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EYE-BALL Guru on – Wayne SWAN – The Australian Treasurer – gets it wrong again …

September 16, 2011
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Title:
Wayne SWAN – Australian Treasurer – gets it wrong again …
Today’s release of the Mining export numbers was something to crow about – and both the Treasurer Mr Swan and the Minister for Resources and Energy and Minister for Tourism – Mr Ferguson – decided that they both needed to highlight the strength of these numbers during Question Time in the HOR.The self-promotion questions were prompted by some media reports and the figures released today by the independent Bureau of Resources and Energy Economics about the record exports result.  The Media story about these numbers is pasted below:

Coal loading port, China

Resources, energy export values grown 27pc to record $175bn

Coal is offloaded in the east China port of Rizhao. Source: AP

THE value of Australia’s resources and energy exports has soared to a new record, buoyed by higher prices for commodities on the back of robust demand from Asia, according to official figures released today.

Much of Australia’s relative economic strength is due to its expanding mining sector and consistently high commodities prices and rich deposits of coal, iron ore, gold and natural gas.

But the mining boom has also driven the exchange rate higher and fuelled capacity constraints, leaving the manufacturing sector to suffer.

The value of resources and energy exports earnings increased 27 per cent in the year to June 30 to a record $175 billion, according to the Resources and Energy Statistics June-quarter report released by Australia’s Bureau of Resources & Energy Economics.

The figure is 9 per cent higher than the last record of $160bn in 2008-09.

Prices for iron ore leaped 56 per cent to $54bn, even as volumes only rose 5 per cent.

For the first time, the value of liquefied natural gas exports exceeded $10bn, helped by a 12 per cent increase in volumes and 34 per cent increase in values.

Export earnings dropped for petroleum refinery products, liquefied petroleum gas, silver and uranium.

The strong showing is impressive for a year during which extended flooding washed out coal-mine operations in Queensland, shutting down production that has yet to recover to full capacity. There has also been disruption to iron-ore production in the Pilbara region, in Australia’s west, and gas production in the Cooper Basin.

Australian Resources Minister Martin Ferguson said today: “These figures are yet another signal to investors that Australia’s resources sector is performing consistently well and rewarding investors with solid financial returns.”

The mining sector now accounts for some 59 per cent of the country’s total goods and services exports.

In a separate development, Rio Tinto said a further $US833 million ($810m) will be invested in major power and fuel-supply projects in the remote Pilbara region as part of its push to significantly expand production capacity for iron ore.

Rio Tinto’s share of the investment is $US706m, the miner said.

With Robb M. Stewart

As for the Parliamentary Hansard records of both Mr Swan and Mr Ferguson’s responses – the copy of their responses and questions asked is pasted below:

Firstly Mr Swan – The Treasurer …

Employment
Mr HAYES (Fowler) (14:43): My question is to the Treasurer. Will the Treasurer outline to the House the importance of responsible economic and fiscal management for the creation of jobs.

Mr SWAN (Lilley—Deputy Prime Minister and Treasurer) (14:43):

I thank the member for Fowler for his very important question, because it is three years ago today to the very day that we saw the collapse of Lehmann Brothers, which sent shock waves right through global financial markets. On that day the world did look into an economic abyss that eventually became the global financial crisis and the global recession. What followed that was an enormous amount of instability in the global economy and a collapse in global demand. What that led to was the worst recession globally in 75 years.

Given the magnitude of all these events, it is perhaps not surprising that the world is still living with the aftershocks of the global financial crisis and the global recession. We can see this in very slow growth rates in Europe and in the United States and we can see it in the really high levels of long-term unemployment right across so many advanced economies; and, of course, we can still see it today in the instability in global financial markets.

But the thing that is very pleasing for our country is that we are uniquely placed: we are in a position of fundamental strength in the middle of this uncertainty and turbulence elsewhere in the global economy. Our economy is stronger than our peers because we as a government took the hard decisions. We as a government got the big economic calls right in this parliament, particularly at the end of 2008 and through early 2009. The consequence of that for this country is that we did not experience the capital destruction, the skills destruction and the high unemployment that plagued so many other developed economies.

