What is the real state of the economy?

[medusala]

I was thinking of Austerity in terms of the failed European approach to the GFC, but if you just mean he will cut, then yes I would agree to that.

Their approach to the GFC was what? See the deficits run up by numerous countries. Hardly austere.

Media beat up. See Krugman and his utter nonsense re the UK where spending was actually increasing whilst he was banging on about austerity.

He will have to cut bigtime to pay for his crazy parental leave scheme, but for all their bluster the Libs still listen to business and everyone knows there is no need for austerity in Australia and that it is a failed economic theory anyway.

Everyone knows? Who is everyone?

You, Krugman, Stiglitz and some ignorant journos?

Not everyone believes in pixies, trolls, unicorns and Keynesian economics.

Surely its just a coincidence that people who believe in such myths also tend to think this has been a good government.

The question is are all these BF members posting ridiculous theories about WA mining and our economy actually stupid or are they still so worried about the election result that they feel the need to spread this misinformation?

What ridiculous theories? That China is slowing is pretty obvious

 

[Slax]

The economy is rooted, mining is grinding to an absolute halt with the growth no stopped and it actually contracting. The economy is absolutely rudderless and it doesn't matter who wins in September nothing will change. Small mining companies are going to the wall and the big ones have stopped expansion projects and even stopped prodcution in some mines.

For those like Rats who want to say otherwise, please state where you get your information.

I have direct contacts into mining companies and know what is on order in the way of mining equipment from the big suppliers in Caterpiller, William Adams and Komatsu and they aren't doing anything, in fact they're all handing out forced redundancies at the moment, so not sure where people get the idea that mining is going well.

As for other parts of the economy, as we've all seen with Ford the manufacturing sector is dead and the flow on closure to car suppliers will see Holden close before the scheduled 2022 as well (probably around 2018). We do not offer value added products to the world and transport costs make us uncompetitive to everything except large scale bulk items (ie, mining, wheat, etc), realistically our economy is only a couple of steps ahead of most of Europe and heading for a crash landing.

 

[greennick]

The economy is rooted, mining is grinding to an absolute halt with the growth no stopped and it actually contracting. The economy is absolutely rudderless and it doesn't matter who wins in September nothing will change. Small mining companies are going to the wall and the big ones have stopped expansion projects and even stopped prodcution in some mines.

For those like Rats who want to say otherwise, please state where you get your information.

I have direct contacts into mining companies and know what is on order in the way of mining equipment from the big suppliers in Caterpiller, William Adams and Komatsu and they aren't doing anything, in fact they're all handing out forced redundancies at the moment, so not sure where people get the idea that mining is going well.

As for other parts of the economy, as we've all seen with Ford the manufacturing sector is dead and the flow on closure to car suppliers will see Holden close before the scheduled 2022 as well (probably around 2018). We do not offer value added products to the world and transport costs make us uncompetitive to everything except large scale bulk items (ie, mining, wheat, etc), realistically our economy is only a couple of steps ahead of most of Europe and heading for a crash landing.

1. Mining is not grinding to a halt, they're just moving from an investment dominated phase to a production dominated phase. Production will probably increase for the next 2 years as projects continue to come on line. Mineral prices are still very high (though have come down significantly off the historical highs). This will mean some job losses, however it always was going to happen as production couldn't continue to increase at the rates it has. This will be partly balanced by the continued expansion of the LNG export

2. Ford screwed itself by refusing to invest in a plant that could produce LHD models. When you constrain yourself to this limited of a market, you were never going to do well in the long term. Sure, the carbon tax and high dollar didn't help, but each of those will likely be gone soon...

 

[greennick]

I like all this crap we keep hearing about how Labor got us through the GFC and left us with low interest rates.

1. Labor spent $300b. Anyone could have spent $300b and got us through the GFC. They could have spent a fraction of that and got us through the GFC. The GFC stopped years ago, yet Labor is still spending $20-40b a year more than they receive...

