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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

#51

Post by brc »

dejb wrote: post #29
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…

> 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 e…

I'm in the same boat as you - the high AUD is killing my profitability - 30% revenue fall in 2 years. However, I don't condone this type of government action just to make my life easier. Continued foreign investment in high risk mining activities is good for the country, and this was going to stop it.

If anything was to be done then the state-based mining royalties should have had some component to adjust with the price of the underlying ore.

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

#52

Post by btilly »

mrtron wrote: post #49
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.

I don't see how China's demand for commodities could be a bubble. They are building in huge volumes, but they have a huge volume of people. There is a middle class developing. Check out Hans Rosling's talks about it. There may be a temporary bubble in the stock market, but China is undergoing an incredible shift towards becoming North American in every way. Beijing is the best example of this - the entire city has be…

The first problem that China has right now is that government policy has made it easier to bring money in than to take it out. This has caused a significant asset bubble. If that asset bubble pops, it will be painful. That's exactly what happened to the Japanese juggernaut that everyone was scared about 20 years ago.

The longer term problems are demographic. The one-child policy means that the upcoming generation is smaller than the previous. Their work-force will soon be shrinking. Furthermore many parents chose to abort girls to make their one child a son. But a generation with a significant surplus of men is bound to have interesting social problems.

If I had to bet, I'd bet that 30 years out we'll be hearing more about India than China.

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

#53

Post by brc »

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…

If there was some broad-based, phased-in, mineral based price tax/royalty that went into an untouchable, national sovereign wealth fund, then I would agree in-principle to a resources rent tax.

As for the regional areas investment, I broadly think that the royalties-for-regions that has been implemented in WA is the way to increase regional investment.

What I do not agree with, is taxing the profits of one industry to fill up general revenue lost through bad government spending. You might support it now, but once the pattern is established, any industry might be next, just for doing too well. And that's a bad principle, and against all concepts of fairness and equity.

If the government wants more tax money from mining, then they should go to the miners and say 'where can we invest to lower your cost of capital, increase your productivity and increase your competitiveness on the world market'. You'd get double the amount of taxes from a doubling in size of the mining companies, and a lot more employment, to boot.

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

#54

Post by jakarta »

mrtron wrote: post #49
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.

I don't see how China's demand for commodities could be a bubble. They are building in huge volumes, but they have a huge volume of people. There is a middle class developing. Check out Hans Rosling's talks about it. There may be a temporary bubble in the stock market, but China is undergoing an incredible shift towards becoming North American in every way. Beijing is the best example of this - the entire city has be…

http://www.scribd.com/doc/28824145/GMO-White-Paper-China

Here's a white paper with some possible red flags that point to a bubble in China.

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

#55

Post by brc »

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.

It's a free market for jobs. Anyone can choose to do it. There's plenty of people in IT making good salaries, but you don't hear about anyone trying to stop that. The age of the recipient is unrelated.

It might hurt for some, but worse would be some kind of intervention to prevent what you see as a problem. That would end up hurting all.

You see inflation, I see strength in the job market, a strong economy, a prosperous nation.

There is far more risk of inflation from continued government borrowings than from some people making good money in the mines.

The worst outcome would be to try and rein in the mining industry somehow. That would create all types of unintended consequences, all bad.

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

#57

Post by adsyoung »

nicko wrote: post #47

I worked in the Pilbara for one of the big miners in an 'automated' laboratory for a couple of years after graduating. AMA. Couple of quick points for anyone tempted to make the move: As an employee you get to interact with some pretty amazing tech, but most of it is created by other firms. Direct employees typically end up operating, maintaining and fixing things when they break. It's a great place to get hands on e…

Hi nicko. Do you have an email address I could ping you on. Would love to quiz you about your experience :)

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

#58

Post by nicko »

adsyoung wrote: post #57
nicko wrote: post #47

I worked in the Pilbara for one of the big miners in an 'automated' laboratory for a couple of years after graduating. AMA. Couple of quick points for anyone tempted to make the move: As an employee you get to interact with some pretty amazing tech, but most of it is created by other firms. Direct employees typically end up operating, maintaining and fixing things when they break. It's a great place to get hands on e…

Hi nicko. Do you have an email address I could ping you on. Would love to quiz you about your experience :)

No probs, I just updated my profile with my email.

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

#59

Post by c1sc0 »

mrtron wrote: post #49
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.

I don't see how China's demand for commodities could be a bubble. They are building in huge volumes, but they have a huge volume of people. There is a middle class developing. Check out Hans Rosling's talks about it. There may be a temporary bubble in the stock market, but China is undergoing an incredible shift towards becoming North American in every way. Beijing is the best example of this - the entire city has be…

Most of what you are writing was true, like a year ago. Never forget that China develops at internet speeds. Here's an update as far as I can tell.

Credit-cards are very much existent right now, to the extent that I know people who got into nasty trouble with them. That's a thing of the last year or so.

Overall credit is a lot easier to get now, which makes the real estate market feel pretty bubbly, but there does seem to be a never-ending demand for new property. First reason is that in the cities you don't marry without an appartment. Second reason is that people are still moving in from the countryside & those that get lucky end up in a position to buy after a few years.

I thought Starbucks was 'out' and the Coffee Bean was 'in' last time I visited. Same story that happened with McDonalds a few years ago: a western brand gets popular just because it is 'new', then people realize that they are eating/drinking crap & come up with their own alternative. Ever noticed how western fast-food joints sinicize (is that a word) their menus? That's not about concessions to the chinese tastes, it's about survival.

You're totally right on the copycat factor though & I actually think that's a great asset of chinese entrepreneurialism. It's a cut-throat world with lots of competition & they know how to stack the cards to their benefit. And why should they not? Unlike the western world they have a massive internal market to develop and cherry-picking 'the best from the west', then copying is a very valid strategy.

There's lots of cash to be made in luxury products I think. Just like the Japanese developed a taste for expensive watches 2 decades ago, I see the same happening in China. Over here in Switzerland jewellers / watchmakers are now openly catering to the asian market. I was in Luzern last weekend and just for fun started looking at the customers in the watch shops: almost all asian faces. And that makes sense, because most of my Chinese relatives will smuggle back a multiple of the allowed $10K worth of watches/jewellery every single time they visit europe. And those people are by no means 'fuck-you' rich in the Chinese sense of the word.

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

#60

Post by brc »

zmmmmm wrote: post #40
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…

> make hay while the sun shines If only we were actually making some hay, or put some of what we do make in the barn instead of gorging on it. I think a better analogy is "let's party while the champagne is flowing". Instead of long term investments in permanent infrastructure and educating our citizens we are largely just padding out the middle class with spurious welfare benefits. That's almost worse than just thro…

I mostly agree with this. While I don't think we should increase mining profit taxes, I do think some of the mineral wealth should be locked away into a sovereign wealth fund - the type that can't be gotten at by sticky fingered politicians of any persuasion. The wealth fund could be used for apolitical purposes, like education funding (scholarships?), national dual lane freeway construction, large-scale water projects. But only after it reached critical mass and was throwing off a couple of billion per year in investment returns.
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