10 steps to manufacturing annihilation

Poor, poor manufacturing. It’s on the ten steps to doom:

1. Resources boom drives up the dollar and crushes competitiveness.

2. Canberra consensus embraces manufacturing’s destruction in the name of “adjustment” towards greater resources output.

3. Australian Industry Group (AIG) adopts a genteel approach to defending its members from annihilation.

4. Ken Henry proposes byzantine resource rent tax structure, government guts it and throws itself on its own sword when challenged by big mining.

5. A resource rent tax, the one hope of helping manufacturing, becomes political poison.

6. Carbon tax debate completely overwhelms the real needed debate about the high dollar. Manufacturing unions join the farce, complaining about the tax.

7. Australian Industry Group continues its genteel approach to defending its members from annihilation.

8. As job losses mount, manufacturing “crisis” debate at last begins, on the eve of GFC II, far too late, and when the Australian dollar is set of tumble, which will kill the debate.

9. Fed will ultimately use QE3 to revive the sliding US economy and the Australian dollar will go to new highs late in 2012.

10. Manufacturing annihilated and the AIG disbanded.

Houses and Holes
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Comments

  1. Anybody who watched Australian Agenda yesterday, Paul Howes said massive job losses are coming in manufacturing. But still backed up the carbon tax saying his members have struck a deal with the Govt over compensation and would avoid job losses. Talk about schizophrenic thinking.

    • That’s because the impact of the carbon tax is minimal (compared with the impact of the strong dollar) and is absurdly over-compensated.

      Also, the carbon tax (if it happens) is 10 months away, while the dollar has been well above its long term average for more than two years now.

      • The bait and switch is astonishing – blame everything on a carbon tax that does not even exist yet !!

        • Its a political gift for Abbott and he’s lapping it up. The problem for him comes once he’s elected the carbon tax bogeyman will be no more, but all the problems of Dutch Disease will remain. Someone or something will have be demonised and my best guess it will be the miners. But as we know, Abbott is the champion of the miners defending them against the Great Big New Tax on mining.

          • I reckon Abbott is done for.

            The West is headed for recession.

            China will slow. We’ll be stimulating before long.

            You don’t change government to small spending Liberals in that environment. The election will be about job security not carbon.

            Abbott is buggered.

          • While we don’t want small spending Liberals (or anyone for that matter) in a recession, I highly doubt that the marginal seats see it that way.

            Abbott has painted Labor into a corner, and I know many, otherwise intelligent people who repeatedly sprout, “you can’t solve a debt problem with more debt”. It’s becoming a truism in the electorate.

            Swan must either deliver a surplus, or create angst amongst the electorate who are petrified that we will become the next Greece (not my thoughts – just saying what I see).

            There aren’t too many voters that understand the difference between MMT and Austrian economics 😉

            In other words Swan will be forced to take us into recession one way or the other, leaving Abbott to utter the immortal words, “it’s the economy, stupid”.

          • Pinguthepenguin

            Can someone explain to me why it is incorrect to say that you can’t solve debt with more debt? Doesn’t seem to be helping the US much.

          • @Pinguthepenguin

            Because with out government debt to sustain jobs, the country would enter a recession or depression, which would mean a collapse in tax revenue, which in turn would mean more debt than what they would’ve otherwise ended up with AND a very high unemployment.

            Also if planned properly, the government may be able to use the debt to build some infrastructures for bargain basement prices, and sell it for a profit when the market is back up (i.e. when the private sector have paid off their debt, or get rid of the debt some other way).

            What we don’t want is for government debt to go into speculative purposes, which is what got us into the mess in the first place.

            Summary – If government use the debt for good productive purposes, it will dig us out the mess very slowly. If the government use the debt for bad unproductive purposes, it will dig us deeper. And if the government does nothing, then we’ll fall deeper and have an unemployment problem on top of that.

          • Pinguthepenguin

            @Kevin

            “Summary – If government use the debt for good productive purposes, it will dig us out the mess very slowly. If the government use the debt for bad unproductive purposes, it will dig us deeper.”

            That is a pretty big if. Judging by past performance I am not too confident that anything good would come out of yet more gov stimulus here. Would most likely end up as more FHOG.