2. By spending that money like it was going to evaporate if not spent tomorrow, it meant the RBA had less of an ability to decrease interest rates. This caused a large interest rate differential between us and most other countries, which is the strongest factor on the exchange rate. This in turn hurt Australian businesses, in particular those in manufacturing.

3. By borrowing the $300b largely from overseas interests, this caused further upward pressure on the AUD.

4. Interest rates are low because the economy isn't doing that well. The interest rate driven sectors of the economy (namely building and construction) are very sluggish. Interest rates were higher when we were supposedly in the GFC than they are now...

 

[Slax]

1. Mining is not grinding to a halt, they're just moving from an investment dominated phase to a production dominated phase. Production will probably increase for the next 2 years as projects continue to come on line. Mineral prices are still very high (though have come down significantly off the historical highs). This will mean some job losses, however it always was going to happen as production couldn't continue to increase at the rates it has. This will be partly balanced by the continued expansion of the LNG export

I'd love to share your optimism but I know for a fact that both Komatsu and Caterpillar are concerned about the state of mining in this country, they have both received an large number of cancelation to orders for new equipment and considering that mining vehicles come with a specified lifespan and the large mining companies do not try and extend the life of the vehicles it means that production is being stopped in some places and equipment moved. You don't move mining equipment unless you have too. In dollar terms we are talking into hundreds of millions worth of equipment.

The idea that the mining boom will continue to drive the Australian and WA economies is a farce and Tony Abbott is going to find life a lot tougher than he thought.

 

[Power Raid]

I'd love to share your optimism but I know for a fact that both Komatsu and Caterpillar are concerned about the state of mining in this country, they have both received an large number of cancelation to orders for new equipment and considering that mining vehicles come with a specified lifespan and the large mining companies do not try and extend the life of the vehicles it means that production is being stopped in some places and equipment moved. You don't move mining equipment unless you have too. In dollar terms we are talking into hundreds of millions worth of equipment.

The idea that the mining boom will continue to drive the Australian and WA economies is a farce and Tony Abbott is going to find life a lot tougher than he thought.

mining is boom and bust but will remain strong from an operational point of view for some time. That said the froth and bubble is gone, meaning new projects trying to get into production will struggle unless they are a producing in the lowest quartile and a commodity of interest.

I wouldn't want to be in gold, metallurgical coal or iron ore but copper, zinc, tin and uranium are interesting.

Companies that rely upon development like engineers will find it tough times ahead but operational guys should be fine.

 

[Enya]

Enya - I don't think that link is working? Any chance of cutting-and-pasting the relevant section?

Might have to do a right-click, save-as.

 

[Enya]

I like all this crap we keep hearing about how Labor got us through the GFC and left us with low interest rates.

1. Labor spent $300b. Anyone could have spent $300b and got us through the GFC. They could have spent a fraction of that and got us through the GFC. The GFC stopped years ago, yet Labor is still spending $20-40b a year more than they receive...

2. By spending that money like it was going to evaporate if not spent tomorrow, it meant the RBA had less of an ability to decrease interest rates. This caused a large interest rate differential between us and most other countries, which is the strongest factor on the exchange rate. This in turn hurt Australian businesses, in particular those in manufacturing.

3. By borrowing the $300b largely from overseas interests, this caused further upward pressure on the AUD.

4. Exchange rates are low because the economy isn't doing that well. The interest rate driven sectors of the economy (namely building and construction) are very sluggish. Exchange rates were higher when we were supposedly in the GFC than they are now...

The last three points are nonsense.

 

[Power Raid]

The last three points are nonsense.

are you for real?

how would you suggest it happened

 

[Enya]

are you for real?

how would you suggest it happened

With the Federal Reserve embarking on the biggest exercise in money expansion in history, Australia competing in a race to the bottom would have been madness. Looking at the USD/AUD exchange rate as evidence of poor policy in Aus is telling only half of the story.

Also, the AUD crashed to around .60 USD during the GFC and didn't beat it's pre-GFC high until late 2011. Same story regarding the TWI.

