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The Forum > Article Comments > Caught between a rock and a hard place, Australia can’t just dig its way out > Comments

Caught between a rock and a hard place, Australia can’t just dig its way out : Comments

By Shahar Hameiri and Toby Carroll, published 30/11/2011

While Australia appears to have so far escaped the ravages of the deep economic and political crisis now afflicting Europe and the US, the resources boom creates massive problems domestically and externally.

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A very good analysis, I feel and one that had to be given. The really big issue that appears to be developing of late is that of China's loan portfolio. With much of the finance being provided by the EU and US, any downturn in those economies will result in a reduction in new loans. In the event of the investment not meeting production demands and a subsequent output loss occurring, existing loans may be 'pulled' creating a recession in China. Either way, with no new investment in China's massive manufacturing industry, demand for resources will also fall. The eggs in the basket could be broken and the wind of change may leave Australia wearing the contents.

Personally, and I know it sounds naive, I believe we should concentrate on making the goods required to suit our own economy first and only export the surplus. We are after all, a nation of ideas people, born out of necessity. In the past great inventions like the ‘Header’ have gone overseas for manufacture and instead we lament the invention of the ‘Hills Hoist’. Some of the best ideas in sustainable energy have come from the land of extremes and yet most are now imported from other countries. The Wind Turbine is not something beyond our capabilities and yet we buy them from the US, the EU and Asia.
We sell iron ore to China and Japan and then buy cars back from those countries, made from that ore. Why don’t we make our own cars?

Economies of scale I hear you say, well we can scale up as we have in farming produce. The problem with Australia is that large corporate salesmen with gleaming teeth promise our politicians the Earth and then proceed to take it, literally, leaving a giant Aero Bar in its place. The jobs created, as stated in the article, are few and the profits huge. When the resources run out, the giants will depart and find another vast land to exploit. Our economy will be left in tatters
Posted by David Leigh, Wednesday, 30 November 2011 12:02:43 PM
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Australians have an assatiable appetite for foreign goods, if you can solve that problem or wait until it becomes the only way you can obtain goods, the trend will continue. The worst part of the iron ore mining is they are only mining the ore that is mountainized. AU will ultimately be left with the not so easy stuff to get.
Posted by 579, Wednesday, 30 November 2011 1:06:24 PM
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This article is better argued than some that take an anti-resource stance, but it still relies on half-truths and deceptions to make its case.

“more than ever the wealth of the few comes at the expense of the many”, it says.

This is wrong. Real living standards are improving across the income spectrum:

http://www.abs.gov.au/ausstats/abs@.nsf/Lookup/by%20Subject/1370.0~2010~Chapter~Household%20economic%20wellbeing%20(5.3)

The authors assume that the rich getting richer means the poor get poorer. But if my real income is rising I’m better off, even if Twiggy Forrest’s income is growing faster still. I’d rather live in a society of unequal but positive gains in living standards than one where are all in equal decline.

Australia’s high exchange rate is squeezing exporters and import competitors. But not all of this is due to the resources boom. Exchange rates reflect the relative strengths of economies, and most developed economies – USA, EU, Japan – are pretty sick. So we’re a safer bet for investors, and our higher interest rates offer better returns. The resources boom is not solely responsible for the high exchange rate. And the woes of education owe as much to changes in government policy as to exchange rates. Anyway, the high Australian dollar benefits Australian consumers through cheaper imports, holidays, etc. The high exchange rate means we can swap our exports for a larger volume of exports, boosting real disposable income.

Likewise, direct employment in the mining sector is low, but many jobs in other industries depend on mining. In WA, our biggest mining State, the ABS estimated that in 2008 5.7% of the employees worked in mining operations, while 8.4% worked in mining support and 5.9% contracted to mining – that’s 1 in 5 jobs dependent on mining.

http://www.ausstats.abs.gov.au/ausstats/subscriber.nsf/0/DF810F0DCC444C4CCA2575D0001C4392/$File/62095_oct%202008.pdf

Since then, the importance of mining will have grown.

The authors talk of social harm inflicted by the resources boom. They provide no evidence for this, but I would have thought rising incomes across the income spectrum, one of the lowest unemployment rates in the OECD and a growing flood of royalties and taxes constitutes evidence of social benefit
Posted by Rhian, Wednesday, 30 November 2011 3:21:53 PM
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Sure, the mining companies are in there to make a profit, but whether or not taxes and royalties are being well spent is not the responsibility of the mining companies.

It is the responsibility of government and the public service, and I do think that there has been such massive squandering of public money under this federal government, it is time for some type of class action to find the people legally responsible.

The author does not put forward any alternative to mining other than “higher education (our number 3 earner), tourism (number 5) and manufacturing”

I would think that higher education only employs a few, and most profits go into the pockets of a very few.

Tourism is similar, and made worse by the fact that so many employed in tourism are backpackers on working holidays.

That leaves manufacturing, but after the education system has been allowed to operate with minimal accountability for so many years, there are such low numbers of people with skills in industry, that it would not enable a manufacturing industry in Australia to grow much further.

Overall, I attribute poor decision making by government and members of the public service, and an education system that has no accountability as Australia’s greatest threats for its long term economy, and not mining.
Posted by vanna, Sunday, 4 December 2011 7:50:00 AM
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