            🙁

          • I reckon Abbott is done for

            In the long term perhaps, but he’ll win the next election. Sadly for the Mad Monk it will be a good election to lose.

            Lets hope Malcolm come through the centre…

  2. love the blog – as someone who was not bright in maths and economics you all do a great job explaining the issues and the data.

    is it meant to be gentle/genteel or is gentile an economic term?

    James

  3. David

    You left out
    -Garnaut and the free traders influencing the dropping of tariffs to virtually zero with no negotiated concessions from trading partners
    -Productivity Commission policies under Scales which were virulently anti-manufacturing
    -influential commentators encouraging illegal dumping to exterminate manufacturers on the basis that consumeres (many supported by government largesse and expenditure) could obtain cheaper prices
    -continued attacks on small manufacturers set up as trusts to force them to marginal income tax rates without the advantage of the use of beneficiary company tax rates
    -a tax system which encourages speculation/investment in property rather than production

      • David

        There is such an economic concept called scale which none of Garnaut and his cheerleaders have ever considered (most of whom never manufactured anything exoept bulldust). Also the large competitors can sustain much lower prices for a long time to wipe out Australian manufacturers.

          • Disagree H&H.

            Surely in the modern world IP is the most mobile form of asset. Any IP advantage developed in Aus would rely on the benevolence of the owner not to manufacture in the most profitable environment.

            A stream of IP might be viable but difficult to achieve given our population size.

            I belive the future of the manufacturing sector relies in basing itself around our immobile sustainable compeditive advantages. Agriculture, forestry, minerals, gas, water (in some parts of the country), space and the like.

            Unfortunately manfacturing is still beholden to state governements, who are elected and hence the current system will continue.

        • Douglas,

          Are you basically making the Infant Industry Argument for protection of domestic manufacturing?

          http://en.wikipedia.org/wiki/Infant_industry_argument

          I agree with H&H about competing without barriers, and note that the AUD is a victim of a global quest to debase money.

          I also had an intereting email from a Swiss friend yesterday about the very prompt and active reforms happening to deal with the impact of a high CHF on small and medium size industries. I am awaiting more detail.

          • Cameron All I know is that we make an emulsion and if we try to export to China the tariff into China is 23%. If they export to Australia the tariff is 5%. This is what I refer to in that the lowering of tariff barriers was done with no concessions negotiated with trading partners. Simultaneously there was huge expansion of govt enterprise and a rampant property boom with comcomitant support enterprises. Is this a good outcome?- manufacturing on its knees and a Ponzi of govt and property expansion

          • Cameron

            BCA has an interesting overview of Switzerland today on their website. Unlike the RBA the SNB was so concerned about the queues of Swiss citizens crossing the border to shop in Germany that they intervened and managed to get the Swissie down about 10 %. Such queues are the equivalent of the 7+million people queuing per annum at Australian airports to travel and shop due to the ridiculous overvaluation of the $A but to the RBA this is of no concern as to the free trade mindset this is just another blowtorch to the belly of those inefficient and unproductive producers in Australia (and retailers).

  4. With 4 & 5.

    If you were ‘big mining’ you would challenge a massive new imposition that is announced without any consulation to your industry. The government stuffed up the rent tax bigtime by announcing it without talking to the mining industry first to get it on side.

    The Hawke government was able to get the Petroleum Rent Tax through in 1987 by talking to the industry for months before it was annouced formally. The Rudd/Gillard government did not do this.

    Also the Rudd/Gillard governemnt cherry picked the Henry report and ignored most of the recomendations.

    • Ok, How much consultation do you want with farmers before we let the miners dig a hole in the farmers backyard and pump it full of toxic sh!t in order to extract coal seam gas?

      • My view is you protect your food supply first. We won’t live long if we can’t eat food that’s safe to eat.

  5. Thanks for stating this:

    “9. Fed will ultimately use QE3 to revive the sliding US economy and the Australian dollar will go to new highs late in 2012.”

    Australian MSM or the government never acknowledge this issue, but in Brazil the politicians and MSM have the courage to state it and do something about it.

    • In Brazil the MSM and government acknowledged fairly early on that a strong currency actually has a downside. All we got here was cheerleading from the RBA, Treasury, government & opposition, and pretty much the entire economic commentariat apart from some nutty fringe blogger calling himself “Houses and Holes”.

