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The Forum > Article Comments > The canary in the Australian economy > Comments

The canary in the Australian economy : Comments

By Robert Tilleard, published 29/1/2013

If anyone was still wondering about the changing nature of the mining investment boom - it should look north. Pacific Aluminium is the canary in the Australian economy.

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Government support = taxpayer handouts ie subsidies

The best support the government can provide is to get out of the way. No carbon dioxide tax, no mining tax, no restrictive labour laws, no environmental nonsense. Let business sink or swim in a free market.
Posted by DavidL, Tuesday, 29 January 2013 10:20:43 AM
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aluminium is in decline right around the world. The only thing we get from mining is Tax, we don't sell iron ore or any other sort of ore, company's sell ore.
Posted by 579, Tuesday, 29 January 2013 11:41:18 AM
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579
That is a salutary reminder:[private] companies sell ore [not "us"]. But who owns the ore?
Posted by Leslie, Tuesday, 29 January 2013 12:00:19 PM
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The suggestion that we spend multi-millions to extend a pipeline just so the remote town of Nhulunbuy can continue to exist is outrageous. If the jobs go and people are forced to move from Nhulunbuy well, I'm sure its a nice place if you like remote parts of Arnhem Land, but maybe that wouldn't be a tragedy.
Posted by Curmudgeon, Tuesday, 29 January 2013 12:07:59 PM
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The author correctly identifies the major problem that is adversely affecting not only the mining sector, but also the other main industry sectors, namely the overvalued Australian dollar. It is a problem that appears unlikely to go away in a hurry, unless perchance the right 'innovative policy choices' are made in the very near future.

Legislating for the subsidisation of renewable energy development, the carbon tax, and the mining tax, although innovative, clearly exacerbated the main industry sector problems.
Posted by Raycom, Tuesday, 29 January 2013 12:12:05 PM
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Because of its lightness aluminium is an important metal.
I think the other plant in Australia is under threat anyway and
Kurri Kurri has closed already.

If it is a long term only supplier in Australia it might well make a
pipeline or a power line from Darwin a practical proposition.
A local supply of aluminium is a security infrastructure.
After all everything will have to become more local in future.
Posted by Bazz, Tuesday, 29 January 2013 12:21:02 PM
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I think this idea of the 'canary' as outlined in the article applies to miners who also engage in energy intensive minerals processing. The article states that it's the alumina production that is threatened and not the basic ore extraction.

Surely the majority of Aust mining is just that, basic ore extraction only. With the capital and energy intensive metals manufacture conducted overseas.

So how does it then follow that all of Aust mining faces the same risks as Pacific Aluminium?
Isn't it really more the currency risk? Though even at current dollar levels Rio is not about to stop digging...
Posted by pedals, Tuesday, 29 January 2013 2:35:12 PM
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Our Aluminium Industries get enormous subsidies by our State Govts.They use 15% of all the power generated here and are subsidised to the tune of over $70,000 per worker.Stop the subsidies.They are not worth it.
Posted by Arjay, Tuesday, 29 January 2013 4:32:58 PM
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I can't help noticing that the author has made no attempt to provide any form of cost-benefit analysis against the proposed (or already approved) $900 million public expenditure (subsidy) to keep this smelter operating - although the author indicates such a study as necessary, and I would have expected government, and Treasury, to have undertaken such a study before committing to any subsidy by way of infrastructure support or otherwise.

Surely details of such an analysis should be available from our government - or are they in the habit of handing out subsidies on mere whim? Although the aluminium price is subject to fluctuation, as well as the $A, I would have thought it not too difficult to compile at least a ball-park assessment:
Revenues from ore production and transportation only; as against -
Revenues from overall aluminium production and shipping, plus wage, salary and welfare-support differential - plus, if relevant, any differential in returns from gas supply to this facility, as against its alternative supply to other internal or overseas buyers.

Not as easy as 'falling off a log' perhaps, but not 'astro-physics' either. Impacts on human capital and potentials a little more difficult, but certainly an essential consideration.

On the general question, if our economy contracts (through mining decline or otherwise), and other world economies recover from current woes (as I would reasonably expect, eventually), our $A should become less of an interest as a trading and speculative currency, and thus to fall substantially from its current extraordinary highs. Accordingly, I suspect the 'canary' is in fact a 'lame duck'.

We certainly do need to concern ourselves with planning for our post-mining-boom economic and social well-being - particularly by taking utmost advantage of the boom, while it lasts, to develop our industrial, manufacturing and other capabilities appropriate to our human and capital resources, such as will place us in a competitive position on international markets.

No 'doomsday' at this point, and our canary still in good voice, but no future but what we make. Shangri-La awaits those with clear vision and boundless, responsible, determination.
Posted by Saltpetre, Tuesday, 29 January 2013 6:16:52 PM
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Saltpetre
quite so - a cost benefit analysis would be nice. The high Aus dollar is a problem at this stage of the business cycle but perhaps we'll stuff things up with wild spending initiatives that will make foreign investors lose confidence and the dollar will fall.. just a thought.
Posted by Curmudgeon, Tuesday, 29 January 2013 10:24:36 PM
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Leslie
technical note - all mineral rights in Aus are owned by the state and federal governments. they don't come with the freehold. Hence the argument over the mining profits tax a few years back.. it wasn't a tax as such but a mining royalties impost which the Rudd government of teh time totally stuffed up.. the states have their own tax/royalties impost in place and the Federal govenrment is basdically coming in on top of what they charge.. there is also a petroleum resources rent tax..
Posted by Curmudgeon, Tuesday, 29 January 2013 10:35:12 PM
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For decades one of our "natural advantages" in industry was our cheap power. Our cheap coal power generation benefited all our manufacturing industries. Alumina production was one of them that prospered.

Then the stupidity of alternate energy, & the subsidies to support it, & suddenly an industry which is a natural for Oz is threatened. Weren't we always told we must add value, & not just export raw products. Fat chance with this bunch of fools in power.

Any more years of this stupidity, & the only employer left will be government, with no tax payers left to generate their pay.

God help us.
Posted by Hasbeen, Tuesday, 29 January 2013 11:11:41 PM
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hasbeen,"...the only employer left will be the Govt." This is the intention.They don't want private ownership for the masses.We are a blight on their planet.Only a few elites in the corporate sphere should own property,energy or shares.It is modern serfdom for the workers and middle class.
Posted by Arjay, Wednesday, 30 January 2013 11:02:48 PM
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