Inflation

[sptrawler]

China is paying for oil in some countries with its own currency now, that's going to ruffle some feathers.

One thing I can vouch for in many ways is that the quality of China's manufacturing is under par, that's one thing the US and Europe have over them, even the Japanese made automotive stuff is well sought after than Chinese. I won't name the company but I put together the steel structure of one of the main gold miners in WA and they imported a heap of a structure fabricated in China, and my goodness the welds looked like they gave a welder to a 15 year old kid and let them rip.

The steel quality was a joke, when rectification work was needed you drilled holes in beams and the hardness of the steel varied dramatically, I very much doubt it even passed Australian standards. If you have a look at companies like Shimano all the high-end segment of gear (fishing and bikes) is still manufactured in Japan and it's done on purpose so that their manufacturing procedures and techniques aren't copied.

The problem is China is one of the only countries that makes enough steel to keep up with supply, so unless we re build our steel industry there is very little option.
The only way we can re build our steel industry, is to encourage the mining companies to build the furnaces as we did in the 1960's, the only way they will do that, is if there is a market here to sell into. So it would take a carrot and a stick approach.
But that couldn't be done in isolation it would require a long term plan to change Australia's trajectory, which has been established over the last 50 years, when tariffs were actively reduced on third world junk.
The intention was honourable, which was to encourage investment in third world countries to enable them to modernise, the side benefit was the multinationals increased their profits by a huge amount.
The problem now is, how to stop ourselves becoming the third world countries.

 

[mullokintyre]

The problem is China is one of the only countries that makes enough steel to keep up with supply, so unless we re build our steel industry there is very little option.
The only way we can re build our steel industry, is to encourage the mining companies to build the furnaces as we did in the 1960's, the only way they will do that, is if there is a market here to sell into. So it would take a carrot and a stick approach.
But that couldn't be done in isolation it would require a long term plan to change Australia's trajectory, which has been established over the last 50 years, when tariffs were actively reduced on third world junk.
The intention was honourable, which was to encourage investment in third world countries to enable them to modernise, the side benefit was the multinationals increased their profits by a huge amount.
The problem now is, how to stop ourselves becoming the third world countries.

One of my sons works for Molycorp, which supplies about 80% of the market for steel balls used in ball mills at refineries/smelters.
They recently closed down their steel making section because it is cheaper to buy imported steel from anywhere but Australia.
We have effectively priced ourselves out of the market.
mick

 

[sptrawler]

Funny how the media which was calling for Phillip Lowes head and got it, are now sounding as though he had it right all along, oh well that's life as the loonies move on to their next target.
It's amazing how the reporters can realise everything so clearly after the event.
As was said earlier in the thread, if people think inflation is under control, tell them they are dreaming.

Booming population is part of our sticky inflation dilemma

Rapid population growth is one of several forces making the decline in inflation slower than the RBA had hoped.

www.smh.com.au

From the article:

Lately, however, booming population growth has become a hot topic in economic circles.

Why? Because it’s becoming clear that the sheer pace of population growth – which is mainly the result of a surge in migration – is having some important effects on the rental market, which then flows into inflation.
House prices aren’t part of the consumer price index, but they, too, are being pushed higher by the combination of fast population growth.

The latest official figures show the population grew by 2.2 per cent to 26.5 million people in the year to March, and it’s likely to have accelerated since. Commonwealth Bank economist Harry Ottley this week said that growth rate was probably about 2.6 per cent in the year to September, which he said would be the fastest in half a century.

Higher consumer spending than otherwise is good news for the profits of big consumer-facing businesses such as retailers, telcos and banks. But for the Reserve Bank’s task of bringing inflation back within its 2-3 per cent target, it’s less helpful.

To be sure, population growth is only part of the picture. It’s got nothing to do with the big rises in the price of petrol, insurance or electricity. But it’s adding to these other forces that are making inflation stickier, or slower to decline, than the Reserve Bank would like. And it’s fuelling more bets on a further interest rate rise as soon as next week.