We did that because we worked together and because this parliament passed not just one but two sensible stimulus packages. The consequence of that has been an economic strength in this country unlike that of our peers. In particular you can see it in terms of unemployment. Unemployment in this country is far lower than that in the United States. When the world went into the global financial crisis the unemployment rate in the United States and Australia was the same. It is almost twice that now in the United States.

So we have an exceptional record in terms of supporting employment, including nearly three-quarters of a million jobs in this country over the past four years—a very strong record of employment creation and, as we saw from the national accounts, a strong investment pipeline, solid consumption and very good income growth.

These are all very good indicators which tell us about the underlying resilience of our economy, but, of course, there are parts of the economy that are doing it tough. That is why we need to put in place a fundamental reform program to assist people across the economy. We can see that those sectors of the economy that are affected by a high dollar are doing it tough. That is one of the reasons why we need the MRRT and the revenue from that to give a tax cut to 2.7 million small businesses—the instant asset write-off worth $6,500 to assist those struggling small businesses. That is why we do need to invest in infrastructure. That is why we need to build the NBN. That is why we need to boost our national savings by building up superannuation.

All of this is based on a very strict, clear and consistent fiscal policy. That is the rock that the resilience of our economy comes from. That is an objective which is not shared by those opposite. In terms of the Parliamentary Budget Office, which we need for transparency to indicate who is serious about strong fiscal policy, we have found out that those opposite want to hide this from the public—

The SPEAKER: The Treasurer will resume his seat. Has the Treasurer concluded?

Mr Pyne: Mr Speaker, the Treasurer should have taken your hint. On a point of order, it could not possibly be relevant to the question he was asked to attack the opposition. Under the ruling—

The SPEAKER: The Treasurer will avoid unduly arguing the response and will avoid debating a matter before the House, not on the basis that it is before the House but on the basis that it should not be debated further.

Mr SWAN: For all of the reasons that I have outlined in the House, we support the Parliamentary Budget Office. We support the recommendation of the joint committee, which was supported by those opposite and is now opposed by them. (Time expired)

Mr Hockey: You screwed it up.

The SPEAKER: Order!

Mr Mitchell interjecting—

The SPEAKER: The member for McEwen is warned, but he raises a valid point, regrettably, for the member for North Sydney. The member for North Sydney will leave the chamber for one hour under standing order 94(a).

The member for North Sydney then left the chamber.

The SPEAKER: Having warned the member for McEwen, I apologise for dobbing him in.

Not long after Mr Swan’s response came Mr Ferguson’s address:

Mr Ferguson’s Address …

Economy
Mr PERRETT (Moreton) (14:50):
My question is to the Minister for Resources and Energy and Minister for Tourism. Will the minister update the House on the contribution that the resources and energy sectors are making to the strength of the Australian economy?

Mr MARTIN FERGUSON (Batman—Minister for Resources and Energy and Minister for Tourism) (14:50):
I thank the member for Moreton for his question. The figures released today by the independent Bureau of Resources and Energy Economics clearly show the strength and resilience of the Australian economy. They are also a very strong statement about our capacity to manage the implementation of the MRRT and our confidence in the future of our economy.

Let us deal with a few hard facts. Firstly, export earnings from resources and energy commodities have set a new record, reaching $175 billion in 2010-11. Secondly, this is an increase of 27 per cent on 2009-10 and a nine per cent increase on the previous record of $160 billion set in 2008-09.

Clearly, the decisive action we took as a government through the global financial crisis is bearing fruit. Our community had confidence in our capacity to go forward and use the resources and energy boom to further strengthen the diversification of the Australian economy. I would also remind you that we have achieved this result despite the serious adverse weather effects experienced in Queensland, the Cooper Basin and the Pilbara region of Western Australia earlier this year. It is also interesting to note that we have not alone benefited from high commodity prices. We are also seeing increases in export volumes, which is very important.

That is related to the fact that we as a government have invested and will continue to invest in productivity related issues such as the skilling of the Australian workforce and infrastructure. It is also why we are working with the resource and energy sector to try and encourage them to invest in the skilling of our Indigenous community side by side, by focusing on the increased employment of women in this sector, and to use migration with a focus on skilled and semi-skilled migration agreements to enable us to deliver these projects on time and on budget.

