here come the drums of a global slowdown..

[trendsta]

Hi Aus,

These are huge projects that will provide value to Australia over the long term and are very strategic. The investments in these assets is essential to Australia – and im all for it. Remember these are giant projects over a number of years ..

But need to keep things in perspective. Size of Australian economy is about 1 trillion .. by value, 70% is services and 10% is mining and agri.. The 70% is dominated by financials, retail, govt, tourism etc.. It is likely the mining projects will have a huge drawdown for specific skills.. However IMHO, for the overall economy, negative impact to retail, financial services, small businesses, tourism etc will be much bigger than the positive from these projects..

The global and australian economy needs to shift. Last 20 years the focus and growth has come from financial innovation and tech, while physical infra etc have been neglected. The world has put to many resources (human, time, and capital) on financials (virtual economy) while neglecting the real economy (commodity, agri, infra etc). In 2000 too much capital was placed on tech and as a result the recession resulted in collapse of thousands of tech companies around the world, high unemployment in tech sector, investment taken out of tech sector etc .. The resources were then diverted away from tech to other areas.

However 9 years later we have the same problem, but this time with financials and related assets.. In short what the world and Oz needs are more engineers, farmers, builders, miners etc and less financial magicians, realtors, retail outlets etc .. to do this we have to go thru a recession or slowdown , so resources (human, time and capital) are diverted from surplus areas to areas that actually need them.

 

[HiredGoon]

Totally agree Trendsta. So much of our countries wealth and energy is used on borrowing money from overseas bidding up existing houses, coming up with crazy new loans and financial schemes, rorting the tax system etc while infrastructure falls apart and little money goes into productive new industries.

We'll be stuffed instead of moving on from fossil fuels we decided to spend our energy on painting feature walls and granite counter tops and flipping houses. Thousands of huge pretty houses nobody can afford to drive to anymore!

I think this is due to the tax system. You pay for education and get 45% tax on productive work but the government subsidies borrowed money and gives a lower tax on capital gains. A recipe for asset bubbles, chasing capital gains over work as can be seen on here with people denigrating productive workers saying Just Over Broke and wanting to live on borrowed money and the work of others.

The mining boom will profit mostly those who work for or in the industry and those who own mining shares. Too bad most people haven't bought mining shares but instead decided to borrow lots of money and bid up McMansions in the outer suburbs of Perth.

Most of Australia looks like the suburbs of Neighbors and yet everyone thinks a mine 800km away will make them all rich!

 

[Ausprop]

true, i have to admit when i have been writing this $90bn number i have been thinking that it aint much in the scheme of our annual GDP, hence i am not sure why bill evans sees it as such a volatile number. perhaps demand at the margins? but then they are spread over many years.

what we really need is a national strategy to eliminate fuel imports, be it nuclear or whatever.

 

[HiredGoon]

I agree about nuclear, we have heaps of it, are geologically and politically stable and we have lots of salt water which could be used and turned into fresh water. Now all you need to do is convince the general public. The easiest way IMO would be to position it as the lesser of 2 evils vs climate change.

I thought we might have some change with a new government but Rudd has revealed himself to be a gutless populist. Green issues should be dealt with via a market system not a moral one (properly pay for externalities and energy and resource usage the cheapest option should be the greenest) people say they are concerned about climate change then buy big 4x4s but now finally when oil prices go up we actually have people reducing their carbon output and reliance on fossil fuels by catching public transport etc, they cave into the whinging outer suburb commuters in their big cars and say they want to reduce fuel prices!

The mortgage market is freezing up and it looks like the house bubble is finally going to end and now they're coming up with more schemes like AussieMac etc to try and get people to take on huge debt and pay prices they can't afford! The construction industry is starting to hurt with their unsold inventory and now they're talking about handouts! The best solution to high house prices is to stand back and let them crash, not prop them up with ever more public money. The more they interfere the worse it will drag on and the harsher the correction when it inevitably busts!

 

[myla]

hello,

what rubbish hiredgoon, my wage in the construction industry has doubled and many developers are doing extremely well,

keep going on the gold futures and commodity futures with the piggy bank

thanks
myla

 

[HiredGoon]

Of course construction has done well, we've been in a building boom where tradies and laborers have seen massive increases far faster than average wages. This is typical of boom industries and the amount of money flowing to real estate and renovations has been staggering.