 

[farmerge]

It is interesting how time changes things.
Back in the 60's and 70's (last century), something that was of inferior quality was derisively called "jap made".
Then the Jap was swapped for Korean (LG was cheap electronic goods) as the quality of Japanese goods improved.
Now its Chinese that is at the bottom, and Korean stuff has moved up the ladder.
I refuse to buy after market car parts from China, they are invariably poorly made, often do not fit , and sometimes do not even work out of the box ( had that occur with a an aftermarket oxygen sensor and an oil pump).
Mick

For me Mick made in China or painted red usually is Chinese and is not acceptable. Like you have been caught also.

 

[divs4ever]

It's almost as if its all intentional.

WHOOPS !! at first read i saw international am i becoming Freudian without the use of cocaine ??

 

[TimeISmoney]

It is interesting how time changes things.
Back in the 60's and 70's (last century), something that was of inferior quality was derisively called "jap made".
Then the Jap was swapped for Korean (LG was cheap electronic goods) as the quality of Japanese goods improved.
Now its Chinese that is at the bottom, and Korean stuff has moved up the ladder.
I refuse to buy after market car parts from China, they are invariably poorly made, often do not fit , and sometimes do not even work out of the box ( had that occur with a an aftermarket oxygen sensor and an oil pump).
Mick

You only have to go as far as to look at the mileage the old Japanese built Hiluxes got compared to the later ones built in Malaysia.

The Japs have always had superior metallurgy, and no doubt China will get better over time but how will the human rights and low wages work out in the future for China? Another thing is it takes years of R&D to get where the Japs are in terms of metal forging, they used special hydroforming on their upper-end bike cranks in the 90s that even NASA was puzzled about how they achieved it. A lot of money goes into R&D with manufacturing mass produced items at a cheap cost, anyone can copy 10 items of a product but try doing mass production 100,000s at a cheap price that most of the populace can afford.

 

[over9k]

We have effectively priced ourselves out of the market.

Welcome to globalisation - globalise markets and you end up with it being cheaper to ship materials halfway across the planet to be refined by slaves than to do it here.

If western wages cost more than the shipping costs then the industry just moves.

 

[TimeISmoney]

The problem is China is one of the only countries that makes enough steel to keep up with supply, so unless we re build our steel industry there is very little option.
The only way we can re build our steel industry, is to encourage the mining companies to build the furnaces as we did in the 1960's, the only way they will do that, is if there is a market here to sell into. So it would take a carrot and a stick approach.
But that couldn't be done in isolation it would require a long term plan to change Australia's trajectory, which has been established over the last 50 years, when tariffs were actively reduced on third world junk.
The intention was honourable, which was to encourage investment in third world countries to enable them to modernise, the side benefit was the multinationals increased their profits by a huge amount.
The problem now is, how to stop ourselves becoming the third world countries.

No one wants to work in Australia and our labor rate is too high, the only way we could achieve it is with automation like the US does with car building. Remember Howard did the deal of the century that screwed up our gas supply at the fixed sale rate to China, which knocked a lot of manufacturing on the head when energy prices started to climb here? They actually get cheaper gas than we do.

Meh, globalisation what a mess it's become.

 

[wayneL]

Aussies have become less productive too. Bad juju.

 

[sptrawler]

No one wants to work in Australia and our labor rate is too high, the only way we could achieve it is with automation like the US does with car building. Remember Howard did the deal of the century that screwed up our gas supply at the fixed sale rate to China, which knocked a lot of manufacturing on the head when energy prices started to climb here? They actually get cheaper gas than we do.

Meh, globalisation what a mess it's become.

Many western countries sent it's manufacturing to China, it mainly happened when tariffs were reduced and our companies couldn't compete with cheap imports.
In Australia tariffs on cheap imports in the early 1970's ranged to about 60%, by the early 1990's they were down to about 5% from memory.
So our manufacturing plants were either closed, or the operations sent to China.

With regard gas back in Howards day, Japan was the major importer from memory, back then China was mainly using coal/oil.