Take the value of liquefied natural gas. Exports of LNG have hit for the first time $10 billion, with export volumes up 12 per cent and the value of exports up 34 per cent in 2009-10. These are exceptional results that we should be proud of as a nation. Similar results apply across a range of commodities, be it iron ore, metallurgical and thermal coal or, for that matter, copper. Importantly, they say to the domestic and international economies that we as a nation are a safe haven for investment. That is why we have a capital investment pipeline at the moment of $430 billion, of which $110 billion is in the LNG sector. I am also confident that over the next six to eight months we will achieve a further investment of $50 billion to $60 billion, effectively meaning that by Easter of next year we will have $500 billion committed to new capital investment in Australia.

Our responsibility is to use this opportunity to assist those sections of the Australian economy who are finding it tough because of the strength of the Australian dollar coming off the back of the strength of our resources sector. It is about diversifying our economy, smart investment in manufacturing, support for financial and legal services and the importance of our hospitality and catering services sector. We are the envy of the world when it comes to economic opportunities, and the Australian community can have a sound confidence in our economic future.

This whole discussion and propaganda spin on export revenues and the high value of the A$ and its true cost to Australian Business is a ‘cup half full’ verses a ‘cup half empty’ debate.  The Government is only seeing the debate from the foreign capital inflows and what that brings to the table.

The Treasurer – Mr Swan, The Minister for Energy and Resources – Mr Ferguson and the RBA Board need to have a good look at the real cost to the Australian economy the high value of the A$ relative to all our major trading partners is causing.

Capital Inflows:

The $500 billion of capital injection into the Australian resource sector for new infrastructure and energy production is great boost for our economy.  The market disruption this inflow of capital causes has its casualties – for every business who benefits from the high value of the A$ – there are at least 4-5 small and  large business who are hurt.

A serious question might be how to prevent the A$ rise with all the inflow of capital?

The RBA’s only concern under its bi-partisan charter agreement is to target inflation at a specific range – it has been this way since the late 80’s and early 90’s when Australia did have interest rates at 17-20% and inflation at double digits.  The world has moved on and the RBA is still in a time zone freeze and unable to see the damage the high A$ is causing.

Since the ‘resources boom’ started and the piggy back investors jumped all over the A$ during the early 2000’s – all on the back of China and India’s booming economies – the A$ has been the darling of all global traders and investors.   With our high interest rate structure relative to the rest of the developed world – and the strong currency – no global investors have any need to fear being long A$’s.  There was a hiccup in early 2009 when the GFC hit hard – the world unwound the resource ‘cash and carry’ trade and the A$ fell 40% to A$0.60c in a matter of weeks. [see chart below]

Coal loading port, China

The world all of a sudden got very scared and the flight of capital leaving Australia was reflected in the A$’s fall.   Yet this brief correction and fall only returned the A$ to levels that had previously made us a very competitive economy on the world stage.

Since then as the chart reflects – the world has once again purchased the $A and this ‘speculation’ combined with the capital inflows into our resource sector that Messes Swan, Ferguson sprout as a result of their ‘economic management’ – tell and highlight a very different tale.  Fools look at the Profit and Loss statement first – whereas smart people want to see the real numbers and make investment decisions on the sustainability f the numbers before they make investment decisions for the long term.

The A$ value and its impact on Business in Australia:

There were very good reasons why the A$ fell in a heap during the GFC crisis in early 2009.  Off-shore investors wanted their money.  Having drained wealth from Australia since 2000 – these investors had more than tripled their capital – why not withdraw and look for another ‘bunny’ market where Governments are too weak to turn this ‘speculative capital’ away.

In the A$ remains at these above parity levels and above its mean average of A$0.75c since it was floated in 1983 – all Australian industry will have to make  adjustments.

Tourism:

Tourism cops a double whammy – rather than tourists visiting Australia with a cheap currency – not only do they stop coming but Austrasians travel overseas because of the high A$ and the cheaper holidays on offer.  The Tourism industry has spent 30 years building its industry and then in a matter of 2-3 years it is stopped in its tracks.

All the infrastructure built to cater for tourists suddenly become vacant – Resorts are empty during peak seasons and the massive investment in the industry over time suddenly becomes worthless.  Tourism is withering on the vine and this Government is open for business as long as you but A$’s and the FIRB sanction your investment.

