Manufacturing - who can help and how
Date: Tuesday, September 06, 2011
Author: Henry Thornton
US jobs fail to rise and double dip recession looks more likely.
Europe debt levels coincide with rising fears of the breakup of the Euro, bad debts for banks and forced austerity.
Global economic and financial volatility rules and fear stalk global markets.
There is general agreement that Australian interest rates are on hold at least until global financial volatility declines to the point that reliable economic prediction is again possible.
The government's woes are now so entrenchged that it is having additional negative impact on business and household confidence.
The Reserve Bank has signalled that interest rates are on hold for the forseeable future. I have no argument with that decision. Global financial volatility is worsening global economic uncertainty. While Australia’s overall inflation is predicted to exceed the RBA’s target, this is not by such a margin that great damage will be done if the RBA waits for global uncertainties to be resolved.
If things become sufficiently gruesome, either internationally or domestically, inflation will cease to be a problem and the next move in interest rates might be downward, as some bold souls have predicted.
The topic of Australia's manufacturing capacity has been much discussed in recent weeks, and in particular what opposition leader Tony Abborr calls 'heavy manufacturing' and Henry calls 'strategic manufacturing'.
While free trade is the modern economists’ mantra, the USA, Europe and Japan all protect their agricultural industries. Furthermore, in other strategic areas, including defence, their rules of engagement clearly favour local industry, and why not, one is forced to ask? While-ever the possibility of serious global conflict exists, no sensible nation should rely entirely on global free trade, trade that will immediately be disrupted in any serious conflict.
There are three things Australia can do to promote 'strategic manufacturing', and the first two will help manufacturing generally and other non-mining industries.
The first is to implement a rersponsible fiscal policy. The economy cannot accommodate massive spending on mining as well as wasteful, excessive and unnecessary government spending, and the net result is interest rates higher than they need be, a stronger currency than there need be and the squeeze on non-mining industries that we are now experiencing. This ‘crowding out’ is a major consequence of inadequate fiscal policy and will continue unless and until a responsible government eliminates the excessive government activity.
A second thing that a responsible government could do, having achieved a substantial budget surplus, is to create a sovereign wealth fund that places almost all of its investments offshore. Currency outflows from such a fund will ameliorate the rise in the value of the Australian dollar while building a war chest of spending power for use when the mining boom subsides or Australia is faced with a serious geopolitical risk.
The final thing that a responsible government could do would be to remove impediments to non-mining activity. Cutting useless government activity will do this across all industrial sectors, but for strategic manufacturing I have far more targeted actions in mind. Australia’s current defence establishment is notoriously focused on ‘inter-operability’ with allies, especially our great American allies. The cost is the demise of the ‘inter-operability’ with Australian industry that was so helpful in WWII.
I present three examples of what I regard as inappropriate treatment of Australia’s strategic manufacturing sector.
These concern ther Joint Strike Fighter project, the 'light-weight Bushmaster' project where anti-protection was implemented and the treatment of Metal Storm Ltd, not unlike the attitude of Australia Inc to the locally developed solar energy generation now used widely in China.
There are calls for the RBA to help by going easy with monetary policy, which are clearly wrong.
How can Glenn Stevens and the Reserve Bank help solve the problems of manufacturing, or non-mining industries more generally.? The answer is obvious. Keeping interest rates lower than needed to contain inflation will do nothing to help Australian industry, and inflation will damage all industries.
It is the government's job to implement, the maximum safeguards for manufacturing and indeed for other non-mining industries.
Today we headed for Darwin to put the car on the train to Adelaide.
Mrs Thornton insisted, of course, on the compulsory viewing and route march.
We looked from a 'hide' over a vast lilly-filled lagoon with birds and no doubt man eating salt-water crocodiles hiding beneath the lilly pads.
The walk was through hideously hot dry scrub, but after half an hour or so a nice view over a vast bird nesting area, including multiple Magpie Geese.
The path was quite a way from the billabong, but frequent signs warned that 'crocodiles have been seen close to the paths'. Henry has been reading We of the Never-Never, published in 1902 by Mrs Aeneas Gunn.
Mrs Gunn helped pioneer the region we were travelling through, her husband managing Esley Station until he tragically died after not much more that a year of married bliss.