Also the gas contracts are usually written by the States and the gas producers, as they actually own the gas in their jurisdiction, Howard from memory used his position to set up negotiations, but from memory he didn't actually negotiate the selling of the gas or the price.

I think it is just another one of those issues, that repetition and the media use to distort history.
The NW shelf contracts were already in place with Japan and China was looking to change into gas.
The State government of W.A actually set up the gas reservation policy with the NW gas producers.
It was the Eastern States that stuffed up and contracted to sell all their gas, with no domestic reservation.

Here is an article regarding the issue back then.
August 2002.

$25 billion deal a coup for Australia

www.theage.com.au

Mr Howard yesterday welcomed "the largest single export order ever won for Australia".
"It is a mammoth export contract. It shows we have a mature relationship (with China), built on mutual respect and mutual self-interest."
The decision followed a trip to China in May by Mr Howard during which he lobbied Premier Zhu Rongji and other Chinese leaders.

Mr Zhu is believed to have pushed for the Australian consortium after the talks, in which Mr Howard emphasised the reliability of the Australian bid.

The contract, equivalent to almost half Australia's present exports of LNG, will supply fuel to six new power stations and converted oil-fired plants. It is the first stage of an ambitious plan by China to reduce severe pollution by switching its energy growth from oil to gas.
While natural gas accounts for only 2 per cent of the country's energy mix, analysts suggest this may increase to up to 20 per cent as industry, domestic heating and even public buses switch to gas.

Mr Howard said the agreement offered hope of more sales as China's energy demand grew. "It was a fantastic team effort, against very tough competition," he said. "It shows that we have a product of very high quality, with a record of secure supplies and delivery on time. This is a gold-medal performance by the Australian mining industry."
The North-West Shelf gas fields are operated by Woodside Petroleum on behalf of a consortium including BHP-Billiton, BP, Shell, Chevron Texaco, Mitsubishi and Mitsui. Their exports are now worth almost $3 billion a year, almost entirely to Japan.

Why Australia must 'make stuff again' and stop buying from China

Australia 'needs to learn how to make stuff again' or face the threat of 'coercion and economic blackmail' by Beijing, outspoken China critic Clive Hamilton has warned.

www.dailymail.co.uk

At its peak in the 1960s, manufacturing accounted for about 25 per cent of GDP, with everything from cars to clothing and kitchen appliances rolling off factory production lines across the country.
But Australia's relatively high wages left local manufacturing unable to compete on price with cheaper, mainly Chinese-made imports.

Now, manufacturing makes up just five per cent of Australia's GDP, and left the country heavily reliant on an uninterrupted flow of foreign-made goods.
Where once factory jobs provided reliable full-time employment for those who were not suited to white-collar careers, those opportunities have now largely evaporated.

While Australia's high-wage model makes the restoration of a manufacturing sector difficult, some comparable countries have managed to maintain those industries, such as the car makers of Japan, Korea and Germany.

Australia's manufacturing sector began to decline in the 1970s as local businesses found it increasingly difficult to compete on price with off-shore production houses emerging in Asia.

By the year 1980, local manufacturing dropped to 19 per cent of GDP, with tens of thousands of jobs vanishing over the decade.

 

[farmerge]

WHOOPS !! at first read i saw international am i becoming Freudian without the use of cocaine ??

New mower conditioner is red but is Case IH

 

[sptrawler]

Aussies have become less productive too. Bad juju.

With new technology labour is becoming a small component in the value adding and manufacturing processes, therefore there is less reason for companies not to value add here, the old story of high wages cost is becoming less credible as an argument.
When I started working in control room, operations had 200 employees, after a control system and hardware upgrade that number reduced to 42 and that was 20 years ago.
Since then the plant has been replaced with modern state of the art equipment that runs unmanned.
With robotics, distributive control systems and AI, it wont be long before most manufacturing plants will run with only a few operator maintainers, all they will do is carry out a mainly monitoring function.

