The state of the economy at the street level

sptrawler · 11 April 2015

McLovin said:
Tasmania seems to have the trifecta of narrow economic base, poorly educated workforce and geographically isolated from the mainland.

And Jackie Lambie.

Yes add to that a lovely picturesque landscape and reasonably priced housing, makes for a wonderful place to retire.

All you need is someone to provide the welfare, and essential services.

As smurph said, the minerals in W.A will be gone in this century, at current extraction rates.

Well my guess is they will be gone much quicker than that.
In the 1960's when I was a kid in the Pilbara, Hamersley Iron imported the Dart truck from the U.S it could carry 80ton.
Now, that is a baby, they could fill that with one shovel scoop.

In the next 10 to 20 years, machinery will be removing ore, at phenomenal rates.

Who pays Tasmania's welfare bill, when Australia is broke?

Lambie, like Shorten, Milne and the rest of the muppets need a reality check, absolute loonies.IMO

banco · 11 April 2015

sptrawler said:
Yes add to that a lovely picturesque landscape and reasonably priced housing, makes for a wonderful place to retire.

All you need is someone to provide the welfare, and essential services.

As smurph said, the minerals in W.A will be gone in this century, at current extraction rates.

Well my guess is they will be gone much quicker than that.
In the 1960's when I was a kid in the Pilbara, Hamersley Iron imported the Dart truck from the U.S it could carry 80ton.
Now, that is a baby, they could fill that with one shovel scoop.

In the next 10 to 20 years, machinery will be removing ore, at phenomenal rates.

Who pays Tasmania's welfare bill, when Australia is broke?

Lambie, like Shorten, Milne and the rest of the muppets need a reality check, absolute loonies.IMO

Given the Government/s seem to have been operating on the basis that mining was Australia's future it always seemed inconsistent that they were so intent on increasing the population through immigration which just meant the take per capita from Australia's mineral resources would be lower.

sptrawler · 11 April 2015

banco said:
Given the Government/s seem to have been operating on the basis that mining was Australia's future it always seemed inconsistent that they were so intent on increasing the population through immigration which just meant the take per capita from Australia's mineral resources would be lower.

Yes, and that has been going on since the mid 1960's, when major resource reserves were found.
Why didn't the various Governments demand GM and Ford, expand their manufacturing to the world car platform? Instead of building the plants in Thailand and South Korea?

Well it is fairly obvious, it is a hard argument to win.

Why has all our manufacturing gone?
How do we get it back? If we don't get it back, how do we support our quality of life and welfare system?

I don't think either party has the answer, but I do think the coalition is the only one acknowledging the question.
Bill is dribbling away in the background, hoping everyone forgets the impotent time, they last spent in office.
More warm feelgood spending on $hit we can't afford.lol

Smurf1976 · 11 April 2015

sptrawler said:
Yes, and that has been going on since the mid 1960's, when major resource reserves were found.

In short, we've trashed manufacturing in SA, Tas and with less consequence in Vic and NSW, pinning all our future plans on digging up coal, gas and iron ore in Qld and WA. It works as long as someone wants the ore and we've got enough easily accessed, high grade deposits left to sell. But it can't work forever - firstly because of resource limits, secondly because the writing is very clearly on the wall for coal in particular.

It's like throwing in your job, and having your entire family do the same, because you won the lottery. Some years later the money's spent and then you're in trouble.

Back to the economy at the street level, thinking of people I know the majority I'd describe as "cautious" when it comes to money at the moment. Paying down debt or building up savings / investments is the order of the day, driven by concern about the future.

sptrawler · 11 April 2015

Smurf1976 said:
In short, we've trashed manufacturing in SA, Tas and with less consequence in Vic and NSW, pinning all our future plans on digging up coal, gas and iron ore in Qld and WA. It works as long as someone wants the ore and we've got enough easily accessed, high grade deposits left to sell. But it can't work forever - firstly because of resource limits, secondly because the writing is very clearly on the wall for coal in particular.

It's like throwing in your job, and having your entire family do the same, because you won the lottery. Some years later the money's spent and then you're in trouble.