The book makes fascinating reading more than a century after the events it describes, and is both informative and quite moving.
Mrs T sparked right up on the the road to Darwin as we were passed by a long convoy of military vehicles including tanks, trucks and armoured cars with men in full combat gear behind wicked looking weapons - heading south.
Tomoow the car goes on the Ghan to Adelaide and we head for the airport to fly to Adelaide.
Date: Monday, September 10, 2012
Author: Henry Thornton
Quality education requires quality teaching.
Over the weekend, Mrs Thornton, herself a popular and effective university teacher, made the obvious point that quality teaching requires quality teachers.
It is not just a matter of money. People of Henry's age, (like most of Henry's readers), received a better education 40 or 50 years ago when Australia, and the world, was far poorer than it is now.
Nor is it just a matter of class sizes. The Asian nations like Singapore and China have larger class sizes than we do, and higher educational achievements. And students of Chinese heritage here do far better on average than students of traditional modern Australian heritage. I venture the hypothesis that children of recent migrants generally also do better on average. All these facts point to cultural factors that are most likely negatively related to the wealth of the relevant parents.
Mrs T has a nice theory to explain the decline in teaching standards that we older people routinely bewail.
Forty or fifty years ago, women had many fewer opportunities in the marts of trade, the professions or the major corporations. Teaching and nursing were the main careers open to most women, and therefore there was a far larger amount of high talent in these professions.
Ergo, teaching (and I suspect nursing) standards were higher then, and as a result children were better educated, especially in primary schools where women teachers were in a strong majority.
I am not sure how the role of women plays out in university education now and then. As a student at Melbourne University I found several formidable women teachers, but only one who had reached the dizzy heights of an Associate-Professorship. Certainly teaching standards generally were far more rigorous than I observe applied to my children's education, but then mass tertiary education has undoubtedly lowered standards of average students as well as their teachers.
The universities I know a fair bit about have women assuming the main burden of teaching, while the blokes mostly pursue 'research', writing papers that in many cases would be better left unwritten for journals that serve mostly to provide points in support of applications for promotion.
Teaching rather than research is a choice often made by women who have children to bring up and hence are forced to compromise far more than blokes in balancing the needs of paid and unpaid work.
Henry knows one of the Group of Eight Research Universities in which a new dean tried to make redundant the five women in their fifties who earnt most of the faculty's large profit from teaching mass classes full of overseas, full fee paying students.
The reason for this master-stroke of incompetence was the dean's negative view of their failure to produce 'research'. This was despite the fact that two of the five had explicit contracts to do only teaching, and the other three had assumed far greater teaching loads than others (with full faculty approval) by virtue of their decision not to pursue research.
The net result was that five very effective teachers are either retired, having accepted redundancy packages, or are teaching far less, having decided to shove it up the dean by reigniting their research careers.
Now the mass-income-earning classes are taught by Ph.D. students on sessional contracts, taught far less well it is almost unnecessary to report.
There is some justice in all this. The relevant dean was demoted and is again a mere professor.
The new dean, however, is headed for a major industrial relations fiasco by refusing to allow one of his (female) professors to travel 'Premium Economy' to receive a prestigious award. This is notwithstanding her doctor's certificate asserting that her medical condition should not be subjected to an economy seat on a plane to Europe.
The said dean is a bloke (of course) and from a country that has been thoroughly thatcherised, so I suppose we should be sympathetic. But you'd reckon he'd be a bit smarter than he seems to be.
How to improve the quality of teaching remains unclear. We cannot turn back the clock. Raising wages of teachers relative to those of the average worker might make some minor difference. Chanelling more children into jobs of a lesser academic nature, eg as truck drivers or tradespersons, where chronic shortages exist, would make sense, and would allow at least some universities to again become genuine centres of excellence, teaching students of higher average ability.
Restructuring universities so that every one of the top universities has at least one faculty in which it has a genuine shot at a top ten or top twenty global position is surely not beyond Australia. This would create a series of genuinely excellent faculties, with positive rub-off effects on other faculties.
Here is one radical idea. Henry observes many of his fellow old persons have a lot to offer, would be willing to help and were trained in days when standards were higher. Why not allow them to teach, especially in universities, after intensive short courses in modern teaching methods. This would free younger men and especially women to work harder at 'research'. A win-win, even if most of the additional research was of little interest or relevance.
