Above is another interesting segment from last night’s ABC The Business (by far the best business/finance show in the country), in which a number of commentators, including Prime Minister Kevin Rudd, question whether Australia will be able to fill the void left as the mining boom unwinds.
While no solutions are yet at hand, it is at least heartening to see the issues of how to deal with slowing mining investment and falling commodity prices being discussed in the open, including from the highest position within the Government. This is a far cry from the ‘head in sand’ approach displayed recently by former Prime Minister, Julia Gillard, in her final address to CEDA, whereby she childishly lambasted any discussion of risk as “doomsaying” and “talking down the economy”. After all, the first step in finding a solution is to first acknowledge that there is a problem.
We await a volte face from the Opposition who will also now need to address the reality of Australia’s weakening fundamentals.
The full transcript is below, whereas the HD video can be viewed here.
ANDREW ROBERTSON, PRESENTER: Kevin Rudd says he doesn’t want to be the Prime Minister of a country that doesn’t make things. Well Australia is a country that mines things and Mr Rudd says it’s time to diversify. He’s laid out his vision for manufacturing and services to do the heavy lifting as the boom fades. But big questions remain over filling the hole mining leaves. Emily Mitterhuemer has this story.
EMILY MITTERHUEMER, REPORTER: As the new financial year rolled in, Kevin Rudd unveiled his newly-minted ministry, and his message: it’s the economy, stupid.
KEVIN RUDD, PRIME MINISTER: The core task of this Australian government is to keep the economy strong. Given the threats we face from the global economy at the end of the China resources boom, we’ve got to make sure we get our responses, our economic policy responses right.
EMILY MITTERHUEMER: He says Australia has to diversify and he’s promised to do whatever it takes. But with forecasts showing that mining investment has peaked, the question is how to take up the slack. The RBA is putting its faith in construction as it continues to hold rates at record lows, but an oversupply in some states and lack of confidence may stand in the way.
LOUIS CHRISTOPHER, SQM RESEARCH: We are actually quite skeptical that housing and residential construction could completely offset a downturn in mining. The Reserve Bank of Australia’s making a lot of assumptions for that to happen, one of them being that we’ll have a national housing construction boom and I just don’t see it.
EMILY MITTERHUEMER: The latest Performance of Construction Index reading shows an industry well and truly in decline. And it seems that even for those on the frontline, a boom is an unlikely scenario.
BRIAN SEIDLER, MASTER BUILDERS ASSOCIATION: There is a definite need for construction. Whether it fills the hole that mining will leave behind, it remains to be seen. I don’t think we’ll get to a boom like we’ve seen in the last 10 years.
EMILY MITTERHUEMER: But some say the death of the mining boom is greatly exaggerated. China is still growing at more than seven per cent and the outlook for the US economy is increasingly looking up, perhaps buying time for the Rudd Government.
ROBERT MELLOR, BIS SHRAPNEL: It’s not like we’re gonna fall in a massive hole over the next 12 or 18 months. I think the bigger downturn in new mining investment will start to show up probably around 2015 and into 2016. So the magnitude of the correction is not huge in the short to medium term, but it will become more significant.
EMILY MITTERHUEMER: New Prime Minister Kevin Rudd has singled out manufacturing and services as the long-term hopes for the economy.
KEVIN RUDD: To enhance our productivity through our investments in skills, in education, in training, in infrastructure.
EMILY MITTERHUEMER: And today some tentative signs of life, with the latest Performance of Manufacturing Index showing the struggling sector on the verge of expansion.
But the services sector has posted 16 straight months of declines. Kevin Rudd says restoring confidence is the key.
KEVIN RUDD: To bring about a much more productive relationship between business and Labor.
EMILY MITTERHUEMER: While there’s much agreement on the problem for the economy, there’s very little consensus on the solution.