 

[sptrawler]

With new technology labour is becoming a small component in the value adding and manufacturing processes, therefore there is less reason for companies not to value add here, the old story of high wages cost is becoming less credible as an argument.
When I started working in control room, operations had 200 employees, after a control system and hardware upgrade that number reduced to 42 and that was 20 years ago.
Since then the plant has been replaced with modern state of the art equipment that runs unmanned.
With robotics, distributive control systems and AI, it wont be long before most manufacturing plants will run with only a few operator maintainers, all they will do is carry out a mainly monitoring function.

The real issue is, why would the companies build value adding plant here, if it doesn't add enough profit to justify the cost of installing it.
That is where the Government has to introduce a carrot and stick approach, where it is possible.
If for example China could reduce its emissions by importing some steel billets instead of iron ore, it no doubt would pay a hell of a lot more for the product and could close some of their blast furnaces. They use some of the iron ore for cast iron and some in the steel making process, why some of that couldn't be done here prior to shipment would seem logical especially if we can do it cleaner.

 

[Smurf1976]

So far as the decline of Australian manufacturing is concerned, it all comes back to a policy decision in 1965 to allow, and later encourage, the mass extraction of natural resources for export in raw form.

Once that decision was made, iron ore was first cab off the rank and it's no coincidence that manufacturing's importance began to decline almost immediately afterward. Next came coal in the 1970's - 80's and then gas from 1989 onwards.

Then came the Lima Declaration (1975) and the progressive abandonment of energy development for the domestic market (with a number of notable stages over a long period 1965 - late 90's).

Now add in high wages and generally not that good business management and that's why we don't manufacture much anymore.

 

[Knobby22]

So far as the decline of Australian manufacturing is concerned, it all comes back to a policy decision in 1965 to allow, and later encourage, the mass extraction of natural resources for export in raw form.

Once that decision was made, iron ore was first cab off the rank and it's no coincidence that manufacturing's importance began to decline almost immediately afterward. Next came coal in the 1970's - 80's and then gas from 1989 onwards.

Then came the Lima Declaration (1975) and the progressive abandonment of energy development for the domestic market (with a number of notable stages over a long period 1965 - late 90's).

Now add in high wages and generally not that good business management and that's why we don't manufacture much anymore.

The car industry was a classic example.
The political argument for shutting it down was that it would result in cheaper cars for Australian consumers and less costs for the Government.

Toyota were selling Camrys worldwide and doing well but once Holden left; the supply chain was not sufficient for them to remain.

It wasn't wages. That is a furphy. Our wages are cheaper when compared to many countries due to the exchange rate and the process is automated meaning wages are only a small component of the cost.

Editorial: How the Coalition ended car manufacturing in Australia – PerformanceDrive

performancedrive.com.au

 

[sptrawler]

The car industry was a classic example.
The political argument for shutting it down was that it would result in cheaper cars for Australian consumers and less costs for the Government.

Toyota were selling Camrys worldwide and doing well but once Holden left; the supply chain was not sufficient for them to remain.

It wasn't wages. That is a furphy. Our wages are cheaper when compared to many countries due to the exchange rate and the process is automated meaning wages are only a small component of the cost.

Editorial: How the Coalition ended car manufacturing in Australia – PerformanceDrive

performancedrive.com.au

Now 10 years on, VW, Ford, GM and Fiat Chrysler are struggling, with the advent of E.V's.
The Australian car industry died when people preferred a dual cab ute and an SUV over a family sedan, once that started happening Holden and Ford were finished, they were sourcing their SUV's and utes from overseas.
You can look up the sales of Commodores and Falcons sales were in a huge slide, all that happened was Australia saved itself billions in subsidies, between then and now.
Do you think for one minute they would still be going now? Everyone wants to re write history, it's so romantic and delusional, just what urban myths are built on.
Hockey was spot on, either get serious, gear up and upgrade the plant for export and platform changes, or get out.
The Australian taxpayer was paying GM and Fords profits, which went straight to the U.S.
If you want to make it political and honest, the nail in the coffin for the Australian car industry was the Button car plan, all hockey did was read the last rights.