But construction is declining and unsold inventory increasing despite the shortage story we've been peddled. The construction industry is now asking for handouts because they (and who can blame them) don't want the boom to end. Construction is an extremely cyclical industry - hope you've saved a lot during the good times.

 

[myla]

hello,

construction has been declining for the past 3-4 yrs, yet the wages are still awesome,

if an issue occurs then handout should be given to the bankers, property trusts or construction workers just like farmers, manufacturers, car industry etc get handouts

gotta have the socialist model for everyone hg, how's the 2-oz play on gold going?

thanks
myla

 

[topcropper]

Yes it is an embarassment but it justified based on the behavior of Australians.

Mining is 1.5% of jobs, and less than 10% of GDP. House construction, real estate, finance, retail, tourism are all far more important to Australia and jobs than mining, though mining is a legitimate boom and so makes a better news story.

.

That's an impressive figure from the mining industry, if correct. Employing 1.5% of the workforce, and contributing almost 10% to GDP!

GDP is in itself a measure of goods and SERVICES. So mining is big, in an ecomomy that is mostly services, and where 75% of the workforce is employed in service industries.

Contribution to GDP, which includes services is a bad way to measure an export industry like mining.



I think mining generates well over 50% of export income, increasing all the time, and employs 1.5% of the workforce...

Now that is impressive.

See ya's.

 

[evand]

That should be an easy one for the Google searchers to look up.

I think mining generates well over 50% of export income, increasing all the time, and employs 1.5% of the workforce...

Now that is impressive.

See ya's.

 

[MichaelW]

Of course construction has done well, we've been in a building boom where tradies and laborers have seen massive increases far faster than average wages. This is typical of boom industries and the amount of money flowing to real estate and renovations has been staggering.

But construction is declining and unsold inventory increasing despite the shortage story we've been peddled. The construction industry is now asking for handouts because they (and who can blame them) don't want the boom to end. Construction is an extremely cyclical industry - hope you've saved a lot during the good times.

For once I find I actually hope you're right. I'm looking forward to developing my multi-million dollar MUH development on the Northern Beaches. The numbers stack up nicely as is with a margin over 25%, but if the construction costs come off a bit then it looks even better! Prices are strong here and won't come off much if at all. Too little product available at the premium price point and way too much demand from the Palm Beach and Church Point crowd moving into town with their yap yap dogs under arm.

Palm Beach showed up recently as one of the top suburbs nationally of properties "owned outright". i.e. no debt. Couple that with the fact that its one of the highest median postcodes in Sydney and there's a lot of "cash" looking to buy my modest quality development in the heart of Mona Vale. They sell down their big 5 bed family home for $2.5M+ and downsize into my 3 bed, 2.5 bath townhouse within 300m from bayview on Pittwater, Mona Vale golf course, gym, cafe strip, specialist medical centre etc for the modest price of only $900K each. Prices for what I am developing continue to rise as cashed up affluent BBs look to lock in their premium retirement plans with all the frills. Happy days!

Maybe mid 2009 might be a nice time to be tendering. Construction prices down please.

Every cloud has a silver lining...

Cheers,
Michael.

 

[Ausprop]

I think you may be living in hope Michael.. from what I can see here are only large increases in material prices in the post.

 

[topcropper]

However 9 years later we have the same problem, but this time with financials and related assets.. In short what the world and Oz needs are more engineers, farmers, builders, miners etc and less financial magicians, realtors, retail outlets etc .. to do this we have to go thru a recession or slowdown , so resources (human, time and capital) are diverted from surplus areas to areas that actually need them.

What a terrific statement. I agree, and looks like I agree with Hired Goon too.


Australia is short of fruit and vegetable pickers. Short of abbator workers, farm workers, miners, engineers etc. So why are we fiiling Sydney and Melbourne with imigrants. The cities are mainly service providers, so the more people piling in, the more services are needed. It's a joke. 75% of Australia's work force are employed in services. But I look at my little spot, and hardly anyone works in services, so I can only assume the cities are much more than 75%.

There are only so many people who can be employed in service industries, and the Poms are about to find out how many are too many, and we are not far behind.

I just dunno.

 

[evand]

Dead right. From what i've been hearing labor rates are levelling out in the building industry but material costs are sky rocketing.

I think you may be living in hope Michael.. from what I can see here are only large increases in material prices in the post.

