earlyBird

28 Aug 2013, 09:10 AM

It's not hard to ensure steady jobs and a stable economy but you have to be prepared to put the economy and before the profits of your friends in big business. Something western governments are not prepared to do.

Housing will not save the economy, housing is consumption and economies cannot survive long with consumption as an engine and debt as the fuel. The solution is that we all need to take a drastic cut in lifestyle, clear out all the malinvestment, the bad housing loans, the white elephant under-river tunnels, collapse the economy enough to wipe out the debt and then we can begin again. No other option is viable at this late stage in the game. Except a War! Wars can fix all manner of economic woes, and fix them very fast.

skamy

28 Aug 2013, 10:12 AM

Nothing like a bit of doomsday spruiking to start the day.

foxbat101

28 Aug 2013, 11:09 AM

if we can just get interest rates down to zero, and we can borrow straight from the government.
Get the banks out of the way.
I mean what do you need a bank for if your government lends you the money straight up.
But wait a minute, no wait, if we all had a 3d printer at home we could print our own money, it would not matter how much a carton of beer or a house cost.
This is super intelligent.
I mean if the governments can print all the money they want and they work for us:)
Why don't we get them to print the money and send it straight to us???
Why spend 8 to 10 hours a day sweeping streets or flipping hamburgers.
We could all be gazillionairs.

i think i will move to Thailand. With my 3d printer.

Buy a condo in down town Bangkok for say $500,000 interest free. And live the dream.

In fact i would just give the vendor what ever they asked i would just print the money on my 3d printer.
A brave new world.
Are you ready???
Peter

Quote:

 

'Mining boom not over': Abbott

Opposition leader Tony Abbott has challenged the idea that the nation's long mining boom was over, even as the resource-reliant economy feels the pain of lower commodity prices and falling investment.

"This idea that the mining boom is over is wrong," Mr Abbott said in an interview with The Wall Street Journal. "The prices we're getting for our minerals are still very high by historical standards, and production is going up and up all the time."

The upbeat language from the leader of the Coalition, which opinion polls suggest is on track for a comfortable victory, is in stark contrast with that of Prime Minister Kevin Rudd, who has warned that the nation faces an economic crisis. Mr Rudd expects waning demand from China for resources exports such as coal and iron ore to curb economic growth and drive a slump in government revenue.

Australia now faces a delicate transition away from its reliance on the resources sector, as demand for commodities from China, its biggest trading partner, weakens.

The Reserve Bank of Australia lowered its benchmark cash rate to a record low of 2.5 per cent at the start of August, the eighth cut since late 2011 as it strives to spur non-mining sectors of the economy. The move was aimed at increasing consumer spending and also boosting the competitiveness of Australia's exports by exerting downward pressure on the Australian dollar. The bank has cut its growth forecasts and warned of an uptick in unemployment.

The aspiring prime minister said a recent correction in the Australian dollar had likely done a lot to ease pressure on struggling exporters such as manufacturers.

"It has come back quite considerably," he said. "I think at 90 US cents a lot of the pressure that was on exporters and import competitors has been relieved."

The local currency was trading at $US0.8966 on Tuesday. It hit a three-year low of $US0.8848 earlier this month on expectations the US Federal Reserve would begin to ease its massive bond-buying program, and amid signs of further slowing in China. The RBA has said the Aussie dollar remains high despite its 13 per cent drop from a peak of $US1.0599 reached in January.

Both Mr Abbott and Mr Rudd have been fighting it out in an election campaign that has focused strongly on which party would manage the economy better, a big concern among voters.

Australia managed to sidestep the global financial crisis without a recession thanks in large part to demand from Asia's quick-growing economies for bulk commodities. Mr Abbott said that appetite had yet to be diminished.

"China and countries like India are going to continue to have a massive demand for Australian resources providing we play our own cards right," he said.

According to Newspoll, Mr Abbott's Liberal Nationals hold a 53-47 lead over Labor under the two-party-preferred system, which if replicated on polling day would result in a comfortable victory.

In the interview, the opposition leader said that while his party welcomed foreign investment, he wanted to boost transparency around the activity of the nation's foreign investment watchdog, and that it was useful to scrutinise foreign state-back buying of Australian assets.

"We've always taken a somewhat different approach to investment by foreign governments and foreign sovereign funds, but again each case has to be judged on its merits," he said.

Read more: http://www.businessspectator.com.au/news/2013/8/28/industries/mining-boom-not-over-abbott

Quote:

 

Is Australia’s mining boom over?- Pete Wargent

July 28, 2013 by Pete Wargent

It’s a phrase we hear quite a lot at the moment, but is Australia’s mining boom over?

