Is the mining boom bust?

DSCN0656The WA economy is riding on a mining boom, but whose boom is it?  The international demand for minerals, particularly iron-ore has seen the 3 big players of Rio Tinto, BHP Billiton and Fortescue Metals invest $millions in expansion projects.  Whole villages have grown up around mines and the port towns of Port Hedland and Karratha are finally getting long overdue infrastructure.  By any standards the investment is immense, but finite.  Many of the expansion projects are nearing completion and the huge workforce will be laid off.  Up until now this has been their boom, but not for much longer.

Now the iron-ore is been mined, processed and shipped overseas.  The workforce required is relatively small, with many jobs being lost and some moving to metropolitan Perth.  The money will roll in for the miners and royalties for the State Government; this will become their Boom, with little left for working people.

The expansion boom has sucked a lot of activity out of the Perth Metropolitan area due to lack of competitive workforce and plant.  Without Government projects such at Northbridge link, the Perth Foreshore project and the new Stadium Perth would be at a standstill.  Development does not just happen, medium and large scale projects have large lead times.

My fear is that the mining boom will be like a black hole for Perth; it has sucked energy out of the city and once it is over the vacuum will remain for quite some time.   Somebody please prove me wrong!

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3 Responses to Is the mining boom bust?

  1. dianaryan says:

    The financial crises we can’t seem to escape are seeing Horoscopes in women’s magazines change, too!

    The new Vanguard: The Aust Women’s Weekly’s January 2013 edition [abridged]:-

    “This year, we have 3 eclipses in the sharemarket and economy signs, Taurus and Scorpio: April 25, May 10, and November 3. Taurus the bull rules Wall Street [currently not negotiating the Fiscal Cliff well; Americans facing new taxes from 2013], also bullion and bull markets. It also rules Spain. What happens in the Spanish and US economies in 2013 will make us realise the GFC was a dress rehearsal”.

    There is more, ie, how the trend of our population to be more cautious with finances will continue.

    We will see a rise in dressmaking, home cooking and gardening, and more people moving back home with their families.

    Predictable stuff? Its a bit overt for a buck each way, although the back to basics prediction feeds well in to the types of articles the Weekly produces.

    Still, why not the Weekly jumping in too? Hardly anyone saw the GFC coming, or maybe they just didn’t want to.

    Not sure how you feel about cross-referencing, Jon, but I posted a video difficult to swallow from a financial services firm on Freo Ramble a couple of weeks’ ago:
    The importance of China in WA’s Investment Market

  2. dianaryan says:

    Hi again, Jon

    Two economists I’ve always listened to are Saul Eslake, now with Merrill Lynch, and Ross Gittins.

    The latter reminds what should ground us: 80% of GDP is actually the buying and selling of goods and services to each other (even online, apparently, we are still buying the lion’s share in Australia). This should put mining in perspective; the two booms have been in the 00s. We were, of course, powering along quite well before this.

    Where real problems occur, of course, is in the speculative. This is where I always find Eslake informative – however, unfortunately, he has just said the US Fiscal Cliff is now “non-trivial” to Australia:-

    “America falling off the fiscal cliff would be the most serious jolt to the global economy since the financial crisis, and would be felt on Australian markets as early as Monday morning, economists say…. The risks are now non-trivial….Should a deal fail, it would take some time for the real economic effects to play out globally and in Australia. But the impact on local financial markets could be immediate…. You wouldn’t see a seizing up of global financial markets, but there would be some parallels to the financial crisis, in the way the financial crisis caused a recession in the US which spilled over to its trading partners…. Although we don’t do a lot of trade with the US, we do a lot of trade with US trading partners.”

    I missed seeing the excellent Nicole Foss, Automatic Earth, when she was in Fremantle, but follow her work, also.

    Read more: http://www.watoday.com.au/business/fiscal-cliff-risk-now-nontrivial-for-australia-20121228-2byr3.html#ixzz2GJfPobbW

    • jonstrachan says:

      I have previously likened growth economics to the ultimate pyramid scheme, insomuch as it constantly requires more and more new money to work and ultimately we will get to a situation where there is not enough new money to keep it afloat. The GFC was a taste of that failure, it was only the spending of huge amounts of government (taxpayers) money globally that restarted the economic machine. Nicole Foss predicted the ultimate failure as coming sooner rather than later, resulting in economic meltdown. Her advice was to take money out of banks, save a modest amount, but expect it to be worthless at some point and invest in things to make you and your community resilient in a post fiscal world.

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