 

[Aaron Sice]

true, i have to admit when i have been writing this $90bn number i have been thinking that it aint much in the scheme of our annual GDP, hence i am not sure why bill evans sees it as such a volatile number. perhaps demand at the margins? but then they are spread over many years.

what we really need is a national strategy to eliminate fuel imports, be it nuclear or whatever.

my prob with this is that the govt will use borrowed money to fund this. then pay interest - which is mad. why not use a surplus?

a budget surplus is wealth confiscation. don't use that surplus to make interest payments on infrastructure loans.

 

[Francesco]

my prob with this is that the govt will use borrowed money to fund this. then pay interest - which is mad. why not use a surplus?

a budget surplus is wealth confiscation. don't use that surplus to make interest payments on infrastructure loans.

Let's hope BC that Minister Ferguson will start an infrastructure fund to sort out energy needs for Australia, something enlightening. Then use the funding built with budget surplus to develop the alternative energy, not borrowing which will exacerbate credit for business and households.

 

[Aaron Sice]

see, i've got no prob with the govt spending on infrastructure with the surplus. go for it! it's what it's there for. it wouldn't impact inflation one bit (well, okay, it prob would, but by less than predicted) because it's tax money.

the trouble is when govt margin the tax money and create more debt - then there's an inflationary problem. just like what WA did with that bloody rail line.

 

[Rockstar]

Dead right. From what i've been hearing labor rates are levelling out in the building industry but material costs are sky rocketing.

Found this on Hotspotting.com

Construction industry wage breakout set to continue
The 10-15% wage rises across the property & construction sector over the past year are set to repeat in the next 12 months. According to a report by Hudson Property & Construction, construction recruitment specialists, this is due to a skills shortage and the demands of several billion-dollar infrastructure projects across Australia.

A Hudson spokesman says he “wouldn’t be surprised to see salaries rise again” due to an unrelenting demand for skilled workers.

Property valuers are particularly in demand with development directors currently earning between $250,000 and $350,000 in Victoria.

While wage restraint remains high on the government’s economy watch, evidence indicates the retail sector is also experiencing significant wage growth with 11% of Australian Retailers Association members facing an increased wages bill.

Apart from the commercial, construction and engineering sectors, however, wage growth remains more in line with the current inflation rate of 4.2%. This differs from the 1970s when wage increases in the property and construction sectors leaked significantly into the wider economy.

 

[tubs]

While our housing needs are going up by around 270,000 dwellings a year, and we're building around 210,000 a year, I can't see why the construction industry would be going down in a hurry.

 

[coastymike]

Michael

I have a weekender at Palm Beach and I agree that the majority of owners there "own" their property outright with little debt. However the majority of homes are like mine. Weekenders. And the reason they are weekenders is so you can head up, enjoy the views and the cafes and get away from the centre of Sydney. I doubt many will be cashing up to purchase a townhouse in Mona Vale with no direct water views so they can go to on weekends. I think the majority who move from Palmy are weekly residents not weekenders. And I think the majority of Palmy are weekenders not weekly residents. I can't see people moving down to Mona Vale anytime soon. Read those stories and chuckled. Properties in Palmy stay in the families for generations. Don't sell unless you are desperate.

 

[kph]

Maybe mid 2009 might be a nice time to be tendering. Construction prices down please.

Every cloud has a silver lining...

Cheers,
Michael.

Part of the big bubble false economy we live in here is Aus.
Rio BHP getting 75% price rises on thier ore exports, and its comes right back and bites us in the b#m as higher steel prices.
Midalia have told us to keep the product book but throw away the price book.
They will quote every order from now on and its valid for 14 days. Just copped another 20% price rise on steel.
With house construction already unaffordable for most what is the answer?
I wish I knew.
Shortage of housing starts across the nation, and no one can afford to buy or build. Its a receipe for disaster or abject poverty maybe.

Next symptom in the cycle is when builders start falling over.

This predicted rise in the cost for construction workers seems to be related to heavy industry more than the building industry.
What we are currently experiencing is building trades chasing work and getting more competitive with their pricing.
And we are operating where it extremely difficult to find tradesmen.

There will also be an influx of 'foreign' highly skilled and motivated ( hungry) workers that will slowly change the building landscape.

When an Irish worker can't compete with a polish immigrant worker in his homeland what do you reckon he does? He goes overseas and Australia is a current target.
Its a ripple now, but may turn into a small flood soon.

I reckon wages will stay in check, but material costs are and will remain out of control.

Kevin.