      • The problem is MSM, and government don’t consider macro economics IMO. The only thing they know how to do is spin, but in the end, as we see the economy is damaged. They don’t take into account when industry is lost what are the wide ranging impacts.

  6. I’m confused, by “10 steps to manufacturing annihilation” are you suggesting that Dutch Disease might be real?

  7. The main problem is obviously an over-valued currency. I’d argue quite strongly about the priorities in fixing that problem..however not here.

    One important thing that is forgotten is the over-government, over-regulation, and over-taxation of anyone who employs people.

    As one who used to run a small manufacturing enterprise s part of my business it is just not worth the headaches. Government interferes with your business at every oppurtunity and Government has reached such a level that it is simply full of people sitting around working out how to interfere with any productive process. There is a total lack of common sense. There is a total lack of any understanding of the processes involved in just plain getting things done.
    Add to that more and more stupidity in the Workplace Health and Safety area, the risk of losing your business and your home because some minor Govt employee takes a set against you personally, or the Govt takes you to Court over an unfair dismissal case that is just ridiculous but they know they can break you with legal expenses. All these things DO happen.

    Now add in Payroll tax!!! What a stupid evil monstrosity this damned thing is. In NSW add in the ridiculous cost of Worker’s Compensation and costs of employing someone in NSW are 10% higher than other parts of Australia.

    It’s as if the whole country is being specifically designed so that smaller businesses cannot employ people. The stupidity of Government is endless

    • Law of unintended consequences (of democracy?) – Liberals went too far with WorkChoices and they got voted out. Labour went to the other extreme to please said voters. Try as you might, it will take years before we go back to WorkChoices.

  8. Here is something else that is stuffing up Australian Manufacturing. High land costs and cumbersome planning permission systems (which contributes to the high land cost).

    Read the (late 1990’s) McKinsey Institute Report on Productivity in the British Economy, and also “The Flow of Money” by William Fruth. After reading those 2 things, anyone with much intelligence should be pretty clear on what Australia is doing wrong, and what it should be doing to get this right.

    Margaret Thatcher’s serious failure, was in not tackling this factor. All her other reforms were seriously hampered in their beneficial effects, by Britain’s “Town and Country Planning Act”.

    • I should have said, it is doubly stupid to have these policy settings that so harm “manufacturing” because ultimately, “value added” is what an economy DEPENDS ON for wealth creation. I strongly urge everyone to read the references above: both Fruth and the McKinsey report.

  9. Lately I am entertaining the idea that:

    high dollar = weeding the weak = enhance productivity = lower inflation = lower rates = lower dollar

    It is supposed to be self-adjusting.
    And that’s supposed to be the advantage of a free traded currency.

    Personally I do not like the dollar at these levels, it does not help me. But it’s just another business challenge, like many others.

    • mb, I’d agree up to a point say about parity, but beyond that there is some real dammage occouring to some sectors.

      There is certainly some weeding / productivity enhancement that needs to occur. This existing in the sector as a ticking bomb, just waiting for a export boom / currency rise to occour.

      The government needs to ensure that once things return to the norm that manufacturing can recover. One of the biggest problems in the past has been the fact that its far harder in australia to start or restart an industrial operation (permitting, planning etc) than it is to close. Unlike mining, and agriculture the ability to put manufacturing operations on ‘care and maintenance’ is not there under australian regulation.

      • I agree with that, it’s never entirely back or white, but then the question is:

        what is the “fair” value of the Australia dollar?

        Maybe it has been excessively low in the last decade, creating the inflation problem we have today.

        Maybe a high dollar will finally stop salaries growing at 4% p.a. and will make houses more affordable for Australians. Maybe it will cause the recession “we have to have” after 20 years of uninterrupted growth.

        • Could always make the case that its been low since we moved to floating rates, and now is just a return to the norm.

          The high AUD is really just a symptom though, given pretty much all other inputs are traded internationally and energy is reasonably cheap in australia an arguement about a high AUD is really an argument about low productivity of local labour.

  10. Substitute iron ore with bananas and think about price rises. Are we finally becoming the banana republic? *boomtish*

    Also, how would a MRRT help manufacturing (step 5)? Not trying to argue, just can’t join the dots in my head. Short to medium term government assistance?

