Mike Smith keeps services hopium alive

By Leith van Onselen

ANZ chief, Mike Smith, has delivered more hopium on why services exports could save Australia from the commodities bust. From The AFR:

Services exports from Australia have already overtaken the minerals trade and have greater potential for long-term growth, a new study shows, providing an optimistic outlook for the economy despite the end of the commodities boom…

“An immense prize awaits Australia with the growth that is occurring on our doorstep. We believe that with a better understanding of the role of services, a sharper focus by business on the opportunity and a supportive public policy environment we can realise that prize,” it says.

ANZ chief executive Mike Smith said while launching the report: “If we want to participate in the global economy we have to be where the customers are, offering services in China, India and south-east Asia. We need Australian-headquartered companies present in the markets of their customers”.

…the study forecasts that by 2030 services exports can dominate and support more jobs than all other export sectors combined.

Ahh no, services exports have not overtaken minerals. Far from it. Here’s some of Houses & Holes’ post from yesterday, which debunked Smith’s view:

And here’s the reality of iron ore, coal and LNG versus services:

The blue lines are MB’s guess for the likely trajectory of monthly bulk commodity earnings as the Chinese structural adjustment away from commodity-intensive investment continues, iron ore heads for $30 dragging coking coal down with it, thermal coal enters structural crisis and the LNG glut prevents any offset. There is no way services (that is, tourism) or services plus agriculture can offset the bulk commodity downdraft in income terms.

QED.