When people say that “the mining boom is over”, what they generally mean is that the dollar value of the construction of Australia’s mines, which has seen vast capital expenditure undertaken over recent years, is finally passing its peak.

The latest round of figures showed seasonally adjusted total capital expenditure in Australia of a huge $38.51 billion for the period Dec Quarter 2012 to March Quarter 2013. That is a truly massive figure in historic terms for Australia:

Graph: Total asset, total industry

Source: ABS

As you will see from the chart above, $38.5 billion is a staggering sum, and one which we could have only dreamed of just a few years ago. So in that sense, at least, the “mining boom” is not over.

However, as you will see clearly from the chart, total new capital expenditure has begun to fall, by a non-trivial 4.4% in the last quarter, and we might expect the total expenditure to continue falling in the coming months and years, as we can’t simply construct mines forever.

Therefore, these cumulative drops will start to represent a drag on GDP growth and the Reserve Bank will likely keep interest rates very low in order to stimulate the other areas of the economy.

What is interesting to note from the most recent capex surveys is that projected total capital expenditure figures may not drop off a cliff as feared. Instead, they forecast that the figures will plateau and drop more gradually:

Financial year actual and expected expenditure - Total Capital Expenditure

Source: ABS

And here you have it in words:

“Estimate 6 for total capital expenditure for 2012-13 is $163,018 million. Estimate 2 for total capital expenditure for 2013-14 is $156,467 million.”

A little lower for the 2014 financial year, but perhaps not disastrously so.

It is a similar story for mining only capital expenditure:

Financial year actual and expected expenditure – Mining Capital Expenditure

Financial year actual and expected expenditure - Mining Capital Expenditure

Source: ABS

And in words:

“Estimate 6 for Mining for 2012-13 is $98,268 million. Estimate 2 for Mining for 2013-14 is $101,897 million”.

A little disappointing, perhaps, given what ‘might have been’, because as you will see from the non-shaded bars it was once felt that the actual figures would ‘peak out’ some way higher than they now will.

But again, hardly a disaster for the 2014 financial year if mining capital expenditure holds at above $100,000 million.

Plateau or cliff?

Is this ‘plateau’ just wishful thinking? Will capital expenditure actually drop off a cliff and begin to punish our economy? In truth, we don’t really know yet and only time will tell.

As someone who used to prepare mining capex surveys and forecasts for the Australian Bureau of Statistics (ABS), one thing I can tell you with certainty is that they are as much an art as they are a science, particularly with regards to which periods projected expenditure will fall into.

Just as when forecasting GDP, the number of variables involved are too many to consider with a high level of accuracy.

It is worth noting that the ‘actual’ figures have sometimes been coming in lower than had been forecast, so we’d be wise to look at the ‘expected’ figures with a healthy level of scepticism.

From construction to production

The other point to make is that the mining boom to date has mainly been about the construction of mines.

Eventually, of course, the point of constructing a mining project is that it will subsequently begin churning out massive output which should fuel the next stage of the mining boom: the production phase.

There will be indeed be some wobbles in the interim. As a general rule it takes more people to build mines than it does to operate them, so we may see a spike in unemployment, which is another reason that low interest rates will prevail.

Commodity prices

Disappointingly for Australians, commodity prices have weakened from their peak:

RBA Index of Commodity Prices graph

One piece of good news is that the iron ore spot price has rebounded to above US $125/tonne.

And, better still, the Aussie dollar has thankfully at long last fallen from 106 US cents to just 90 cents, which means that in Aussie dollar terms the iron ore price is closer to A$140/tonne.

This is a darn sight healthier than the $60/tonne that some were forecasting in October 2012. A volatile commodity combined with a volatile currency…watch this space!

Australia is the world’s largest exporter of iron ore and forecasts a 14% increase in exports in the 2013-14 fiscal year.

Coal and iron ore exports have already boomed over recent years, increasing from $17.7 billion in 2001 to $110.9 billion in 2011, a sixfold increase.

In accounting terms, Australia will shift from investing in construction capital expenditure to generating revenues.

Summary

Overall, the capex figures in the charts above at this stage seem to imply that the economy will have a fair amount of time in which to rebalance itself as the dollar value of construction should not immediately plummet.

But we’ll have to keep a close on the data in coming months in order to be more certain about that.

In the meantime, keep watching the labour force employment figures and note whether the low interest rates begin to generate economic growth elsewhere in the economy in the coming months.

In particular, the RBA would like to see dwelling construction start picking up to follow a surge in approvals.

We’ve done well at building mines; now we need to build some houses.

Read more: http://propertyupdate.com.au/is-australias-mining-boom-over-pete-wargent/