    • An SWF which is involved in buying up foreign assets has the so-called Sterilization effect on currency appreciation.
      .
      I don’t have a full understanding of this, so let me quote liberally from Wikipedia:
      .
      “A central bank can intervene on the foreign exchange markets to prevent currency appreciation by selling its own currency for foreign currency-denominated assets, thereby building up its foreign reserves as a happy side effect.”

  11. Douglas is spot on about a tax system that encourages speculation… if we didn’t have negative gearing there wouldn’t be this huge problem with housing unaffordability. Also, flawse is totally right about being regulated out of existance… every time I see those punitive Workcover “we’ll get you” ads directed towards employers I always think “Wow, no Workcover inspectors in China”.

    I’ve been really worried about the crash in manufacturing in this country in the last ten years… we’ve accelerated off a cliff and there’s virtually no interest from our politicians about it. My concern is that the car industry (for example) gets around six billion in handouts over the last ten years to keep making cars that nobody wants to buy anymore (Ford Falcon isn’t even in the top ten models any longer) while manufacturers like Kimberly Clark Australia (the only ones left who still make toilet paper and tissues in this country) are left to die and slow and painful death because of dumping of cheap/subsidised products from Indonesia.

    My question is: What the hell will do when the arse (inevitably) falls out of the mining boom? Put houses on boats for export?

  12. H&H I can only assume this post is a wind-up or you have abandoned your usual insight.

    1. Australia along with economies adopted the mantra of globalisation and free trade. Established a floating exchange rate and removed tariffs and protections from Australian business to allow them to operate in internationally competitive markets.

    2. Many Australian businesses moved offshore to benefit from cheaper labour and other input costs, particularly those businesses involved in the manufacturing sector.

    3. Australian companies benefitted by maximising profits and shareholder returns.

    4. Widespread decline (over a period of many years) occurs in the manufacturing sector. Very few express concern.

    5. The decline is further accelerated by the politically and educationally inspire Clever Country notion – we’d transition our economy into tertiary services and all the ‘dirty industries’ could be relocated offshore but be managed locally.

    6. Again, very little debate about the wisdom of this scheme but it is embraced nonetheless. Again, few in leadership, business or even the unions question the rapid loss of our manufacturing capability.

    7. The country is engaged in a credit fuelled ‘wealth’ creating rush into services sector, primarily FIRE and property related. The services sector growth only sustainable via corresponding credit growth. More businesses offshore production to cheaper sources in order to maximise profits.

    8. Still no mention of the hollowing out of our economy – no we were on the path to prosperity via services.

    9. GFC hits. Credit growth restricted or in decline. Sectors reliant on the continued significant credit growth experience stagnation or decline.

    10. China undertakes massive stimulus programe to underpin its economy faced by global recession. Australian resources sector experiences unprecedented levels of demand for various commodities. The inflow of funds goes some way to compensate for the outflow of funds to foreign creditors – debts incurred during the credit binge.

    11. Commodity based economies like Australia experience rising currency impact which further exacerbate difficulties in the tradable goods sector.

    and this is where we are now.

    Globalisation which has brought many benefits comes at a cost, the price of which we are now experiencing.

    We long abandoned any genuine interest in the manufacturing sector. Occasionally there would be a lone voice in wildnerness questioning the wisdom of what we were doing (including me) but these voices were drowned out in the free-trade cacophony.

    What little manufacturing remains is now faced with a high AUD, but was long faced with enormous levels of bereaucratic compliance devised by scores of government departments peopled with graduates of universities with little or no practical experience of running a company and often a ideological aversion to industrial and manufacturing processes.

    This is nothing the do with the resources sector. Countries around the globe has allowed there manufacturing abilities to be seriously eroded – a gift to China you might say. Well now China is giving a little back in the way of demand for our resources. Thank god.

    It is the model of globalisation we operate under that needs to be debated – not the resources sector.

    The government has clearly stated NO SWF. They have negotiated the MRRT – what they do with the proceeds remains to be seen.

    Manufacturing has been dead man walking for twenty years, the resources boom and high AUD only in recent months – clearly the resources boom cannot be ‘blamed’.

    At last some are coming to care about the future of manufacturing in this country. At least identify the culprit correctly.

    • Very nice reply old boy. And I agree with just about all of it.