Killing the Industry Softly - The 1985 Button Car Plan

In the 1970s, the Australian new car market was dominated by the Big Three. Ford, Holden and Chrysler. They weren’t the only ones building cars in Australia there was also Leyland, Toyota, Volkswagen, Renault and Nissan. Large tariff walls had forced anyone who wanted to sell large volumes in...

www.carthrottle.com

The last couple of paragraphs sums it up well, but the whole article is worth a read:

What Button had forgotten was that the Australian car industry was entirely foreign owned. They were owned by companies who hadn’t yet learned how to think globally. The Ford Falcon had been more than a match for the Taurus and Scorpio. Ford could have, if they wanted to, sold the Falcon in America or Europe. Holden did manage to get the Monaro to the US, but only after an internal struggle lead by Bob Lutz to overcome rampant American nationalism. The same nationalism couldn’t be overcome at Ford. The Australian government offered to fund the R&D costs for a left hand drive Falcon police car, but Dearborn rejected in favour of the Taurus Police Interceptor to keep American factories going. We essentially opened the door to foreign manufacturers in the hope that other countries would reciprocate.

Australian manufacturers couldn’t go the other way either. Building different cars proved to be a very difficult case to make. The Ford Territory and Holden Cruze are the only ones that made production. Ford Australia wanted to build the Focus, Ranger and Everest at Broadmeadows but couldn’t,citing the free trade agreement with Thailand. Toyota Australia tried to get an Australian made Kluger (Highlander), but was repeatedly rejected. Australia gets its Klugers from the US, another country Australia has a free trade agreement with. There was no need to build a Focus in Australia when they were already being built elsewhere.

While the Button Plan did technically work in the 1990s, signs that it had stopped working were clear in the early 2000s. Successive federal politicians on both sides failed to deliver a solution. Mitsubishi shut down in 2008, Ford in 2016. The last Holden Commodore will be built in September.

 

[Knobby22]

Now 10 years on, VW, Ford, GM and Fiat Chrysler are struggling, with the advent of E.V's.
The Australian car industry died when people preferred a dual cab ute and an SUV over a family sedan, once that started happening Holden and Ford were finished, they were sourcing their SUV's and utes from overseas.
You can look up the sales of Commodores and Falcons sales were in a huge slide, all that happened was Australia saved itself billions in subsidies, between then and now.
Do you think for one minute they would still be going now? Everyone wants to re write history, it's so romantic and delusional, just what urban myths are built on.
Hockey was spot on, either get serious, gear up and upgrade the plant for export and platform changes, or get out.
The Australian taxpayer was paying GM and Fords profits, which went straight to the U.S.
If you want to make it political and honest, the nail in the coffin for the Australian car industry was the Button car plan, all hockey did was read the last rights.

View attachment 165221

Killing the Industry Softly - The 1985 Button Car Plan

In the 1970s, the Australian new car market was dominated by the Big Three. Ford, Holden and Chrysler. They weren’t the only ones building cars in Australia there was also Leyland, Toyota, Volkswagen, Renault and Nissan. Large tariff walls had forced anyone who wanted to sell large volumes in...

www.carthrottle.com

The last couple of paragraphs sums it up well, but the whole article is worth a read:

What Button had forgotten was that the Australian car industry was entirely foreign owned. They were owned by companies who hadn’t yet learned how to think globally. The Ford Falcon had been more than a match for the Taurus and Scorpio. Ford could have, if they wanted to, sold the Falcon in America or Europe. Holden did manage to get the Monaro to the US, but only after an internal struggle lead by Bob Lutz to overcome rampant American nationalism. The same nationalism couldn’t be overcome at Ford. The Australian government offered to fund the R&D costs for a left hand drive Falcon police car, but Dearborn rejected in favour of the Taurus Police Interceptor to keep American factories going. We essentially opened the door to foreign manufacturers in the hope that other countries would reciprocate.

