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The Deal Is Simple. Australia Gets Money, China Gets Australia

businessweek.com

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Re: The Deal Is Simple. Australia Gets Money, China Gets Australia

#21

Post by kentosi »

brc wrote: post #13

I'm not sure of what the point this article is trying to raise? Is it that Australia is not in recession? Is it some sort of suggestion of xenophobia on the part of Australians? Australians have all seen this before in the 1980's when the Japanese were buying real estate, companies and generally splashing cash around. I think this time around most people are more relaxed about it, and a feeling of 'make hay while the…

I have to agree with you. The title itself feels like the author's taking a biast stand that s/he wants to vent. But the article itself is completely indecisive. Almost as if the author wants to speak ill of Chinese hands in Australian soil, but can't.

Either way, I found the article's facts interesting. I don't think many people know the scale of these operations, not the history of similar events with the Japanese. Both of these were news to me.

Re: The Deal Is Simple. Australia Gets Money, China Gets Australia

#23

Post by metamemetics »

brc wrote: post #13

I'm not sure of what the point this article is trying to raise? Is it that Australia is not in recession? Is it some sort of suggestion of xenophobia on the part of Australians? Australians have all seen this before in the 1980's when the Japanese were buying real estate, companies and generally splashing cash around. I think this time around most people are more relaxed about it, and a feeling of 'make hay while the…

It's not an editorial, it's a well written news article. It's goal was to cover multiple points of view of a massive event without explicitly endorsing one of them as canon.

Re: The Deal Is Simple. Australia Gets Money, China Gets Australia

#24

Post by nl »

jakarta wrote: post #18
nl wrote: post #8

Earlier quoted context omitted.

If China is indeed a bubble (at least in the medium-term) Australia is going to experience a world of hurt. Yes, but... Australian is a commodity exporter. If China is a bubble, then yes, Australia will be hurt unless another country (US/India/Japan/Korea) picks up demand. Also, it's not a property bubble when there are less houses than people who want them. Because the population growth rate in Australia is (compara…

Do you realistically expect the US, Japan, or Korea to somehow fill the gap if China suddenly drops its demand for Australian commodities? India might pick up some of the slack, but I would bet against it. Household debt / disposable income in Australia is 157% versus 133% for the US shortly before the financial crisis. That level of debt combined with ever increasing home prices should create a pretty volatile situa…

Do you realistically expect the US, Japan, or Korea to somehow fill the gap if China suddenly drops its demand for Australian commodities?

Probably not, but it depends. If you think the "China bubble" is because of Chinese domestic demand (ie, construction in China) then it will be hard to replace. If you think it is because of Chinese exports then it's possible another country could substitute.

Personally I reject the idea of a Chinese bubble altogether.

Household debt / disposable income in Australia is 157% versus 133% for the US shortly before the financial crisis.

It would be great if that was lower, but there are reasons for it. It's mainly because of high house prices. Unlike the US we don't have a housing bubble, because of our increasing population.

Average household debt is around 20% of household assets (http://www.abs.gov.au/AUSSTATS/abs@.nsf/Lookup/4102.0Main+Fe...). While the asset prices (ie houses) keep increasing that level of debt remains serviceable.

Re: The Deal Is Simple. Australia Gets Money, China Gets Australia

#25

Post by wisty »

nl wrote: post #8
jakarta wrote: post #4

It's pretty interesting to see how intertwined China is with Australia. If you ever want to short China, your best bet is to target Australia which already has a bit of a property bubble, mining companies that are dependent on Chinese demand, and a currency that is buoyed by commodity prices. If China is indeed a bubble (at least in the medium-term) Australia is going to experience a world of hurt.

If China is indeed a bubble (at least in the medium-term) Australia is going to experience a world of hurt. Yes, but... Australian is a commodity exporter. If China is a bubble, then yes, Australia will be hurt unless another country (US/India/Japan/Korea) picks up demand. Also, it's not a property bubble when there are less houses than people who want them. Because the population growth rate in Australia is (compara…

The problem with commodities like iron is they mean-revert.

Iron ore traditionally sells for under 40 cents. It's over 160. There is a big price bubble, because there was such a large spike in demand (thus a shortage, so customers bid the price up).

But if demand drops, those mining trucks can't just sit idle. They run 24 hours a day, whether they are raking in money or just eking out a profit. The same goes for the 2 mile trains, container ships, loaders, and so on. Quantities won't drop a lot, so price will, right down to the cost of production. Once it hits the cost of production, companies will start scrapping trucks, but that's a very bad way to lower quantities.

Re: The Deal Is Simple. Australia Gets Money, China Gets Australia

#26

Post by megablast »

nl wrote: post #17
brc wrote: post #10

Earlier quoted context omitted.

There were other factors at work with Rudd's removal. The mining tax was the last act in a long play of dropping promises, reneging on commitments and policy backflips. The mining tax was a disaster and, in it's original form, was reverse nationalism by stealth. The government was going to tax profits above 6% with a 40% 'super tax' - terminology straight from a Marxist script. They were then going to reimburse Miner…

There were other factors at work with Rudd's removal. The mining tax was the last act in a long play of dropping promises, reneging on commitments and policy backflips. I agree with this The mining tax was a disaster and, in it's original form, was reverse nationalism by stealth. The government was going to tax profits above 6% with a 40% 'super tax' - terminology straight from a Marxist script. They were then going…

The tax was a great idea, and only hated by mining companies and people who happened to believe everything they see on TV. Most other big mining countries (Canada, Brazil, etc...) are also thinking about bringing in a mining tax like this.