      Except where you go all weird about mining at the end.

      It’s screamingly obvious that manufacturing is being hurt more severely now that in any prior period. Look at the PMI. It’s been in recession almost without cease for two years. That’s never happened before in recovery.

      You know I’m very grateful for the mining boom and see it as a major net blessing.

      But you seem to think we should just sit on our arses and say thanks for that, when there are major downsides that do not need to happen.

      I’m not satisfied with that. Why are you?

      As for the government saying there’ll be no SWF. And?

      They stills ay there’s no housing bubble. They used to say there were WMD in Iraq.

      Why do you cherry pick this one issue on which to lie down and accept the greater wisdom of Wayne Swan?

      • Houses & Holes, thanks for pointing out the bleeding obvious, that we get lied to constantly… all the time… by people who state that they are representing our interests. Its not good enough to say “we’ll all be clever country millionaires” or “carbon tax makes jobs” when those horrible smokestack industries are all offshore. By the time we are back into double digit unemployment people like Swanny and Julia will be well and truly on their six figure government pensions guaranteed for life thanks to a far-sighted Peter Costello who put aside billions specifically for the polly’s super fund. How lovely for them that they don’t have the same risks the rest of us do!

        The overall problem is that I’m convinced Tony Abbott will be driving us off that cliff at a much greater pace than Julia is at the moment… Tony is a wonderful Thatcherite at heart and he won’t care about the million plus unemployed we’ll be likely to have once the economy inevitably tanks.

    • +1. I agree with this synopsis, although I don’t think we have been completely asleep at the wheel while manufacturing has been hollowed out.
      Successive govts have steadfastly maintained at least some level of support to the heavy end of industry, steel making, vehicles, ship building. This has failed to produce competitiveness, and probably never will given our low productivity, and a general lack of interest in quality (she’ll be right is alive and well in the Oz workforce).
      However, we need to continue this level of support for key industries as it’s strategic in a military context, and something we need to keep doing for the rest of this century at least, given we can see a shift in the balance of global power. The only newly powerful neighbour we may be able to rely on in the middle of this century is India.

    • Manufacturing has been dead man walking for twenty years, the resources boom and high AUD only in recent months – clearly the resources boom cannot be ‘blamed’.

      If I recall correctly, manufacturing and manufactured exports were doing very well in the late 90s and early 2000s when the AUD was in the 50s and 60s.

      It did ok through the mid-noughties because even though the dollar was rising so was demand both domestically and globally.

      The slump in demand from the GFC was softened by stimulus locally, and the collapse in the AUD internationally.

      The real death knell of Aussie manufacturing has been the post GFC period when the currency has hit record highs, demand has been weak, and competition from Asia intense.

      If the dollar was still in the 70s or 80s, Aussie manufacturing would still be alive — struggling, but alive — but thanks to Mining Boom 2.0 we have a dollar at $1.05 – $1.10.

      Remember Fanboy, manufacturers are not asking for the right to be obscenely rich (like say, ummm, miners) they are merely asking for the right to survive. They’re not asking for handouts, just a level playing field, where their competitiveness isn’t constantly eroded by the rising price of iron ore and coal.

      • Lorax, I could have been a little clearer.

        Manufacturing dead man walking – in terms of number of companies offshoring manufacturing processes, an almost inevitable outcome when always seeking the cheapest provider, or as tenets of globalisation would have it, economies exploiting their natural comparative advantage ie cheap labour.

  13. Hey I’m not that old!

    I agree that manufacturing is experiencing its most difficult period in decades, no question. I maintain that it has been progressively castrated via a range of implements for decades. The really sad thing is that those that have managed to survive in an ideologically adverse environment have probably been pretty resiliant operators to continue in business.

    It appears to me that quite significant structural and policy changes need to be employed to salvage what manufacturing is left and ideally to reinvigorate future growth – but this would fly in the face of the philosophies of globalisation – and that is a biggie.

    The high AUD is to the detriment not only of manufacturing but as often discussed here, retail, tourism and education. However I remove retail from the equation because the high AUD is beneficial in pricing of many imported items, retails big problem is closed wallets and declining credit growth.