Sure, criticise the debt spending. Don't attribute causes that clearly didn't exist.

 

[Power Raid]

With the Federal Reserve embarking on the biggest exercise in money expansion in history, Australia competing in a race to the bottom would have been madness. Looking at the USD/AUD exchange rate as evidence of poor policy in Aus is telling only half of the story.

Also, the AUD crashed to around .60 USD during the GFC and didn't beat it's pre-GFC high until late 2011. Same story regarding the TWI.

Sure, criticise the debt spending. Don't attribute causes that clearly didn't exist.

Too much spending and too much waste

which would you have preferred? a measured response from the government which enabled the RBA to work with the government.

or the government pumping and dumping cash into pink bats, tv set boxes, solar panels and the harvey norman cash give away resulting in the RBA countering the stimulus with high interest rates, resulting in a high AUD and strangling the eastern states?


We have spent $B's and have little to show for it. We don't have a full appreciation yet of the waste until we start experiencing the pain of paying off the debts. It is fine for guys who have set up their lives but for the under 30s still building wealth, they will feel the pain the most.

This is has resulted in the biggest swindle of shifting wealth from the youth to the aged.

 

[Enya]

Hey, I'm not disputing that a lot of the spending was on frivolous stuff. Just the idea that it had short term economic consequences regarding interest rates and the exchange rate. Did nothing of the sort.

 

[King Elvis]

The BER and the like came into play while the RBA was increasing interest rates...?

 

[Power Raid]

The BER and the like came into play while the RBA was increasing interest rates...?

Spot on!

http://australianpolitics.com/topics/rba/interest-rates-since-1990

The fundamentals behind the program were good but the program should have been rolled our in a measured manner. If it wasn't rolled out in such haste we probably wouldn't have seen such a blip in the interest rates, the high AUD we could have reduced the waste.

http://www.theaustralian.com.au/national-affairs/ber-waste-tops-15b/story-fn59niix-1226090622303

of well, at least we have an opportunity every three years to hold them accountable

 

[tazzietiger]

I'd love to share your optimism but I know for a fact that both Komatsu and Caterpillar are concerned about the state of mining in this country, they have both received an large number of cancelation to orders for new equipment and considering that mining vehicles come with a specified lifespan and the large mining companies do not try and extend the life of the vehicles it means that production is being stopped in some places and equipment moved. You don't move mining equipment unless you have too. In dollar terms we are talking into hundreds of millions worth of equipment.

The media are now reporting on the cut backs.

Companies that supply equipment and services to the mining sector are flagging lower profits and job cuts as the investment boom loses steam.
Thousands of mining jobs have been lost over the past year, especially in Queensland coal mines, as projects are completed or scaled back.
The job losses have prompted a string of downgrades from contractors as the once-in-a-century resources boom peaks.
West Australian earth-moving firm NRW is the latest contractor to announce a profit downgrade.
NRW's net profit is expected to fall by around 25 per cent and the firm has slashed its workforce by a quarter.
West Australian geology company Digirock sees the downturn as "quite dire".
"We are bunkering down for the next two years," Digirock managing director Peta Libby said.
"I think we are at the bottom, but we could stay at the bottom for a while."
Construction firms with links to mining are also bracing for job losses.
Executive general manager of Georgiou Group John Galvin says "there are many people who have been made redundant in the last couple of months out there looking for work."

http://www.abc.net.au/news/2013-06-11/australia-mining-supply-jobs-shaky-as-boom-loses-steam/4747478

 

[Enya]

The BER and the like came into play while the RBA was increasing interest rates...?

I don't see the relationship you are trying to draw.

 

[Power Raid]

I don't see the relationship you are trying to draw.

have a look at the RBA links and compare the interest rates with the stimulus

 

[greennick]

The last three points are nonsense.

How so?

Are you saying borrowing money from overseas does not push up the exchange rate? It is simple supply and demand.

Are you saying that expansionary fiscal policy does not have an inflationary effect and does not result in less of a requirement and ability to reduce interest rates?

 

[Enya]

How so?