A reader has provided evidence on this matter. Two ANU economists, Andrew Leigh and Chris Ryan, concluded in 2006: 'Using consistent data on the academic aptitude of new teachers, we compare those who have entered the teaching profession in Australia over the past two decades. We find that the aptitude of new teachers has fallen considerably. Between 1983 and 2003, the average percentile rank of those entering teacher education fell from 74 to 61, while the average rank of new teachers fell from 70 to 62. ...
'We believe that both the fall in average teacher pay, and the rise in pay differentials in non-teaching occupations are responsible for the decline in the academic aptitude of new teachers over the past two decades'.
Henry respectfully concludes that the far wider role of women in the economy generally is also a major factor, especially over the longer period considered in the blog.
Saturday Sanity Break, 8 Sept 2012
Date: Saturday, September 08, 2012
Author: Henry Thornton
US jobs increased by 96,000 in August, short of economists' expectation for 125,000 jobs. The unemployment rate, however, fell to 8.1 per cent from 8.3 per cent a month earlier. Presumably, this is because there was a fair number of people leaving the workforce.
Stocks rose marginally, as the weaker than expected jobs outcome was judged likely to slightly increase the odds on more money printing by the Fed.
A day earlier, the European Central Bank (ECB) cheered global equity markets more decisively when it's Chief, Mario Draghi, declared that he would attempt to solve the Eurozone crisis by printing money, lots of lovely Euros.
A Bundesbank spokesperson said: "In the most recent discussions, as before, Bundesbank President Jens Weidmann reiterated his frequently substantiated critical stance towards the purchase of government bonds by the Eurosystem.". He "regards such purchases as being tantamount to financing governments by printing banknotes."
Hear, hear, says Henry, but no one but him and the Germans seem to care. The rising price of gold suggests there may be a number of canny folk preparing for the consequences.
Industrial relations in Australia are clearly in need of repair.
Like the Geelong forward with the difficult name, journalism's most mature rising star, Judith Sloan, today catalogues the deficiencies and provides a blueprint that Henry is generally in agreement with.
The Prime Minister's conflation of 'mines' and 'minds' when addressing a bunch of miners, ignoring their travails and challenges as the mining boom deflates before our eyes, has been commented upon by another of The Australian's rising stars.
'THE Prime Minister's speech to open the Association of Mining and Exploration Companies annual conference on Tuesday really was emblematic of the government's approach to mining operations in this country: a dismissive approach that has been in effect for some time, not just during the life cycle of Julia Gillard's prime ministership.
The cartoon that adorns this article was a close second for image of the week, but Gina Reinhart's blathering won by a nose.
Gina Reinhart has embarked on a one woman crusade to save Australia. Henry's one man crusade having not yet done the job, Gina's entrance to the fray is welcome. Her moving the goalposts so far to the right makes Henry's views look reasonable, even sensible.
Sarah O'Carroll of News Corporation provides an excellent coverage, including a video extract from Ms Reinhart's recent Sydney mining club speech, that mysterously disappeared from the screen when Henry tried to access it. That was the one about paying Australians $2 per day to work in the mines, to equalise our competitiveness with Africa. The linked article contains another, more innocuous, extract.
Hawthorn belted Collingwood last night in a tough and at times spiteful encounter. Greg Baum reports.
Henry's favourite tipster, Julian McCrann tipped Hawks, Swans, Cats and Eagles for the weekend, but sadly his incisive analysis of exactly why got lost in transmission.
Caaaarlton! is said to be on the brink of signing supercoach Mick Malthouse, and three of five assistant coaches have already received their pink slips.
No doubt there is a rationalisation of fringe players still to come.
Image of the week
Courtesy The Australian
The luck runs out
Date: Friday, September 07, 2012
Author: Henry Thornton
Economic data indicative of the state of the Australian economy gave little joy this week.
Iron ore prices continued to plunge, indicating the massive trouble in China's steel mills and the likely further effects on our much-hyped resource boom.
Fortesque's sale of its power station, dismissal or resignation (in anger) of key staff, with 1000 workers still to go and postponment of expansion plans is ominous and reinforces BHP's defensive actions and those of many junior miners.
