Two speeds out the wazoo

Here’s a couple more charts from the National Accounts. The two speeds of Australian states are starting to become pretty crazy. Victoria and SA are in recession. NSW is growing at 0.5%. Meanwhile, WA grew at 8.4% at QLD at 3.5%. That is, for the quarter.

Houses and Holes
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  1. The imbalances are going to get worse before they get better, judging by the capex lining up in the mining sector. Prepare for massive population shifts.

    • What do you mean Alex? Are huge numbers of people going to move to mining areas? There isn’t the infrastructure to support them, the kinds of jobs in demand there are fairly specific (think limited fungibility of labour) and costs of living are often heavily distorted, effectively locking out many of those who do not have large incomes.

      • The infrastructure is lagging, but it will catch up. The rentals currently available in the north west guarantee that.

        That means that there will be plenty of jobs for people with house building skills, who will not be needed in the east any more now that the bubble is over.

        The north west is at a similar stage now as Victoria was in the early gold rush days. When do you think most of Victoria’s infrastructure was built? Before the gold rush? Miners lived in tents on the goldfields.

        • You don’t sound like you’ve ever lived here in a resource area Alex. I live in one of the cheapest resource areas to live and the cost of living here has still managed to drive many people out.

          Don’t get me wrong – I would like to see mining areas develop but unless solutions can be found and enforced to bring down the idiotic price of accommodation, anyone coming here who is not directly involved in resources will need to live in a tent, Victorian gold rush-style. And that’s NOT a joke!!!

          • That’s my point exactly. The ridiculous current level of rents will encourage rapid investment in more housing. There’s a buck to be made.

          • OR it will mean increasing the ratio of FIFO-only contracts that make up the employment in the sector.

            I think you underestimate the short-termism of mining companies. They will take the cheaper short term option wherever they can. Noone wants to invest in rural towns.

          • Jason, I think it depends a lot on the specific project. Port facilities, which are very long term, are most likely to get decent infrastructure. With mines, it depends on mine life and also the availability of other stuff like water and power. I agree with you that most mines are likely to remain FIFO. I did my FIFO stint in the early eighties, probably before some of the commenters here were born. And I lived in tents while out there (it was a seismic crew, always on the move).

          • “That’s my point exactly. The ridiculous current level of rents will encourage rapid investment in more housing. There’s a buck to be made.”

            The ridiculous levels of rent and house prices that are relatively new here in Gladstone have been a fact of life for years in other mining town. There appears to have been no investment in affordable housing and I expect that to be the case here. I assume that the cost of land for development is so expensive that affordable housing development is out of the question without government intervention. Costs of living driving out and keeping away the people who provide the social infrastructure necessary for a fully functional community are an example of how markets can fail. There simply exists no incentive for the private sector to provide housing that ordinary income earners find affordable.

          • Ports are even easier to automate than mines, and don’t require nearly as many workers when they are operational.

            Although we do have a lot of ports that seem like they’re perpetually under construction (due to constant expansion planning and implementation), they are really just trying to catch up.

            We are still in the uptick of our resources boom and once the expansions start slowing down (which may be only a couple of years away in my experience) projects will be dropped. Mining companies aren’t in any illusion that demand will stay this high forever.

          • No, the investment in cheap rental housing has not happened yet. Sounds like it won’t happen then.
            .
            Apparently they cannot find the land (in this generally vast desert).

          • There is risk in the remote cities like Gladstone and Mackay and Port Headland. While they host ports that will be be in use for quite awhile the amount of workers there during the construction phase is significantly greater than the number of people that will be there once the ports are fully developed and no further capacity is needed.

            It’s not hard to see why developers might be averse to entering such markets. While there might be a shortage of housing now, too much development could mean a serious oversupply not too far in the future. Especially in a country where people are still moving away from remote areas and flocking to the capital cities.

          • I own property in Gladstone. Went to do an inspection and there was literally a guy living in a tent in the backyard.

            Rents will double from their current levels in the next 2 years in Gladstone, as the projects really start to ramp up.

          • Jason, you’ve just identified another reason why FIFO works, most workers being housed in purpose built camps that can be dismantled and moved on post construction.

            And these camps, especially the newer ones are really quite impressive.

        • Mr SquiggleMEMBER

          They may not move direct to the mining area, but they might move to the nearest capital city (ie Perth or Darwin).

          I can’t see much FIFO happening from a family base in Melbourne.

          • Mr Squiggle, you’d be surprised. The FIFO resource construction workforce here in WA comes from everywhere – all States, NZ, Bali, Thailand and most are from family bases.

            The opportunity to earn good salaries, a unique lifestyle temporarily free from usual domestic demands, enjoy an often breathtaking outback environment combine to make FIFO a worthy alternative to 9-5.

          • Not just the construction workforce either, 3d1k. There was an item in the Weekend Oz about prostitutes in Qld mining towns. One they profiled came from NZ and was working to put her children through uni.

