs and the long term operation of a plant/mine has far more economic benefit then construction. The Government gains in revenue from profits from the exports and company taxes over time. It gains from increase long term employment in income taxes. The overall economy gains buy increased spending due to long term secure jobs.
The short term impact, yes less jobs needed and those workers will move on to other areas or other sectors if no jobs exists. If was only a few years ago we had huge shortages of labour, workers reskilled or moved to Australia, FIFO. People will move again to where work exists or retrain, or go else where. That still leaves a lot of jobs over decades that remain behind which in turn generate more jobs in the broader economy.
It will be painful, but not as painful as some here expect. The total mining and mining construction sector is just 6% of GDP and 2% of the work force. Only a fraction of that will lose jobs and move on. So we are not talking huge numbers when compared to the size of the economy. It slow us down, it depends on how well the rest of the economy does over the coming years to minimise the impact and allow the economy to rebalances away from investment like it was pre 2009/10.
You recall the RBA raised interest rates after the GFC to crunch the rest of the economy to make economic space for the construction boom. Meaning the RBA wanting to reduce other sectors of the economy by increasing rates to keep inflation under control. Now it is trying to reinflate those other sectors that got crunches such as housing construction, services, consumer spending. The RBA crunched 94% of the economy to allow 6% to Boom. Now it wants the other 94% to Boom while the 6% contracts.
Lets see if they get it right. Early signs are positive.
If house prices in China do correct you could see a couple of year hole in that scenario.
Not to mention the ever decreasing number of people required to dig it up. Thank automation for that one.
There is a strong possibility that Chinese demand will fall. Most of the ore imported goes into construction and from what I saw over there, I am pretty sure they can't keep up that pace of development for much longer (not forever, that's for sure).
The other consideration for mining production workers will be lower wages as the big miners look to cut costs. It doesn't take many redundancies to scare the remainder into accepting whatever pay deals they are offered.
Matthew, 30 Jan 2016, 09:21 AM Your simplistic view is so flawed it is not worth debating. The current oversupply will be swallowed in 12 months. By the time dumb shits like you realise this prices will already be rising.
We or the rest of the world have not built anywhere near the required amounts to bring most of Asia up to our living standards.
Some smart people a lot smarter then you or I have calculated that it would require the resources of 3 planet earths to bring all of China up to our living standard that we enjoy today.
So as Asia gets richer and we are only in the early stages of Asia's rise resources will become more and more scarce. Australia let alone the rest of the world will lack the supply to feed the demand.
So you are trying to tell us, that a mine that operates for 30-50 years has less economic benefit in terms of jobs and economic growth then a construction project over a few years.
Time to go back to school and study economics 101. The mining industry is large, just ask the RBA or ABS.
Mining including mining construction account for 6% of GDP and 2% of Australia's workforce.
So as mining investment slows it will certainly have an impact.
However we only need a fraction of an increase in the remaining 94% of the economy and 98% of the work force to counter this decline.
It is a challenge but hardly a challenge we cannot meet.
What makes you think all of Asia will one day equal our living standard? Do you think that is in their governmnts interest?
Whenever you have an argument with someone, there comes a moment where you must ask yourself, whatever your political persuasion, 'am I the Nazi?'
I think you are downplaying just how big mining investment has become over the decade to now. It was only after 2004 that it became a quite significant portion of GDP for the first time in quite a few generations, vastly overshadowing all of it's previous level of contribution.
Unless safety nets are in place, the fall from the very top of a ladder tends to be more painfull than the fall from one or two rungs up. We have fallen from the bottom rungs of the mining investment ladder before but have never done so from anything like this high - do you agree that this is a fact?
These enormous projects represent a very large, continuous pump feed of $$$ into the economy - one that has been more or less constantly increasing in volume for a decade. Unless somethig changes quite dramatically, over the next few years that torrent will slow to a relative trickle (it will not fall to actual zero of course).
Can you explain why you do not see the loss of such a large flow of spending as a likely problem? What do you forsee replacing it in order to achive a "smooth baton change"? The bulk of mining profits from the actual export of our dirt and gas belong to someone outside this country. Governments will rake back some taxes and royalties from it but they are not of an expansionary mindset and are unlikely greatly increase their social spending in response. Private credit growth is flat and there may be as little as 100 - 150 bp of ammunion left in the interest rate gun.
So what powerful growth drivers do you see taking over? Government deficit spending? - pretty unlikely at this stage. The only significant one I see likely at present is the possibility of the RBA running a ZIRP. That might help for a while but what then?
One day, government deficit spending will be an accepted driver of growth again. But they will resist all the way, consequences be damned.
Lef-tee,
All I am saying here is two things:
- the commodity cycle will at some stage continue its upward trend for at least the next decade; and
- we didn't have a construction bust, the only busting that happened was all the major construction contractors Project Directors balls by their various boards as all of these major contracts have came in late. They should have been finished much earlier.
Australia and the world are looking at a sustained increase in demand for almost everything for decades to come as the largest population in Human history moves from poverty/poor to the middle class, educated and enjoys a quality of life similar to our own.
The most likely scenario is that our standard of living will drop to something halfway between what we have now and what the Chinese have now. Our population will increase over time, our homes will get smaller, rich Chinese people will own our best property and buy our best produce.
Our wages will fall in order to remain competitive and theirs will rise. There is not enough stuff in the world for everybody to have a 'western" lifestyle and the wealthy Chinese and Indians are already buying our lifestyle from us from right under our noses.
Matthew, 30 Jan 2016, 09:21 AM Your simplistic view is so flawed it is not worth debating. The current oversupply will be swallowed in 12 months. By the time dumb shits like you realise this prices will already be rising.
So you are trying to tell us, that a mine that operates for 30-50 years has less economic benefit in terms of jobs and economic growth then a construction project over a few years. ----------
Mining including mining construction account for 6% of GDP and 2% of Australia's workforce.
So as mining investment slows it will certainly have an impact.
However we only need a fraction of an increase in the remaining 94% of the economy and 98% of the work force to counter this decline.
It is a challenge but hardly a challenge we cannot meet.
This is the nut of it.
The RBA commented that it was fortuitous that the rest of the economy had been weak during the peak of the mining investment boom as it can easily expand to compensate losses to GDP from the completion of these projects.
It is just a bear myth that falling investment will lead to major problems in the economy, it won't.
Here are another two good news stories for big Perth based companies
Definition of a doom and gloomer from 1993 The last camp is made up of the doom-and-gloomers. Their slogan is "it's the end of the world as we know it". Right now they are convinced that debt is the evil responsible for all our economic woes and must be eliminated at all cost. Many doom-and-gloomers believe that unprecedented debt levels mean that we are on the precipice of a worse crisis than the Great Depression. The doom-and-gloomers hang on the latest series of negative economic data.
- we didn't have a construction bust, the only busting that happened was all the major construction contractors Project Directors balls by their various boards as all of these major contracts have came in late. They should have been finished much earlier.
Gina Rinehart is giving the big US companies like Chevron a lesson in constructing in Australia. Roy Hill is going great guns it seems.
Definition of a doom and gloomer from 1993 The last camp is made up of the doom-and-gloomers. Their slogan is "it's the end of the world as we know it". Right now they are convinced that debt is the evil responsible for all our economic woes and must be eliminated at all cost. Many doom-and-gloomers believe that unprecedented debt levels mean that we are on the precipice of a worse crisis than the Great Depression. The doom-and-gloomers hang on the latest series of negative economic data.
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