Are you saying borrowing money from overseas does not push up the exchange rate? It is simple supply and demand.

Are you saying that expansionary fiscal policy does not have an inflationary effect and does not result in less of a requirement and ability to reduce interest rates?

The evidence doesn't match your theory.

Exchange rate is set by many things. A lot of it has to do with US monetary policy.

The cash rate was 4.75% at its peak. If the economy can't handle that then there are more fundamental structural problems than government policy.

 

[Enya]

have a look at the RBA links and compare the interest rates with the stimulus

Correlation does not prove causation.

Interest rates were always going to rise after the GFC.

 

[Power Raid]

The evidence doesn't match your theory.

Exchange rate is set by many things. A lot of it has to do with US monetary policy.

The cash rate was 4.75% at its peak. If the economy can't handle that then there are more fundamental structural problems than government policy.

you are almost there

 

[Enya]

you are almost there

Almost where?

 

[tazzietiger]

More mass job losses this time at retailer Target.

Staff at Target headquarters in Geelong are already walking out the door with boxes of their possessions after being made redundant this morning.

A total of 260 staff have been made redundant after management earlier told the more than 1000 Geelong staff to be at work this morning for an announcement on expected job cuts.
Staff areas where there have been sackings over the course of the morning include contract procurement, marketing, corporate affairs and store design.


Read more: http://www.theage.com.au/business/target-sacks-260-in-geelong-20130612-2o2yq.html#ixzz2Vy2cs8or

 

[Admiral Byng]

Over the last year or two I have been developing my own economic theory.

My theory on the Achilles Heel of the Australian economy is the high cost of housing. I think all we have done with the mining boom (in this state at least) is turn it into a property boom as people flocked in looking for jobs. This has burnt lots of ordinary people in the cost of housing - both rents and mortgages. It seems to have soaked up all the extra discretionary income people had as a result of the boom and then some. I reckon this is what is driving up the cost of doing business in Australia, not the unions, or IR laws, or carbon pricing. Nobody wants to work for low wages if they aren't enough to cover a mortgage or rent.

You can't address the cost of doing business in Australia without doing something about the cost of housing. Not the cost of living in general terms, the cost of housing specifically. An extra $25 a year on electricity and gas because of carbon pricing isn't the real issue when rents are going up by $25 per week with every 6-month revision.

Problem is that no political party will do anything about it. Their policies are aimed specifically at the "struggling" McMansionites and property investors.

Investment in property is all well and good up to a point, it benefits the individual, but at some stage if everyone is doing it the overall effect becomes detrimental to the nation as a whole.

 

[tazzietiger]

Over the last year or two I have been developing my own economic theory.

My theory on the Achilles Heel of the Australian economy is the high cost of housing. I think all we have done with the mining boom (in this state at least) is turn it into a property boom as people flocked in looking for jobs. This has burnt lots of ordinary people in the cost of housing - both rents and mortgages. It seems to have soaked up all the extra discretionary income people had as a result of the boom and then some. I reckon this is what is driving up the cost of doing business in Australia, not the unions, or IR laws, or carbon pricing. Nobody wants to work for low wages if they aren't enough to cover a mortgage or rent.

You can't address the cost of doing business in Australia without doing something about the cost of housing. Not the cost of living in general terms, the cost of housing specifically. An extra $25 a year on electricity and gas because of carbon pricing isn't the real issue when rents are going up by $25 per week with every 6-month revision.

Problem is that no political party will do anything about it. Their policies are aimed specifically at the "struggling" McMansionites and property investors.

Investment in property is all well and good up to a point, it benefits the individual, but at some stage if everyone is doing it the overall effect becomes detrimental to the nation as a whole.

Growth in house prices will slow down along with the economy as it slows down. As for needing a housing crash to help us compete globally outside of the mining sector no side of politics at state or fed level will advocate for that. Policy's like the carbon tax which increases power bills doesn't help the wider economy like the retail sector. I don't support the idea that we can ignore bad tax policy just because other price increases are happening as well.