GDP growth for the June Quarter was a strong 0.6 %, producing annual growth in excess of the sustainable 3 % or so. But June's growth was lower than that for the March quarter, and reinforces other suggestions of a slowing economy, especially declining job advertisements and jobs lost.
Statistics on days lost because of industrial action, often illegal as in the Grocon dispute, have rocketed, suggesting to Henry that militent unions are attempting to make hay while the Labor sun is shining, however feebly. 'Fair Work' anyone? Is it fair to picket honest men and women, who have already said in public they are quite happy with their work, pay and conditions, from getting on with the job?
Yesterday's official (ABS) labor market statistics were more bad news. People seeking work fell more than people losing jobs, producing an entirely misleading slight fall in the official rate of unemployment.
We are sick of pointing out that Australia has many more people than officials acknowledge either working less hours than they would prefer or not actively seeking jobs - 'discouraged workers' or people who have made life on the dole an art form.
The inimitable Gary Morgan has uncovered an utterance by Penny Wong from 2007, when she was an effective opposition attack ... person.
'Senator Penny Wong, in a reply to a letter from Marcus L’Estrange concerning Australia’s true rate of unemployment had this to say: (March 8, 2007) — while in Opposition to the then Howard Government'.
“Whilst Labor is always pleased to see the official rate of unemployment drop, and to see more people gaining work, we recognise a great many people do not show up in those figures. For example, one in five part-time workers — some 600,000 people — want more work than they can get.
“There are also many people who are not in the labour force at all. Around 1.2 million Australians would like to work but for various reasons are not looking. Many of them are discouraged or do not have the skills employers are looking for.
“When you add these two factors to the nearly 500,000 officially unemployed, we know that there are around 2.3 million Australians who are officially unemployed or want more work than they can get. This is a point that I, and a number of Labor members have made on a number of occasions.”
Senator Wong has not repeated these statements since the ALP won Government at the 2007 Federal Election.
Money is again being thrown at 'worthy causes' like a drunken sailor on speed. Graham Richardson tallies the promises in today's Oz, but notes the stupidity of the $23 carbon tax that will morph into an Emissions Trading Scheme with a minimum $15 price in the strange universe in which Labor wins the next election.
The loss of revenue from effects of lower commodity prices, fewer people working and additional calls on welfare, means there is NO WAY Wayne Swan can produce a budget surplus without the most draconian spending cuts and soak-the-well-to-do taxpayers. We await the backflip on that promise.
Our luck has run out.
The Lucky Country, badly managed
Date: Wednesday, September 05, 2012
Author: Henry Thornton
The Prime minister has confused us all by conflating 'mines' - which rip stuff out of the ground and send it to China - and 'minds' - which underpaid teachers try to stuff stuff into, in many cases with little effect.
Has anybody noticed that the gummint is now into buying votes, or if that fails leaving legacy programs that an Abbott gummint will be forced to cancel or postpone.
All this comes on top of more money to 'improve' the mind stuffing business, free or cheap dental work for battlers, handouts to people to 'compensate' them for the carbon tax, itself to morph into a link to the European (European!) economy in some indistinct future, the massively costly NBN, already over budget and behind schedule, coming on top of handouts to encourage consumerism, pink batts put in and ripped out, refurbishing schools with no reference to specific needs or adequate budget control, the list goes on.
Has the 'world's greatest Treasurer' not told the PM that the party is over, revenue is falling and will fall faster as China's boom evaporates, and she still has the budget surplus promise to consider?
Henry's guess is that the gummint will stay true to form and stick to the budget promise in the face of massive evidence it is impossible, then do a massive backflip with pike, and ridiculous arguments in support of the new position.
Henry yesterday pointed out that there has been solid evidence about the weakness of China's growth since early 2012, evidence regularly noted in his near-daily blog.
Is the RBA in a 'bubble' about its own infallability just as blindly as Ms Gillard and her cabinet?
Does the RBA not read these missives from the great beyond?
If not, perhaps they should, painful though it might be at times.
It is the grain of sand that makes the pearl, Mr Stevens.
RBA Board meeting: here are the main issues
Date: Tuesday, September 04, 2012
Author: Henry Thornton
The board of the Reserve Bank should confine itself to thinking and talking today, as there is no case to alter the stance of monetary policy.
The overall point is that, while there are plenty of problems, none of them would be helped by a change in monetary policy at this time.