Back to the economy at the street level, thinking of people I know the majority I'd describe as "cautious" when it comes to money at the moment. Paying down debt or building up savings / investments is the order of the day, driven by concern about the future.

Yep, we're on the same page, some on the forum say $600k is a great retirement, I'm thinking kiss your ass goodbye with that much.

Unless the media wake up to the severity of our situation, and start to report logical non inflamitory economical analysis, we are in really deep $hit.

Most I know are only falling on their feet near retirement, due to inheritances, this won't be available for our kids.IMO

The Governments will have to re introduce inheritance taxes or death duties.IMO

The ridiculous situation in federal politics, will not allow measures to be put in place to allow meaningful budget changes.

In the end it will require drastic action, death duties like the U.K 40% gives a real sugar hit, Keating got rid of them, easily re introduced.

Then gen Y really see how life was.lol

How does the old saying go? The first generation make it, the second generation enjoy it and the third generation blow it.

So how do we turn it around? we vote in Clive Palmer, Lambie a Rugby player and someone who really likes cars.lol

Obviously at street level, no one gives a $hit.Australia your standing in it.

sptrawler · 12 April 2015

Smurf1976 said:
Back to the economy at the street level, thinking of people I know the majority I'd describe as "cautious" when it comes to money at the moment. Paying down debt or building up savings / investments is the order of the day, driven by concern about the future.

That's great untill you've lost your job.
I think the proverbial is hitting the fan, when 45 yr old PSC's with diplomas in engineering can't get jobs.

That's scary and it's happening.

McLovin · 12 April 2015

sptrawler said:
Why has all our manufacturing gone?
How do we get it back? If we don't get it back, how do we support our quality of life and welfare system?

It's been gone for the better part of thirty years and the sky hasn't fallen in. If we'd kept manufacturing, sheltered as it was in the 1970s under sky high tariffs, we'd be where Argentina is now. It's not as though Australia was struggling until the mining boom -- far from it. While there will be a readjustment at the end of the boom (it has probably already started) I wouldn't be betting on the doomsday scenarios that get bandied about on this forum, all of which assume a steady state into the future, something that almost never plays out in reality.

All this talk about Tasmania, Tasmania has about 2% of the population living in it. It's hardly representative of Australia.

I guess a bit of panic is good, it gets the things that need to be done done.

sptrawler · 12 April 2015

McLovin said:
It's been gone for the better part of thirty years and the sky hasn't fallen in. If we'd kept manufacturing, sheltered as it was in the 1970s under sky high tariffs, we'd be where Argentina is now. It's not as though Australia was struggling until the mining boom -- far from it. While there will be a readjustment at the end of the boom (it has probably already started) I wouldn't be betting on the doomsday scenarios that get bandied about on this forum, all of which assume a steady state into the future, something that almost never plays out in reality.

All this talk about Tasmania, Tasmania has about 2% of the population living in it. It's hardly representative of Australia.

I guess a bit of panic is good, it gets the things that need to be done done.

That is all true McLovin, the difference between the mid 60's and now, is the population was 12million now 24million.
Whether that proves a positive or a negative is yet to be seen, also your assumption that a silver bullet will be found, will become apparent over time.

Currently the only real information we have, is the knowledge that our lifestyle has to now, been funded by our manufacturing, mining a service industries.

The first has almost gone, the second has definite time limit and the third doesn't do much other than send money round in a circle.

Also to say Australia wasn't struggling before the mining boom, is somewhat incorrect.
Before the mining boom commenced in the mid 60's most middle class Australians really struggled.
Wages were low, most rented and to buy a house was a lifelong ambition. As a kid I remember my mother always struggling to make ends meet, actual meat on the table was a special treat.
There was no single mothers pensions and welfare was minimal.
There was nowhere near the affluence, we now enjoy.

Don't get me wrong I don't think it is all doom and gloom, but I do believe there needs to be a massive change in work ethic and endeavour. Necessity is the mother of invention.

Smurf1976 · 12 April 2015

McLovin said:
It's not as though Australia was struggling until the mining boom -- far from it.