Australian manufacturers couldn’t go the other way either. Building different cars proved to be a very difficult case to make. The Ford Territory and Holden Cruze are the only ones that made production. Ford Australia wanted to build the Focus, Ranger and Everest at Broadmeadows but couldn’t,citing the free trade agreement with Thailand. Toyota Australia tried to get an Australian made Kluger (Highlander), but was repeatedly rejected. Australia gets its Klugers from the US, another country Australia has a free trade agreement with. There was no need to build a Focus in Australia when they were already being built elsewhere.

While the Button Plan did technically work in the 1990s, signs that it had stopped working were clear in the early 2000s. Successive federal politicians on both sides failed to deliver a solution. Mitsubishi shut down in 2008, Ford in 2016. The last Holden Commodore will be built in September.

I'm not saying it was a wrong decision but it is a great example of why manufacturing in Australia gets shut down. And it wasn't just the car companies only, a lot of associated manufacturing companies closed at the same time.
Australia generally doesn't like to subsidise manufacturing unlike many other countries however we will subsidise other parts of the economy.
Yes, and I agree these free trade agreements we sign seem to stop any support.
I was very pleased when we walked away from the EU agreement.

 

[IFocus]

A couple of points...

Your current standard of living is supported by Chinese imports without them you wouldn't be able to afford the items.

The western world exported all their pollution to China where the sky is brown... think about that for a second.

China long has made goods cheaper than anywhere else this is before BC look it up it's nothing new.

Manufacturing in Australia was generally rubbish and expensive I still have the tools to prove it.

Having said that Australian manufacturing provided the skill set for the rest of the economy, note the skills were very poor worked with Germans in 85 they were 10 x's better tradesman.

Finally Germany still manufactures sort of shoots holes in many of the arguments put up here.

 

[mullokintyre]

Some key points about the US Enployment figures from Zero Hedge.
1. Last months huge number was revised down from 360,000 jobs to 297,000 jobs.
2. The month prior to that, August , was also revised downwards by62,000 jobs to 165,000 jobs
3. Eight out of the last nine months of BLS figures have been revised downwards, some months have had two downard revisons.
4. The adjusted figures that the BLS applies to the raw data created 412,000 jobs. So without this seasonal adjustment, the figure would have been deeply negative.
5. So many of the "new" jobs are not new employees, but existing employees taking a second or third job to make ends meet. In October, the (not seasonally adjusted) number of multiple jobholders was a record high 8.5 million, a surge of 396K in one month.

And finally, the unemployment rate has crept up to 3.9% from 3.8% which has triggered the Sahms rulle for Recession.
As a reminder, the rule, created by former Fed economist Claudia Sahm, posits the start of a recession when the three-month moving average of the unemployment rate rises by a half-percentage point or more relative to its low during the previous 12 months. The low for joblessness so far this year was 3.4% in April while October’s rate was 3.9%, the highest so far this year and following two readings at 3.8% in August and September. More importantly it means that there is now a 0.5% spread from the April low and while one can wait for the 3MMA to confirm it, we can now go on the record as saying that the Sahm's Rule has been activated and the countdown to the next recession has begun.
Given the massive influx of migrants , illegal or otherwise in the past twelve months, there must be a lot of people working off the books for cash, or the unemployment rate is significantly higher.
Mick

 

[TimeISmoney]

A couple of points...

Your current standard of living is supported by Chinese imports without them you wouldn't be able to afford the items.

The western world exported all their pollution to China where the sky is brown... think about that for a second.

China long has made goods cheaper than anywhere else this is before BC look it up it's nothing new.

Manufacturing in Australia was generally rubbish and expensive I still have the tools to prove it.

Having said that Australian manufacturing provided the skill set for the rest of the economy, note the skills were very poor worked with Germans in 85 they were 10 x's better tradesman.

Finally Germany still manufactures sort of shoots holes in many of the arguments put up here.

Even Germany uses China for manufacturing, some model BMW cylinder heads get cast in China and then they machine them in Germany. Europe has always had a better system for trades, it's like a Uni degree over there.