Or perhaps it is here, with wall-to-wall endorsements by national paper editorials today. But that’s not what this post is about. Rather, it is about the economy and the coming Abbott triggered boom! The Australian today reckons the post mining boom adjustment is a figment of Kevin Rudd’s imagination:
THE next federal government is poised to reap the spoils of a major economic boost and multi-billion-dollar revenue windfall by 2016 as a result of the recent construction boom in Australia’s liquefied natural gas and iron ore sectors.
The Australian has analysed a range of economic data, official forecasts, state and federal budgets and resource company profit estimates that all cast doubt on Kevin Rudd’s assertions during the election campaign that the resources boom has ended.
Export earnings from Australia’s resources industry are forecast to rise almost 20 per cent — from $186 billion to more than $220bn — by 2017, according to forecasts by the Bureau of Resources and Energy Economics.
…Senior government sources have told The Australian that the scale of the economic impact from the next wave of the boom — as projects under construction are commissioned and begin earning revenue — has been little understood.
…The spectacular growth of the LNG industry will contribute $520bn to the economy in the decade from 2015, adding 2.6 per cent to national GDP and increasing the annual tax take by $11bn, according to McKinsey.
…And the WA government is forecasting that its iron ore royalty income will rise by a stunning 55 per cent — from $4.4bn to $6.9bn — between 2012-13 and 2016-2017.
…According to BREE, exports of thermal coal and metallurgical coal exports will increase, by 8 per cent and 4 per cent a year, respectively, until 2018.
None of this is wrong exactly. But in context it sure ain’t right. The LNG boom is not over, though I suspect it’s close to its peak spend, especially in WA. But when it begins producing, it is going to sorely disappoint in terms of returns. The US shale gas boom will push down north Asian prices and Australia’s high cost of production gas projects are going to be at the wrong end of the cost curve. That’s not to say they’re not brilliant, they are. But the so-called “third phase of the boom” is not going to be enough.
As for iron ore and coal, why does The Australian think the economy is so weak right now? It is directly the result of the iron ore and coal busts. These have a long way to run yet and the iron ore supply deluge either wipes out price or itself. You can’t have it both ways.
That’s where Gotti comes in. Yesterday I received an excited email from my local real estate agent containing the following quotes from out excitable BS cousin:
The looming Coalition landside win on Saturday is now virtually certain to trigger a series of housing booms in Australia. In some areas the boom is not waiting for September 7…at the weekend I was in the company of one our larger outer-suburban homebuilders with operations in Brisbane, Sydney and Melbourne. In the last few weeks they have seen a level of inquiry rarely matched in their history. But unusually, the levels of inquiry did not see the normal level of agreements signed, even though the buyers were clearly ready to go. They just wanted to make sure that the current government really is going to be convincingly removed on September 7. The builder is then expecting an unprecedented avalanche of orders.
…There is keen competition between buyers at auctions. Once the current stock is exhausted, the price rises could accelerate…
We all know that Gotti has low impulse control on the way up and down in the cycle. But I remain of the view that the days when consumers chased such hysteria are behind us for a generation. When I look at charts for saving and spending I see rock solid trends in prudence. The RBA has now bought this line as well. Beyond a hard core of Australian specufestors, are we wrong to think that the consumer has made a structural shift to prudence and will not chase a new boom in housing?
As well, I still think that a deteriorating economy as the mining boom ends will prevent any material acceleration in borrowing. Will an election really make so much difference to the average punter? I don’t give a hoot in terms of my own spending decisions. Am I so different?
Perhaps Australians really are the perfect Ricardian equivalent. And the echo of John Howard will be enough to get them to drop their guard. At least until fiscal instability overtakes Tony Abbott as well.
Tell me I’m wrong!