Agriculture:

Australia has had two bumper years of grain and produce production – yet the high A$ has diminished returns to farmers by 20-30%.  This despite the higher global prices for their produce.  At a time when Farmers should be rejoicing – they are lamenting the A$ value and its impact on their cash flow.

Retail:

Jerry Hervey from Hervey Norman has been the loudest to complain about the high A$ – the impact on retail sales is that everybody now wants to buy on-line and off-shore because the high value of the A$ works in favour of the consumer.   Computers, TV’s and other home use items are half the price they were two years ago – profit margins are squeezed , shop owners have permanent sales and trying to keep staff employed is a losing battle.

Manufacturing:

Same thing – the higher the A$ goes the more expensive it is for overseas buyers and this makes it impossible to compete against low income economies.  Just look at the amount of out-sourcing of employment – call centre operations and the like by mainstream companies – Australian jobs are being exported offshore because of the high value of the A$.

Mining:

All the capital inflow into this sector does not cover the lost A$ receipts caused by the high A$ – this all at a time when we are selling into a sellers market – these resources once used – are gone forever – this is Australia’s legacy to the world and this Government is allowing it to be shipped off-shore at a fraction it would return to Australia is the A$ value was at its mean average –

The Capital inflow is important to build the infrastructure – surely the Government and the RBA could think ahead a little and allow the inflows to fund this infrastructure to be purchased away from open market activity.

The Swiss stepped in to protect their currency from being priced out of the market – the Japanese have been doing it for years – everywhere else in the World Nations Central Bankers are taking measures to protect their economies and their competitiveness.  Mr Swan is happy to sit back and watch it happen.  He is a weak man – he has no vision for where this high A$ is leading this economy.  He is still drunk with an ego problem over what he thinks was saving Australia from the GFC – he thinks that the wasteful spending during 2008-9 was well worth the value received and climbs atop his personal dungheap to crow about his saving of the Australian economy.

News for you Mr Swan – your dungheap stench is getting worse  …

The Cash and Carry Trade:

It is not just capital inflow for resource investment buying the A$ – every global investor/speculator is locked into this trade and this Government and the RBA remain content to sit back and wear the resultant economic fallout.  The record resources export numbers – both in terms of A$ export receipts and volumes exported as reported above only tell one side of the story.

The flip side of all this hoopla is a simple yet real cost to Australian Business’s that nobody wants to face or talk about in any preventative way.   The industries impacted by this neglect cover every aspect of Australian economy.

Just for a moment – can you imagine what these export numbers would be if the A$ was where it has averaged for the last 40 odd years – around the A$0.75c level.

It was good enough for the Swiss to intervene to stop their currency rising and their financial clout is renown. Would any sane person stack Mr Swan’s and the RBA Board’s reputation up against the Swiss Financial knowledge base?

The above media article quotes A$175b as the amount received in export revenues – if the currency was at A$.75c during this period – this number would be 25% higher – some A$44b … given the A$ has been at these lofty levels for some years – the calculated A$200b wealth transferred to our trading partners and off-shore investors during this period – all receiving investment income and capital gain on their currency purchase – why is there no spin or mainstream talk about this transference of wealth from the Australian mortgage borrowers – the miners – the farmers – the tourism operators – the manufactures and all the other business’s hurting because to off-shore lands?

If the Opposition knew numbers and had any economic management credentials – they would be all over this – that could cause massive damage to Swan’s creditability – yet they languish in a maggot infested dungheap – beneath Wayne Swan trying to white ant him in other ways.  What ever ‘crow’ value Mr Swan offers in the House – the Opposition ‘crow’ less – all because even they don’t get the fundamentals on what a high A$ cost Australians.

These resources are a once only asset and we are selling them at firesale prices when global demand is at its highest.  These record export values only paint a small picture about what is really happening – and Mr SWAN is allowed to wear his ‘duncehat’ in full view of the Australian Media because they are dumber than he is.

A new story in on the impact of the high A$ on employment has just been published – read it below … not much more needs to be said.

The Australian – Strong dollar costs nation 90,000 jobs

David Uren, economics correspondent
From: The Australian September 16, 2011 12:00AM
Unemployemnt

INDUSTRIES trying to win exports or fend off imports have shed 90,000 jobs in the past three months as they try to deal with the high Australian dollar.