    No I don’t think we should just sit on our arses – but I am being realistic (and I am usually a mildy optimistic type). The reponses to the situation we are facing are simply beyond the vision of the leadership we currently have, and that extends to both sides – apart from one or two luminaries, not likely to be in a position to exercise any real influence.

    You misunderstand me on that point. I abhor the policies of Swan, if that is what his pronouncements are to be called. FFS, I fully supported the campaign rejecting the RSPT – because it was an abomination of drafting legislation and clearly inequitable.

    I believe that we have ridden the globalisation train for all its worth, extracted what we felt were gains at the time and now don’t like the ride anymore. Our reaction is to further tax the one sector still growing with no policy nor plan as to how to preserve this wealth (and future loss of resources) to assist future generations.

    We have leadership with no vision and I do despair – I don’t think there is an easy fix to hand and it certainly is not placing onerous tax obligations on any sector only to see the revenues raised squandered.

    • I fully supported the campaign rejecting the RSPT – because it was an abomination of drafting legislation and clearly inequitable.

      Are you saying self-interest had nothing — absolutely nothing — to do with your opposition to the RSPT?

      If you are not, in principle, opposed to a mining tax, please describe a mining tax you would support.

      Our reaction is to further tax the one sector still growing with no policy nor plan as to how to preserve this wealth (and future loss of resources) to assist future generations.

      Ok, so there’s no SWF, we can all agree that is a bad thing, but even if the proceeds of the mining tax go into paying down government debt, or supporting/retraining unemployed workers in manufacturing, education, tourism etc then it is having a positive effect. Certainly better than letting the Big Miners rake in gazillions in cash to spend on football teams, Ferraris and television networks.

      • Lorax, you’ll just have to trust me on the RSPT – a shoddy, poorly drafted, inequitable proposal not worthy of making it into legislation. I have said here before that an additional impost on resources companies along the lines of royalties – to better reflect the loss of finite resources and less susceptible to commodity price movements would be my preference – difficult to draft appropriate legislation due to Constitutional restrictions.

        Interesting to see this chorus of voices calling for more taxes on resources companies – where were all these voices over the last decade when the Big 4 have been raking in substantial profits from other Australian businesses and households…

        On your second point. Don’t concern yourself with the wealth of individual miners – they are a minority and it’s only money! Yes, perhaps if additional revenues raised from additional taxes on resources were utilised to pay down government debt and then accrued to a SWF designed to be free from political manipulation, government raiding, invested overseas and/or utilised for infrastructure projects of generational benefit, fair enough.

        But is it not going to happen with this government. There is a total lack of vision and no will at all to tackle difficult issues not related to retaining government.

      • “Certainly better than letting the Big Miners rake in gazillions in cash to spend on football teams, Ferraris, television networks and run ad campaigns to vilify and delegitimize democratically elected governments”
        ..
        +1 .. My addition in bold.

        • err.. comment fail – my addition is “and run ad campaigns to vilify and delegitimize democratically elected governments”

        • What Mav – you and Lorax want to restrict what people spend their money on…

          Their money and they can spend it on whatever they like. For the record, most miners don’t own football clubs but may have a preference for nice cars – so what. It’s only money, their money, get over it.

          • I have no problems with football clubs and Ferraris – but when the money is derieved out of the natural resources of this nation and is the used to screw around with the legitmate mandate.
            .
            The situation is a bit like (but not as bad) the bailed out banksters in US – They receieved bailout money from the taxpayers, then turned around and used that money to lobby against the interests of the taxpayers – We now have the unseemly sight of Messers Jamie Dimon and co squealing loudly against higher capital requirements and other regulations under Dodd-Frank.

          • No. I didn’t say we are there yet – but IMHO Australia is slowly but surely moving from 1 person/1 vote model to the a corporate $1 / 1 vote model of the US.
            .
            IMHO, the US political system is beyond redemption.

  14. I think ..Selling a countries assets whilst losing productive capacity is a form of uneducated theft…

    Nice topic H&H ,cheers…JR

  15. Saul Eslakes version of the Resources tax , could be reworked so as you had a rising dollar, you have an automatic stabiliser in the tax rate of export orientated companies, higher dollar, lower tax rate, lower dollar, higher tax rate.
    I believe the Swiss have a number of measures re assisting their export industries including incentives to vulture european assets in financial strife as well as reducing costs.