        • You would think so 3d1k but wherever I look, large numbers of FIFO’s go hand-in-hand with distorted housing and rental costs. And they still use the area’s infrastructure.

          • Lef-tee I suggest that you aren’t looking very far. Many mine projects have portable housing (Donga’s as they are affectionately known) close to the site. You get a bus to and from camp. The companies pay for the portable accommodation so it works out a lot cheaper.

            For such FIFO sites, there is no need for massive amounts of infrastructure or employee-owned/rented housing.

            Only a small number of mines/plants have distorted housing/rental costs and are usually in areas where a decent-sized town nearby already exists and FIFO isn’t being operated.

      • Absolutely agree. Mining companies have been actively working to reduce the amount of labour they need directly at the site. On-site dump truck operators aren’t the first jobs to be automated and they certainly won’t be the last.

        I should know, I’m an automation engineer in the industry.

        This doesn’t even recognise the increasing popularity of fly-in, fly-out arrangements, some mines are 100% FIFO with more looking to go that way. It usually works out cheaper for the company to pay their workers extra to do FIFO and there’s no shortage of takers.

        • But, but … weren’t the one million Australians currently employed in manufacturing all supposed to get mining jobs? That’s what Gittins! told me.

          FIFO? Automation? Short-termism? Surely you can’t be talking about our glorious mining companies that saved Australia from recession in 2008?

          Cue the MineBot…

          • Don’t believe everything Gittins tells you…

            FIFO is a success.
            Automation where possible and practical has a large role in the future of mining.
            Short-termism in employment numbers on major project (2-4yrs), but generally there are always other projects about to get the go-ahead to soak up what is a very mobile workforce.

          • would have to agree with 3d1k, I fail to see why either is the issue is really. why people are so cut up about FIFO, how is this different to tourism in a particular area?
            also for automation, I am sorry that it displeases unionists that we don’t need to risk people’s safety and remain at the same level of labour productivity to “save jobs” for the next 100 years. 6 x 12 hr shifts including boring as hell nightshifts are the norm for labour such as haul truck drivers. This is why people die in the mines and why they’re pushing for automation.

          • Yes, I’m sure its all very profitable and makes good economic sense.

            One wonders about the wisdom of wiping out an industry that employs over a million for an industry that employs almost no-one, but what would I know? I am but a confused Dr Seuss character.

            I also wonder about the carbon footprint of FIFO workers, but hey, that’s not an issue for you denialists. Oh so convenient!

          • ‘…wiping out an industry that employs over a million..’

            Lorax, your continual claim of millions of jobs lost in manufacturing (due to the resources sector) has thus far been proven entirely false. In fact the latest PMI showed increase in export manufacturing activity. Unemployment levels across all sectors to date relatively stable.

            If ever manufacturing were to lose one million jobs, that is, one million workers newly unemployed – it would be a disaster for this nation and I guarantee you something far more ominous than a resources boom would have transpired.

            Carbon footprint of FIFO workers. Good grief, clutching at straws.

            Let me see, slightly less than that of various Australian entourages that attend Climate Policy talkfests in such places as Kyoto, CanCun and Durban in 2012.

            Only FIFO is far more productive.

          • Manufacturing lost 53,000 jobs over the past 12 months. Most of the job gains that offset that have been in health and social services (i.e. work that depends on government spending). Mining has made very little contribution to jobs growth.

            As I’ve said many times, we are becoming a welfare state dependent on mining income. If that is our destiny, we need to make damn sure we tax the bejesus out of the mining companies.

    • > Prepare for massive population shifts.

      On a fortnightly basis. Invest in regional airlines 🙂

  2. I’m confused. Is the second graph the actual growth rate or the rate of change in the growth rate. Are you saying that VIC and SA economies contracted last quarter? The chart seems pretty noisy and doesn’t seem like a useful indicator considering the massive fluctuations.

  3. Yes this was to be expected.

    Now look at the homes on market trend for the state capitals, and the look at the median house prices.

    That will tell you which cities will see price falls and which will see price rises, relatively speaking at least.

    The market may be covered with a semi-permeable membrane courtesy of the EUZone that stops a free flow, but Osmosis will still occur.

      • QLD and WA to recover first (less stock on market and not growing – and more price falls already) whereas NSW, VIC, SA and ACT are stuffed.

        • Trust me. The Gold Coast, Sunshine Coast and FNQ will not be recovering anytime soon. So when you say “Queensland” you need to be more specific.

          • Correct Nick – Lorax for Qld insert Brisbane – and yes the Gold and Sunshine Coast tourist recession does lean on Brisbane quite a bit, especially in the Southern and Northern extremities.

            It is quite easy to live in Caloundra or Southport and work in Brisbane. I have friends who do, so those areas do present low priced options, albeit with higher commute costs.