For a change, and to salute the popular ABC TV program, today we present our regular advice to the board of the RBA in the form of Q & A.
Here are the questions that board members will (or should) ask.
Q. What is happening in Europe?
Q. How bad is the China slowdown?
Q. Is Ben Bernanke going to print more money, and does that matter?
Q. This all sounds pretty downbeat Mr Stevens, surely another rate cut would do no harm?
Q. So what is the overall state of the domestic economy?
Q. That ten speed economy includes several sectors hurting badly – manufacturing, tourism and education to name three. The dollar is too high for these sectors to flourish. I must ask again why it is not possible and desirable to engineer a lower Australian dollar?
Q. What about all those people that Roy Morgan says would like more work and cannot get it, and those people who say they cannot get a job or live on existing welfare payments?
Q. Inflation is low and seems destined to remain low, certainly that is what the forecasts say. That is our main job, so why not give a bit of help to the unemployed and other battlers with a lower interest rate?
If you are interested in the answers that should, or will, be provided, tune in here.
A prophet in the wilderness
Date: Monday, September 03, 2012
Author: Louis Hissink
Today's Blog is a modern parable, coming direct from a prophet in the wilderness, Louis Hissink.
Consider we have John the Breadmaker and Mark the cobbler who makes shoes, and Fred the gold miner. John makes bread, Mark makes shoes, and Fred produces gold. Mark needs to eat and, noticing that John bakes lovely smelling bread, offers to barter, or exchange, one pair of his shoes for, say, five loaves of bread. This John finds acceptable and swaps (barters) five loaves for one pair of shoes.
Next day Mark is hungry again and needs more bread but John, not having worn out his shoes, doesn't need another pair, and hence declines to swap another five loaves of bread for Mark's shoes. Oh dear, this means Mark might have to go hungry, and what should he do? He hits on a bright idea and swaps a pair of shoes for some gold that Fred produced.
Fred also swaps some gold for bread, and soon John, Mark and Fred are exchanging their products via the bits of gold that has become the item of intermediary exchange, and that has now developed into an acceptable paper receipt exchange system. (HWG assumes that Henry's readers basically understand all this stuff, so no more will be written on this topic here).
Then along comes Wayne the bureaucrat who produces nothing. Problem is that Wayne needs to also eat and have at least a pair of shoes, but as he produces nothing what is he to do? Well, it's clear that John, Mark and Fred are not going to swap their products for nothing that Wayne offers.
So Wayne develops a cunning plan - he will print some money! And so he enters the market with his newly created money and is able to eat and not wear his feet out from not wearing shoes, etc. While John, Mark and Fred are able to exchange their goods and services in terms of their productivity, that is, there are only so many loaves of bread one can bake in a day, shoes one can cobble, and gold one can mine, they notice that somehow the money supply seems to be more.
Of course noticing this new quantity of money John decides to increase his bread production by borrowing some of it to build new bread making machines. The problem is that it’s illusory and like the desert mirage, the new money actually doesn’t represent anything real, and hence his new bread maker is based on a fiction which as expected, he discovers too late when the economy slumps around him and his mates. Wayne of course survives by printing more money and starts the next business cycle.
Henry's regular advice for the Board of the RBA will be available in the Oz and here tomorrow.
It has a new format, and is headed 'Q&A at the RBA'.
Saturday Sanity Break, 1 September 2012\
Date: Saturday, September 01, 2012
Author: Henry Thornton
Australia's richest person, Gina Rinehart, has issued a stern rebuke to those jealous of the wealthy: start working harder and cut down on drinking, smoking and socialising'. (Reported by Steve Burrell, The Australian, 30 August)
Henry is pleased to endorse these robust sentiments, and also that the lady did not include eating too much as something to be avoided. (Disclosure: like Ms Rinehart, Henry is above the medically optimum weight for someone of his height.)
Mitt Romney was upstaged by Clint Eastwood speaking with his invisible friend, Barak Obama. But Mr Romney seems to have done ok and the polls are narrowing. Game on!
US Fed Chief, Ben Berenanke has presented a strong speech suggesting he has more pushing on a string with US monetary policy. No indication of timing and what the precise action might me – 'QE' or 'operation twist'. We remain perplexed.