The only parts of the economy that have been adding staff in any numbers are the state and commonwealth public sectors, health, professional services and the mining industry.

Manufacturing is suffering the most and has lost 30,000 jobs in the past three months and 50,000 in the space of six months.

The sector has been under pressure for the past two years, but the pace of contraction has increased in the past six months as the Australian dollar has remained above $US1.

Education and training, one of Australia’s biggest export success stories over the past decade, has also started losing jobs rapidly, with 29,200 workers leaving the sector since May.

Training institutions, in addition to being hit by the high dollar, have also suffered as a result of the government’s decision to deny residency visas to graduates of cooking and hairdressing courses.

Although farming has been enjoying fair growing conditions and markets, it has also been hurt by the high value of the dollar and may be losing employees as a result of consolidation of properties.

Jobs in the farm sector have dropped from 380,000 to 315,000 since May last year, with 20,600 workers going in the past three months.

The hospitality industry, which includes accommodation and restaurants, is one of the big growth industries of the past 30 years thanks to tourism and a continuing rise in the number of people eating out. However, the stress in tourism has cost it 10,000 jobs in the past three months and 18,000 in the past six.

Construction is another big growth industry of the past decade that appears to be entering more difficult times. Although it added more jobs than any other sector in the past six months, there has been a small contraction in the past three months. Construction is a winner from the mining boom but is shedding workers in housing and commercial building.

Retail, one of the biggest employers, has been holding staff numbers steady at about 1.2 million for the past 18 months, despite weak consumer demand.

Mining, which is still one of the smaller industries, on a par with property and communications, has grown by 10 per cent, or 8900 workers, in the past three months.

The big job creators are the commonwealth and state governments, through their public services and their funding of the health industry. They have generated 46,800 new positions in the past three months.

The uneven influence of structural change in the economy has made a big difference to the occupations. The contraction of manufacturing and the weakness in housing and commercial construction has resulted in the loss of 107,000 skilled trades jobs in the past six months and 49,000 labouring jobs.

The weaker outlook has cost 56,500 sales jobs and 33,500 professional positions in the same period. The loss of professional jobs may partly be the result of outsourcing of information technology positions to India, The Philippines and other countries in the region.

However, growth in the public sector has led to a rise in the numbers of managers and clerical, social and community workers.

The strength of the mining industry has helped generate almost 50,000 new jobs in the last six months for machinery operators and drivers

What do you say now Mr Swan to your ‘JOBS – JOBS – JOBS’ rants over the last 2 years or so … Al these jobs disappearing on your watch – and all you want to do is sit with your smug smile thinking you’re some sort of hero for saving us all from the GFC take 1 … well Humpty Dumpty is about to take a great big dump – and all over you …

____________________________________________

The EYE-BALL Guru …

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  1. Ghost of yoda
    September 16, 2011 at 10:15 am

    I am not going into the overall rhetoric of your blog, other than to say both Mr Swan and Mr Ferguson are either total fools or are living a fantasy existence.
    [Edited by moderator] – I am afraid to say Swan and Ferguson have given it a new dimension to the saying – you do not understanding that you don’t understand.

    I am not even prepared to explain this to any potential reader as it has me non plussed that two ministers could portray the level of ignorance and misunderstanding of what is happening to the Australian economy by mismanagement of the wealth created by the mining industry. This is not a case of finding fault with the mining industry or taxing its wealth. It is a case of applying it in a manner that benefits the other spokes of our industry, ie Manufacturing, Agriculture and Tourism.

    The natural spinoffs then boost the building and retail industies in a manner that all working Australians can enjoy. The world’s ongoing financial crisis will continue, but Australian could be as well insulated as humanly possible in the global village we all have to survive in.

    As the disparate effects of our economy come home to roost, where will Mr Swan and Mr Ferguson be…..comfortably tucked away in opposition….although Swan will lose his Brisbane electorate and will hopefully be with Mr Thompson exploring the brothel industry based on Mr Thompson’s working holiday in that arena.
    .
    Unfortunately i suspect running a small business will be beyond both of them! although I am sure that Mr Ferguson will be able to invoke some union privledges to help them out.

  2. Gerry Hatrick
    September 16, 2011 at 6:27 pm

    How do you set Wayne Swan up in small business?

    You give him a big one and just wait!

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