Unemployment was a chronic problem from the early 1980's until the mid-00's. The figures bounced around, but most of the time there was no shortage of people out of work and that's over a period of two decades.

All this talk about Tasmania, Tasmania has about 2% of the population living in it. It's hardly representative of Australia.

The concern isn't so much about Tas per se, but that it represents what may well lie ahead for other states.

SA now looks to be clearly going down the same track that Tas has already gone down and for the same underlying reasons. Indeed if you look at unemployment right now, SA is in worse shape than Tas.

Looking further ahead, the fundamental economic base of Qld and especially WA, that is mining, is clearly not sustainable forever. WA is basically a two trick pony, iron and gas, with everything else small in comparison. Both seem to be reaching their realistic limits to growth now, the market isn't there for iron to expand and costs are becoming less competitive for gas. Then what?

At least Tasmania manufactured everything from footwear and linen through to chemicals and paper. It took a lot of individual closures to bring about the economic trouble the state has experienced. In contrast, WA is far more dependent on two pillars than Tas ever was.

As for Qld, well they're more diversified than WA with a lot of agriculture and tourism. But mining, particularly coal, is nonetheless a huge thing in Qld and ultimately that can't continue forever. Without starting yet another debate about climate change, it seems fair to say that the writing is on the wall for coal in the longer term. Regardless of any science, the political direction is increasingly to move away from coal.

The thread has gone a bit off the original topic, but the point being made is really about the future. If we don't manufacture and don't have growth in iron ore and coal, then the "Tasmania problem" suddenly becomes the "Tas, SA, WA and Qld" problem and that's too big to offset by means of wealth transfer through the taxation system. We can afford to prop up Tas and SA given their population size and of course many will relocate to get jobs elsewhere. But it's game over in a big way if WA and Qld join that list.

sptrawler · 12 April 2015

Getting back on thread, the problem at street level is, we are at the end of a major growth phase.

What do we have to show for it? lots of SS Comodore utes, heaps of Harley Davidsons and of course expensive housing.

What we don't have, is any increase in manufacturing capacity, one would expect from massive construction projects.

Now we are even prepared to allow O/S companies, to extract our gas offshore, how is that going to help at street level.

It's o.k talking about the next 'phase', that will generate growth, post mining boom.

But from the street, it sounds like people away with the fairy's, apologies to any fairy's no offence intended.

On a brighter note, GO FREO.

McLovin · 13 April 2015

Smurf1976 said:
Unemployment was a chronic problem from the early 1980's until the mid-00's. The figures bounced around, but most of the time there was no shortage of people out of work and that's over a period of two decades.

I'm not sure I'd agree with that. The early 1980s was a dismal period economically for Australia. From the end of the '91 recession it was like being in a different economy. We barely felt the Asian financial crisis or the aftermath of September 11. There was no spike in unemployment and the long term downward trend in remained. We entered the mining boom as one of the richest countries in the world. So, respectfully, I disagree.

That's not to say Australia doesn't have problems in its labour market or that the decline in manufacturing and unskilled jobs didn't leave some people out. The unfortunate by-product of the upskilling of the labour force can be seen in south west Sydney, amongst other places. Finishing school in year 10 (or earlier) without any intention of further education is no longer an option.

Smurf1976 said:
Then what?

I don't know, but an educated workforce is far more able to adapt than a poorly educated one. I don't believe that economies can't transform, but this will be a monumentally more difficult task for Tasmania than the mainland states. Australia doesn't live on the sheep's back anymore, thirty years ago our biggest non-resource export didn't exist as an industry, so I have a hard time beliving that SA/WA/Qld will do nothing.

Anyway, we are well off topic now, but an interesting discussion.

CanOz · 13 April 2015

McLovin said:
It's been gone for the better part of thirty years and the sky hasn't fallen in. If we'd kept manufacturing, sheltered as it was in the 1970s under sky high tariffs, we'd be where Argentina is now. It's not as though Australia was struggling until the mining boom -- far from it. While there will be a readjustment at the end of the boom (it has probably already started) I wouldn't be betting on the doomsday scenarios that get bandied about on this forum, all of which assume a steady state into the future, something that almost never plays out in reality.