All Australians deserve returns from the investment, not just the tiny number of miners, who earn ridiculous sums of money.

Re: The Deal Is Simple. Australia Gets Money, China Gets Australia

#27

Post by wisty »

nl wrote: post #24
jakarta wrote: post #18

Earlier quoted context omitted.

Do you realistically expect the US, Japan, or Korea to somehow fill the gap if China suddenly drops its demand for Australian commodities? India might pick up some of the slack, but I would bet against it. Household debt / disposable income in Australia is 157% versus 133% for the US shortly before the financial crisis. That level of debt combined with ever increasing home prices should create a pretty volatile situa…

Do you realistically expect the US, Japan, or Korea to somehow fill the gap if China suddenly drops its demand for Australian commodities? Probably not, but it depends. If you think the "China bubble" is because of Chinese domestic demand (ie, construction in China) then it will be hard to replace. If you think it is because of Chinese exports then it's possible another country could substitute. Personally I reject t…

Yeah, but if the average Australian owes 1.6 times their annual salary, and house prices are 6X income, and they also have 2 years income locked into superannuation for their retirement (go boomers!), then things could go bad. Ask an American, English, Irish, Greek, Icelandic, or Japanese poster.

Re: The Deal Is Simple. Australia Gets Money, China Gets Australia

#28

Post by nl »

scn wrote: post #22

"A 20-year-old off the street can come up to the Pilbara and earn A$92,000 a year," says Boxy. The median household income in Australia is A$67,000. Talk about inflationary pressures.

Those jobs are well paid for a reason.

They are in the middle of nowhere (unless you've been there you have no idea how isolated the Pilbara is), and the climate is less than ideal:

The climate of the Pilbara is semi-arid and arid, with high temperatures and low irregular rainfall that follows the summer cyclones. During the summer months, maximum temperatures exceed 32°C (90°F) almost every day, and temperatures in excess of 45°C (113°F) are not uncommon. The Pilbara town of Marble Bar set a world record of most consecutive days of maximum temperatures of 100 degrees Fahrenheit (37.8 degrees Celsius) or more, during a period of 160 such days from 31 October 1923 to 7 April 1924.[5] http://en.wikipedia.org/wiki/Pilbara

In the non-open cut mines, many jobs are underground and a lot of people don't seem to cope well with being 1km underground.

A few well-paid jobs don't create inflation on their own. The inflation rate remains a steady 3%.

Re: The Deal Is Simple. Australia Gets Money, China Gets Australia

#29

Post by dejb »

brc wrote: post #10
Estragon wrote: post #5

Earlier quoted context omitted.

I don't think it's that simple. Consider, for example, that the Australian Prime Minister, Kevin Rudd, lost his leadership largely because mining companies were upset by his plan to tax them further. From the article: Economic and diplomatic advances, however, have not fueled a warm national glow. Australia's proposal to increase taxes on mining became a national issue, precipitating a three-month barrage of anti-gov…

There were other factors at work with Rudd's removal. The mining tax was the last act in a long play of dropping promises, reneging on commitments and policy backflips. The mining tax was a disaster and, in it's original form, was reverse nationalism by stealth. The government was going to tax profits above 6% with a 40% 'super tax' - terminology straight from a Marxist script. They were then going to reimburse Miner…

> The tax was beloved by pro-government tax-raising types and lovers of economic theory and hated by pretty much everyone else.

From a 'web startup' point of view I can tell you it seemed like a lifeline to have some downward pressure on the aussie dollar (as this tax did) as well as a small decrease in tax rates. As mining heats up it becomes more difficult to operate any other export business because of increased exchange rates and pressure on wages. The danger is that we will become over-reliant on mining as it tends to squeeze out other export industries.

Re: The Deal Is Simple. Australia Gets Money, China Gets Australia

#30

Post by nl »

wisty wrote: post #25
nl wrote: post #8

Earlier quoted context omitted.

If China is indeed a bubble (at least in the medium-term) Australia is going to experience a world of hurt. Yes, but... Australian is a commodity exporter. If China is a bubble, then yes, Australia will be hurt unless another country (US/India/Japan/Korea) picks up demand. Also, it's not a property bubble when there are less houses than people who want them. Because the population growth rate in Australia is (compara…

The problem with commodities like iron is they mean-revert. Iron ore traditionally sells for under 40 cents. It's over 160. There is a big price bubble, because there was such a large spike in demand (thus a shortage, so customers bid the price up). But if demand drops, those mining trucks can't just sit idle. They run 24 hours a day, whether they are raking in money or just eking out a profit. The same goes for the…

Yes, this is a good point.

But I don't think the demand is going to stop (for a significant period of time anyway).

While the Chinese standard of living keeps increasing their domestic demand is going to keep increasing.

If their standard of living stops increasing then you'd have to question the stability of their government. If that happens then the world economy is probably screwed anyway.

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