Henry watched with growing disbelief while following the score from afar as his beloved Blues failed to dispose of the lowly Suns last weekend. Caaaarlton! seemed to be taking its conservative born to rule attitude to literally, as in another must win game earlier this year when they were felled by cellar dwellers Port Adelaide.
Winning those two matches would have ensured a place in the finals. Winning a couple more might have secured the top 4 position on the ladder so vital to further success. It was not the injuries that cost the team its finals opportunity and the coach his job. Just an inconsistent and unprofessional attitude by the senior players, who should hang their heads in shame.
Brett Rattan showed his mettle at the press conference to abbounce his sacking. He was brave, down to earth and generous to his players, who he described as a top four team. Top four in talent, perhsaps, not in attitude, but he did no more than hint at that point. My guess is that 'Ratts' is, or has been, a bit too matey with the players, too willing to accept near enough is good enough. I trust the iron has entered his soul and expect he will be tougher and more demanding in his future coaching role, which will surely come sooner rather than later.
If Caaaarltton! snares Mick Malthouse or Paul Roos to coach next year the players will be on notice and will surely perform consistently far nearer their potential.
Henry's latest painting is on show at the Collingwood Gallery in Smith Street, you guessed it, Collingwood, and below Henry will next week mount an expedition deep into enemy territory to see how the painting holds up in a general exhibition. Solace after the root canal fix, perhaps.
Image of the week
Canary in the iron ore mine; Afghanistan
Date: Friday, August 31, 2012
Author: Henry Thornton
The biggest economic news of the year is the continued plunge in the price of iron ore. Having spent the best part of two weeks touring the mines and ports of Australia's mighty Pilbara region, this has especial resonance for Henry. It is further evidence that the China boom is faltering, probably more seriously than the glass half full men believe.
Way back in January of this year we reported the thoughts of Ambrose Evans-Pritchard of the UK Telegraph, who said that China's slowdown is serious, more serious than the official numbers, swallowed by the global press, suggested.
Evans-Pritchard quoted statistics showing sharp falls in China's exports, and in the Shanghai container freight index. But his kicker was an old favourite of this writer: 'The Baltic Dry Index measuring freight rates for ores, grains, and bulk goods, has fallen 44pc over the last year. Kasper Moller from Maersk in Beijing said weak Chinese demand for iron ore was the key culprit'.
Old time miners used take canaries into their mines to check on the quality of the air. I saw no birdlife at all in the mines of the Pilbara, itself a signal of some sort. But if iron ore is the canary in Australia's resource boom it is wobbling on its perch. Perhaps Martin Ferguson is not as goofy as his silly grin suggests, although I do accept that, although the commoidity price boom is over, both the investment boom and the export boom are still before us. Or so we hope.
Adam Creighton of The Oz has an extraordinarily interesting article today.
He quotes an eminant economist, Robert Gordon of Northwestern University, to the effect that after the excitement and progress of recent centuries, 'per capita economic growth in the West might be drifting back to its long-term trend – close to zero'. As Henry said at the end of last month's advice to the board of the RBA: 'One possible result of the current extended global crisis may be a more general realisation that growth could to advantage be redirected to solving deeply entrenched problems of modern capitalism rather than restoring unsustainable growth based on excessive and wasteful consumerism'.
An 'emerging' economic power like China can grow faster than already 'emerged' nations of the West by exploiting new technologies and best practice borrowed (or pinched) from the West, but the West has to rely on genuine technical or policy breakthroughs. If, as Professor Gorden warns, invention and practice improvements are drying up, growth in the West may slow substantially.
Australia can grow on the coattails of China's technological catch-up, and also China's expanding industrial workforce. But if the rest of the West is undergoing structural stasis, even China's growth will slow.
We should be warned - the canary is wobbling on its perch.
Only focussed and serious economic policy reform can maintain Australia's prosperity if the canary falls to the bottom of its cage.
Like all Australians, we grieve for the brave Australian soldiers killed in Afghanistan. The loss of men relaxing in their compound, shot by a rogue Afghan, a so-called 'ally', is almost too much to bear.
By all means tighten security. But one hopes our Prime minister is considering more drastic options.
The Mighty Pilbara #7 – Farewell and return to civilisation
Date: Thursday, August 30, 2012
Author: Henry Thornton
'Hungry and thirsty, blistered by the glare of the salt in the pitiless sun, we struggled on, with a wondering thought of what the end would be.