  16. Saul Eslakes version of the Resources tax , could be reworked so as you had a rising dollar, you have an automatic stabiliser in the tax rate of export orientated companies, higher dollar, lower tax rate, lower dollar, higher tax rate.
    I believe the Swiss have a number of measures re assisting their export industries including incentives to vulture european assets in financial strife as well as reducing costs.

  17. Why doesn’t the Aussie Federal Government buy a shed load of Gold? That’d push our dollar down and at the same time make our dollar stronger…. hey wait a doggon minute. that’s just crazy enough to work

    • Excuse me. Costello did a Gordon Brown in 1997 and sold 167 Tonnes and failed to even consider the Perth Mint’s warning not to. The RBA has 80 Tonnes left, but it’s most likely leased out, and gone. If they wanted it back where do they get it from???

      • Dude – I said buy a shed load of gold with the intent to devalue our dollar. That suggests buying from overseas. Where will they buy it? From any source that isn’t in Australia.

        Yeah Costello sold off our Gold at bargain prices. The tin foil hat wearing version of me thinks that he did so under instructions from his owners

        • Yeah I know ASX3K, but the RBA like the FED don’t, publicly, take gold seriously so they are not going to buy it, and like 3d1k says they’ll nationalise it like South Africa is talking about if it comes to that.

          I don’t know if you’re aware but in the Australian constitution the government can confiscate gold just as the US can.

          I was having a cheap shot, but there is a serious point to what I said. Try and get lots of gold now. From my understanding you’d be able to get it from the Perth Mint easier than any overseas source. The COMEX warehouses have a lot, but could you get it? The Perth Mint export about 300 Tonnes a year which is about 1.5 x what Libya has or had. So for Australia to get gold we’re got it here…save a whole lot of transport costs if you wanted physical delivery. But would you trust the BoE to store it for you if you went down the LBMA path??

  18. Some great quotes today…

    “There is an absolute risk that we could well and truly find ourselves in a hollowed-out economy that was living on the mining boom,” Mr Kraehe said in an interview with Dow Jones Newswires.

    “If you look at the 1970s and 1950s, Australia had terms of trade that were right up high. Those booms ended in recession and this one is a bigger and longer boom,” he added.
    — Graham Kraehe

    BTW, thank Christ he’s on the RBA board and not another mining boom cheerleader.

    “This is a matter for business as well. And I think there is a responsibility on the mining industry the Gina Rineharts, the Clive Palmers, the Twiggy Forests, the BHPs, the Rio Tintos to actually stop lining their wallets and start making an investment in manufacturing jobs in this country.”
    — Doug Cameron

    The Reserve Bank and Treasury have been warning for some time that manufacturing is going to have to quote ‘make way’ for the mining boom. But if this is the pain that is going to be part of this adjustment, I suspect it is more acute than most people thought because I think they actually thought the income boom that the resources boom would generate would be much more widespread and consumers would be much more confident, so we’d get demand in other areas.

    It is just not happening.
    — Heather Ridout

    Hear hear! The income boom just isn’t happening. Its staying in Gina, Twiggy and Clive’s pockets while the rest of us get screwed.

    Well its pretty bloody obvious now people are fed up with this so-called “boom” and are getting angry, and that means big political headaches ahead for both the ALP and Coalition.

    • Remember Lorax, the boom is here to stay as long as China maintains growth. Good.

      Try not to concern yourself with the income of others, it doesn’t really matter, it’s only money.

      Cameron, that’s ironic – it is not the responsibility of the resources sector to carry manufacturing. Resources sector is doing what it does best and doing it well. It is for others, entreprenuers assisted by government policy and union cooperation to ensure the continuation of the manufacturing sector. Sadly, government and unions have both been complicit in manufacturing demise. Cameron better than others should be aware of this considering his background!

    • Doug Cameron will suddenly find a “pinko commie” label stuck on his head by the ever obliging MSM pundits in 1 .. 2.. 3…seconds..

      • Actually Mav, you could have a field day with Cameron’s background. He’s a joke. Hundreds of links available – intimidating and ambitious for a political career.

        Does Cameron Really Care About Jobs
        http://www.greenleft.org.au/node/20950

        And while you’re at it note that this article is from 2000 – nothing to do with the resources sector (or should I say scapegoat). Jobs have been going, manufacturing neglected for decades.