          • One more thing, many areas of Qld are booming. Qld is far less centralised than most states.

            The tourist areas you mentioned are important, but so is the mining belt in Central and Western Qld. Try telling the people of Emerald or Moranbah we are in tough times.

          • Yes, that’s why I mentioned the coalfields hours ago (see immediately below)

            Again, we are substituting a big employer (tourism) for a relatively small employer (coal mining).

            I must say it just fills The Lorax with joy to know that coal miners are raking it in, while eco-tourism operators in FNQ are struggling. Makes you proud to be Australian.

          • Yes I’m well aware of your longstanding views, and although I don’t come here to post my moral and political views, I do see the risks in creating long lasting damage to these industries.

            Our manufacturing and tourism was always going to be a little brittle long term. We have 3 billion close neighbours to provide more manpower that we ever could in this new era, and we are too far from everywhere for a sustainable tourist industry, and almost no history and culture to put on show.

            But you know all of those close neighbours have to be fed. You have considerable IT skills and ingenuity, have you thought about our natural resources such as plenty of sunlight and open territory. It is ripe for combined solar farming and large scale hydroponic farming. Set up costs are very high, but once established the maintenance and running cost is ultra low, and the number of mouths to be fed are a guaranteed demand that will become increasingly more difficult to satisfy from traditional farming areas and methods.

            Yes it sounds like pie in the sky, but it’s not, and we do have to re-invent ourselves. Only government has the resources to get the ball rolling.

            We would have to think in terms of scales never before seen here.

          • 3d1k – well it’s a big gamble, but food production is much less risky than building another Dubai and hoping tourists come. There is little to debate about future demand.

            The biggest hurdle is getting the right people to think on a never before seen scale.

            I’m embarrassingly short on detail, but we have to think outside the square for our future.

  4. Like I said yesterday: WA needs its own currency and monetary policy. What’s going on over there bears no resemblance to the rest of the economy.

    The Qld numbers look like a post-flood recovery bounce and growth will probably slow next year. Qld will see plenty of growth coming out of the coalfields and CSG, but that is balanced by the tourism regions (Gold Coast, Sunshine Coast and Far North Queensland) which are the most depressed areas in the country.

    • That’s a dangerous road, Lorax. WA would instantly have the world’s most sought after reserve currency. They could issue bonds at will. Very quickly, almost overnight in fact, they could raise enough dough to recruit a mercenary army from Sandline.

      The rest of Australia would be insolvent just as instantly. Our own army would fall into instant disrepair, collapsed morale and be open to recruitment by the Sandline army across the border.

      In three months, six months tops, Colin Barnett would invade.

      The degenerating eastern states wold fall like dominoes. And the POWs would be transported straight to the Pilbara to work for free in the mines, ensuring massive ongoing investment from multi-national corporations, which would keep the Western Reich’s financial power churning.

      New Zealand would be next, followed by the entire Western Pacific.

      • No, follow Alex’s que.

        Everyone will move west.

        To paraphrase PJK, “If you aren’t in Perth, you’re camping out”.

      • Sandgroper Supremacy. Perfectly described aspirations of some in Western Australia…mind you, Barnett would be a benevolent leader. Other States may even get a fair share of GST revenues (minus cost of massive infrastructure spend required in the glorious state to further promote its resplendent resource base). Don’t think Sandline would do the trick, better Xe.

          • General Disarray

            …”Lord” Monckton. Gina would put him up as health minister as well, just so he could set straight the whole cigarettes cause cancer hoax.

  5. Unfortunately Sandline ceased operations in 2004. Luckily for Col. Barnett though their CEO created Aegis Defence Consulting and he can continue his world domination with their private army.

  6. 33.2% annualised for WA? Is inflation going to overshoot massively now for then ext couple of months until RBA meets again in Feb?

    All that mining growth they were worried about finally coming home to roast?

  7. adelaide_economistMEMBER

    Er… steady chaps.

    State final demand is not ‘equivalent’ to GSP.

    I know it sucks that GSP figures are only released once a year and SFD might seem like a nice proxy but it’s not quite the same thing.

    One of those ‘failed’ ‘in recession’ States, like SA, might just be having a significant boom in agricultural exports – which won’t show up directly in SFD.

    • A fair point and one that Rumple has fleshed out in another post. SFD is a decent proxy for growth, though I may have stretched things a bit describing VIC and SA as “in recession”…

  8. Mr SquiggleMEMBER

    Thanks 3D1K – I’m ready to listen to the facts on this…

    apart from anything else, I quite like the idea of earning $200K if I agree to FIFO up to Pilbara or wherever and learn Diesel mechanics.

    I really hope the population of Melbourne starts to fall, I’ll never own in my home city without some sort of burst bubble

    • You may not be that concerned.

      I work in finance, my wife in law. It would serve us well to have Melbourne property collapse, we’d free up our Perth property.