All this talk about Tasmania, Tasmania has about 2% of the population living in it. It's hardly representative of Australia.

I guess a bit of panic is good, it gets the things that need to be done done.

Great post mclovin!

qldfrog · 13 April 2015

McLovin said:
Australia doesn't live on the sheep's back anymore, thirty years ago our biggest non-resource export didn't exist as an industry, so I have a hard time beliving that SA/WA/Qld will do nothing.

Anyway, we are well off topic now, but an interesting discussion.

and it is
if I well remember a graph i saw in the AFR a month or so ago, last year export revenues were iron, coal some minerals and then FAR FAR FAR behind
a bit of tourism
education as a service (aka the sale of australian residency visa against cash)
minor agricultural sales and a tiny bit of services
we are talking 1 to 8/10 ratios on the graph
So now that the sell price is basically cut in two for the huge majority of last year export what do you see able to take over?
What are we going to sell ? More visas?
and a country which can not sell but only import is doomed.
but you have a very good point about a bit of panic needed to move things;It will take decades to recover if we do IMHO

qldfrog · 13 April 2015

http://dfat.gov.au/trade/resources/trade-at-a-glance/Pages/top-goods-services.aspx
for the top export 2013
2014 is even less balanced
then change that to crashed price for coal/iron ore and petroleum and you do not want to be Joe Hockey

Smurf1976 · 13 April 2015

McLovin said:
I'm not sure I'd agree with that. The early 1980s was a dismal period economically for Australia. From the end of the '91 recession it was like being in a different economy. We barely felt the Asian financial crisis or the aftermath of September 11. There was no spike in unemployment and the long term downward trend in remained. We entered the mining boom as one of the richest countries in the world. So, respectfully, I disagree.

Some interesting charts here put it into perspective. http://www.budget.gov.au/2004-05/bp1/html/bst4-01.htm

Unemployment shot up after 1974, marking an end to about 35 years of continuously low unemployment around 2%. It went up again in the early 1980's to around 10%, briefly dipped down to 6% by the end of the 80's then promptly shot up again to about 11%, not coming back down to 6% again until around the year 2000. So with the exception of a year or two at the end of the 1980's, we had 20 years of unemployment in the 6 - 11% range.

an educated workforce is far more able to adapt than a poorly educated one.

Agreed as a general principle, though there still need to be jobs in the first place.

I don't believe that economies can't transform, but this will be a monumentally more difficult task for Tasmania than the mainland states. Australia doesn't live on the sheep's back anymore, thirty years ago our biggest non-resource export didn't exist as an industry, so I have a hard time believing that SA/WA/Qld will do nothing.

Tas has transformed to a significant extent, tourism is now easily the biggest job creator, but there's a scale issue. What on earth is WA going to do when the iron ore boom turns to bust? Bust as in outright production declines, not merely a fall in price as we're seeing at the moment? It will happen someday, and we're talking about close to a quarter of the entire country's exports there and that's not easily replaced. Closing a few factories in Tas and SA is a drop in the ocean compared to the scale of mining in WA.

We've got somewhat off topic but it's an interesting discussion. Whilst I disagree on some points, I certainly do respect the alternative views. For that matter, I hope you're right and I'm wrong with this one.

qldfrog · 13 April 2015

Smurf1976 said:
We've got somewhat off topic but it's an interesting discussion. Whilst I disagree on some points, I certainly do respect the alternative views. For that matter, I hope you're right and I'm wrong with this one.

same here
I really hope both Smurf and I are wrong

sptrawler · 13 April 2015

I think it is a bit of a phurphy to say a greater number of students going on to uni is going to help.
Apparently the units are concerned about the lack of students doing science engineering mathematics and chemistry.
Apparently they are inundated with students wanting to do warm feel good courses.lol

nulla nulla · 14 April 2015

sptrawler said:
I think it is a bit of a phurphy to say a greater number of students going on to uni is going to help.
Apparently the units are concerned about the lack of students doing science engineering mathematics and chemistry.
Apparently they are inundated with students wanting to do warm feel good courses. lol.

