Advance Australia Fair

Kennyboy66

Or maybe not.

3 down and 1 to go as Mitsubishi closed car manufacturing in Aus in 2008, Ford closes in 2016 and now Holden announce closure in 2017.
Sadly Holden mainly manufactures in Elizabeth, SA where a fair few of my rels live - most of whom have at some time worked in parts manufacturing supplying Holden.

Which just leaves Toyota, although the logic of manufacturing cars in Australia always seemed a bit odd.

What will happen if the Iron ore price drops back from its level of US $ 135 per tonne, to the level seen until 2007, when it had never exceeded $ 40 per tonne.

What if, at the same time the Aus $ gets progressively weaker at the same time, and interest rates have to trend upwards to combat imported inflation ?

What if there has been a housing bubble and it goes pop ?

No recession since 1992 which is a long, long time.

Generali

The most Australian way to answer your questions would be to remind you that if my Aunt had balls she'd be my Uncle.

Instead, as a Pom, some what ifs from where we are.

Car manufacturing has been hugely subsidised for decades, basically just in case we need to build tanks as if that's going to make a difference when the Indonesians/Chinese are charging across the desert towards Brisbane.

The rest of Aussie manufacturing has been down for a while but mostly that's been exchange rate related. That's for 2 reasons:

1. Beggar-my-neighbour FX policies from the bankrupt countries of the north
2. The Dutch Disease

Now that the Aussie dollar is falling towards a more 'correct' level of AUD1 = USD0.8 = GBP2.3, manufacturing should start picking up and indeed we're already seeing that as the AUD falls from nearly USD1.1 to a bit over 0.9.

As for the iron ore price? Well that's seen as a proxy for the Aussie economy as a whole. Mining is, from memory, under 10% of the Aussie economy and iron ore mining is less than 20% of that (happy to be corrected). Also whilst falling investment in mining will reduce GDP, a lot of the stuff bought as a result of that investment will have been made abroad.

GDP : Consumption + Investment + Govt Spending + Net Exports

If investment spending rises by a dollar but that dollar is spent on importing a drill bit then there is no net increase or decrease in GDP.

The part that pessimists, and indeed optimists like our Chief economist at my work, are missing is that the past few years of investment will produce decades of output and employment. Employees and shareholders gaining from profits will use that money to buy stuff in Woolies and Coles.

I reckon, as does the bloke that sits opposite me who runs AUD65,000,000,000 of money, that BHP and Rio Tinto are great buys at the moment. The investment boom is over which is fantastic for anyone that owns their shares as they'll be throwing off billions and billions of dollars every year.

If the iron ore price falls from USD135 to USD40/tonne while the AUD also falls in value then the impact will be lessened. That's the great thing about floating interest rates: as the terms of trade change your FX rate changes to cushion things.

My guess is that Australia over the next few decades will become:

1. The bread basket of Asia
2. The middle-class holiday destination of Asia
3. The Asian HQ destination of choice for companies too lazy to do business with scary Asian cultures directly.

michaels

Dutch disease is certainly the issue here and hopefully Britain of the 80s is not the role model that will be followed....

...on the other hand even if it does all go t*ts up, being unemployed on Bondi Beach probably beats being unemployed in Skeggy

Loughton_Monkey

Generali wrote: »

......

My guess is that Australia over the next few decades will become:

1. The bread basket of Asia
2. The middle-class holiday destination of Asia
3. The Asian HQ destination of choice for companies too lazy to do business with scary Asian cultures directly.

Far be it from me to challenge this, but aren't you a bit optimistic on point 2?

My own preference for Asian holiday destination is without doubt Bali [OK, red rag to an Aussie], and specifically something like the Oberoi. In 2002, I did indeed go to Sydney/Brisbane for a well-earned holiday.

Talk about chalk & cheese!

Like being back in 'old' England again. Shops close at 5. Staff offhand and rude. Postage stamp hotel rooms . Carry your own bags - even in Hilton. Expensive......

Generali

michaels wrote: »

Dutch disease is certainly the issue here and hopefully Britain of the 80s is not the role model that will be followed....

The thing is it can't be had both ways. Either:

1. Soaraway commodities prices (iron ore) mean that the AUD soars in value which beggers manufacturing but assists miners or...
2. Commodities prices drop and the Dutch Disease goes away

michaels wrote: »

...on the other hand even if it does all go t*ts up, being unemployed on Bondi Beach probably beats being unemployed in Skeggy

That was pretty much my rationale for moving here in the first place during the GFC. Broke on a sunny beach in an egalitarian society or broke in London in a Plutarchy, which do I prefer?

London is a fantastic place to raise kids if you're in the top few %. Below that? Not so much.

Jonbvn

Generali wrote: »

AUD1 = USD0.8 = GBP2.3

I think you may have got your sums wrong.;)

Generali

Jonbvn wrote: »

I think you may have got your sums wrong.;)

Ha ha, yes. Well spotted. It would be GBP1 = AUD2.3 of course!

Road_Hog

Generali wrote: »

That was pretty much my rationale for moving here in the first place during the GFC. Broke on a sunny beach in an egalitarian society or broke in London in a Plutarchy, which do I prefer?

I couldn't agree more, but it's headed your way, we've just had a couple of hundred years head start on you. You'll still have the weather, but where as you had tightly controlled immigration, you're starting to become open border. And your last PM was a typical lying politician, no green taxes, oh thanks for voting me in, I promise to promote green energy which will be paid for by green taxes.


I always like this video, it of course applies to all developed countries, not just Oz.


I give you the Lima Declaration:


http://www.youtube.com/watch?v=6dGwCInvOGw

Generali

Road_Hog wrote: »

I couldn't agree more, but it's headed your way, we've just had a couple of hundred years head start on you. You'll still have the weather, but where as you had tightly controlled immigration, you're starting to become open border. And your last PM was a typical lying politician, no green taxes, oh thanks for voting me in, I promise to promote green energy which will be paid for by green taxes.


I always like this video, it of course applies to all developed countries, not just Oz.


I give you the Lima Declaration:


http://www.youtube.com/watch?v=6dGwCInvOGw

The carbon tax was a means of income redistribution to poorer households. A typical watermelon tax (green on the outside, red inside).

Not sure why you think Aus has an open border policy. We don't except with NZ.

Fruit_and_Nut_Case

Djames581 wrote: »

its all depends on inflation rate. Inflation increasing day by day and also impact on all kind of fix assets.

Even more :spam:

Kennyboy66

The last one bites the dust as Toyota announce closure of car manufacturing from 2017.

The problem with the dutch disease is that when currency strength unwinds, there is no manufacturing left to benefit.

Iron ore volumes down, iron ore prices down and forecast to fall further in the next 2 years.

Still, house prices booming, up by 10% in 2013.

What could possibly go wrong ?