        Nothing to do with mining.

        • Yeah ok, Doug Cameron is a bit of friutloop, but hey, I’ll support anyone having a go at the miners at the moment, even (gulp) Paul Howes.

          The push back is happening Fanboy and you know it. Another six months of layoffs and the punters will be demanding a bigger, badder mining tax.

          Golden Goose my arse.

  19. Merrill Lynch: 100,000 job losses in the pipeline

    100,000 people “making room” for the mining boom and “freeing up” their labour. How many people does resources employ again? A bit over 100,000?

    Following other banks recently forecasting RBA rate cuts, Merrill Lynch strategist Tim Rocks today told clients their are “100,000 job losses in the pipeline” and forecast the RBA to cut rates by November at the latest.

    The RBA’s official cash rate has been at 4.75 per cent since November, but a string of poor data – including a spike in the jobless rate last month to 5.1 per cent from 4.9 per cent, and volatile markets – has seen banks tip the RBA to cut rates in coming months.

    On Merrill’s numbers, about 50,000 job losses are consistent with another 0.5 per cent jump in the unemployment rate, which Mr Rocks said “would make an irresistible case for a rate cut”.

    “Anecdotes suggest that official employment data is lagging a material change in labour market conditions,” said Mr Rocks. “We have tallied 7000 announced job losses since June, which are unlikely to be in the official numbers yet. This would be a subset of total losses since not all layoffs are announced.

    “The RBA would ease rates once it becomes aware of this new trend in the labour market – we expect this by its November meeting but financial dislocation could force a more immediate response.”

    Bluescope today said it would cut 1000 jobs due to the high Australian dollar and soaring materials costs, as it became the latest in a string of companies to announce job cuts in recent weeks, including Coca-Cola Amatil, Westpac, Premier Investments and Ten Network.

    Mr Rocks said more job losses are “inevitable” in the retail and construction sectors and the jobless rate could rise to 6 per cent by March.

    Job creation would also slow in the booming mining sector as global growth concerns linger, said Mr Rocks.

    Along with cutting rates, Mr Rocks said the “deteriorating conditions” could also see a broader response from the government, including bringing forward payments of up to $300 to pensioners and low-income earners as part of its compensation plans for the proposed carbon tax.

    Combined with the RBA cutting rates by 50 basis points and petrol prices falling 25 per cent in Australian-dollar terms, $4 billion could be added to family budgets in the fourth quarter of 2011, he said.

    “Investors should position for RBA easing and the potential for a broader policy response,” he said

    • A reasonable percentage of those job losses will be retail related – end of the debt binge.

      Nonetheless, we are only just beginning to experience exactly what many other developed economies have already have – reduced consumer demand, stalling/declining property markets, increasing unemployment, currency fluctuation – we are all in this together – it’s called globalisation.

      Guess what – most of these countries do not have a thriving resources sector to blame and are compelled to face the issues honestly.

      It looks as though, yet again, Australia will take the easy option and cut down the tall poppy – when we should be cultivating it as a means to ensure income to government at a time when most needed, without which government revenues would be in dramatic decline.

      We are fortunate to have a resources base at this time. Be honest.

      • It looks as though, yet again, Australia will take the easy option and cut down the tall poppy – when we should be cultivating it as a means to ensure income to government at a time when most needed, without which government revenues would be in dramatic decline.

        More self-serving drivel.

        The government tried to increase its income from the mining sector. You protested against it. Remember?

        Anyone just watch the 7:30 Report? Dutch Disease was the lead story. Paul Cleary called the mining boom “unhinged”.

        Finally, the biggest economic issue in Australia is getting some airtime.

  20. Michael I am aware of martiins conversion and I was never convinced by the free traders like Garnaut. So I did not need to convert. David as far as IP is concerned do you realize that a large proportion of CSIRO IP and patent applications are made to enhance the publication profile and promotion prospects of the scientists and enrich patent attorneys. We have been going for twenty years with CRC activity and where are the results in the trade account? I have IP in four different fields and I can tell you the foreign competitors are ruthless and rat cunning. It is about time policy makers ran policies which give reasonable conditions to producers not ridiculous interest rates to control a govt induced property boom and a forty percent overvalued dollar.