A problem facing recent Science graduates is a lack of employment opportunities. It seems that the pendulum has swung from not enough science graduates for the past employment demand levels, to too many graduates for the present employment opportunities. Science courses were at one point discounted to encourage enrollments. They are no longer discounted.

McLovin · 14 April 2015

Smurf1976 said:
Some interesting charts here put it into perspective. http://www.budget.gov.au/2004-05/bp1/html/bst4-01.htm

Unemployment shot up after 1974, marking an end to about 35 years of continuously low unemployment around 2%. It went up again in the early 1980's to around 10%, briefly dipped down to 6% by the end of the 80's then promptly shot up again to about 11%, not coming back down to 6% again until around the year 2000. So with the exception of a year or two at the end of the 1980's, we had 20 years of unemployment in the 6 - 11% range.

But if you go back further then that period from the end of the War to 1974 is an outlier. Was there perhaps some post-War euphoria, massive infrastructure investment and the like?

The unemployment rate has fluctuated throughout the century, with peaks and troughs closely reflecting movements in the economic cycle (graph 6.44). In 1906, unemployment stood at 6.7%, and fluctuated at around this rate (though it rose briefly to a little over 9% in 1915, and just over 11% in 1921) until 1929 when unemployment stood at 11.1%. The unemployment rate then increased rapidly to 19.3% in 1930, before reaching a peak of 29.0% in 1932, in response to the economic conditions of the Great Depression. This unprecedented high rate of unemployment persisted for two years, before the unemployment rate fell rapidly to below 10% by 1937. During World War II, unemployment in Australia reached a new low of 1.1%. This marked the beginning of a sustained period of low unemployment, with the unemployment rate generally remaining below 3% until the early 1970s.

http://www.abs.gov.au/AUSSTATS/abs@.nsf/Previousproducts/1301.0Feature Article142001

As an aside those ABS Year Books can be pretty interesting. Why don't they still gather stats on the "masculinity of illegimate births registered in Australia"?

Smurf1976 said:
Agreed as a general principle, though there still need to be jobs in the first place.

Of course, but my point is the investment will tend toward a knowledgeable workforce. Tasmania lags the Eastern states by about 10-15 points when it comes to high school completion rates, iirc. It kind of limits the kind of industry that will see the state as an attractive proposition.

Smurf1976 said:
Tas has transformed to a significant extent, tourism is now easily the biggest job creator, but there's a scale issue. What on earth is WA going to do when the iron ore boom turns to bust? Bust as in outright production declines, not merely a fall in price as we're seeing at the moment? It will happen someday, and we're talking about close to a quarter of the entire country's exports there and that's not easily replaced. Closing a few factories in Tas and SA is a drop in the ocean compared to the scale of mining in WA.

Again, I don't know what WA will do, but for the first time in Australia's history we're in the right part of the world. I do think talk of the end of mining is WA is somewhat premature. With current technology and prices there is 40-70 years (depending on whose forecasts you believe) of ore left. I would hate to make any sort of forecast of what the world will be like in 40-70 years, let alone try and forecast the demand/supply/price/extraction ability of a single mineral. Australia seems to squander its booms then get its act together once the **** hits the fan, this boom has played to the script so far.

Smurf1976 said:
We've got somewhat off topic but it's an interesting discussion. Whilst I disagree on some points, I certainly do respect the alternative views. For that matter, I hope you're right and I'm wrong with this one.

Always good to hear others opinions.

McLovin · 14 April 2015

Smurf1976 said:
Tas and SA both suffer hugely from the absentee landlord problem, not just literally but politically as well.

Picking up on this point, I agree with you smurf. We have a federation but the mindset in Canberra increasingly sees the states as a bothersome impediment to progress. Federations like Germany and the US where states have much more autonomy have much more decentralised populations with industry and jobs spread much more widely. Instead in Australia we have a bunch of premiers who go cap in hand each year to the Commonwealth, there is no competition, just net payers and net recipients and we end up with a bizarre discussion about welfare transfers between the states.

I often wonder how much better states would be if they were given some autonomy over their revenue base and could compete with lower rates of tax etc for industry.

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