'Think of us, picture us, ye city magnates, toiling and struggling that your capacious pockets may be filled by the fruits of our labour: think of us, I say, and remember that our experiences are as those of many more, and that hardly a mine, out of which you have made all the profit, has been found without similar hardships and battles for life!'
This is an extract from a wonderful book in the Penguin Colonial Masterpieces series. Its title is Spinifex and Sand, and it is written by the Hon. David W. Carnegie, youngest son of the Earl of Southest, and first published in 1898. Carnegie was an engineer working on a tea plantations in Ceylon but came to Australia when gold was found in Western Australia in 1892. He joined the rush to Coolgardie and then for the next five years led several important exploring expeditions through the colony's arid regions.
Carnegie was awarded a medal by the Royal Geographical Society for this work, and was appointed Assistant Resident in Nigeria, where his life was ended at age 29 by a poisoned arrow, which struck him when he tried to quell a native uprising.
It is impossible to criticise dud airconditioning, incompetent table service and badly cooked food when you have read of Carnegie's struggles through unforgiving bush and desert for months on end. On many occasions, Carnegie was forced to search for water for days to save his expedition, and the lives of men and camels. He took months navigating from water hole to water hole, on one occasion in desparation capturing a 'buck' (his term) native to whom he fed salted beef to encourage him to find water.
We flew or drove from place to place in comfort of a standard David Carnegie could not have imagined. The mines we visited would have boggled his mind, and he would very likely have been overwhelmed by their technology and productivity. Our overwhelming thought was how much has been made of country so apparently poor in every way, occasional small outcrops of goldbearing rock excepted.
Our final destination in the Pilbara is Port Hedland, a place that David Carnegie never reached. In 1628, a Dutch ship had visited, captained by one Gerritt Frederickson De Witt, who ran his ship aground – the tide has a large rise and fall, which today complicates departure of heavily laden iron ore ships.
HMS Beagle visited the area in 1840 – memo to self, check if Darwin made any portentious predictions based on the look of the place. In 1861 Francis Gregory led an expedition to the North West and reported favourably on its 'wool growing pastures'. The next year, the first non-aboriginal settlement took place at Cossack, whose ruins are mentioned in report # 2.
At about the same time, a mariner, Master Peter Hedland, discovered the deep water harbour subsequently named for him. A causeway across the mud flats was built in 1897 and Hedland's first jetty was completed in 1898.
The first shipment of Pilbara wool reached London as early as 1864. There was great excitement when gold was discovered on Malina Station in 1887, leading to the establishment of the towns of Marble Bar and Nullagine. There was more excitement when far larger gold discoveries were made in Kalgoolie and Coolgardie in the 1890s, providing hope to a continent whose eastern colonies were in serious depression.
Today, Port Hedland is a bustling port city whose margins are expanding almost visibly. The mighty Esplanade Hotel and just been renovated and can be purchased for $30 million. The far more downmarket pub next door, the Pier Hotel, is also for sale, but one imagines it is being promoted as a 'development opportunity.' We can confim, however that the draft beer was magnificent and the chips with the steak sandwich was quite edible. The blonde barmaid had nice tats (that was with an a, not an i, dear reader, remain calm). The tables in the (covered) beer garden had that stressed look so loved by east coast middle class trendies, but in this case it was because they came by camel train in 1903, or thereabouts.
Shortly we board a plane for Perth, where a dentist awaits Henry to undertake some root canal exploration, which antibiotics and pain killers have held under control during our odyssey to some of the greatest sources of Australia's wealth. Remember the highly efficient miners, gentle readers, and even more the earlier prospectors and explorers, who bravely went where no wealth seeker had gone before.
The Mighty Pilbara #6 – RIO`s Yandi mine
Date: Wednesday, August 29, 2012
Author: Henry Thornton
We farewelled Mount Whaleback and the town of Newman at precisely 6.50 AM, Malcolm X being keen to arrive at the office of RIO's Yandi mine at precisely 9 AM. We would of done it too, with Henry at the wheel of the Toyoto gunship, except that entry to the RIO mine is via the BHP mine.
(Yandi is short for Yandicoogina, an indigenous word for 'Place of giant alluvial iron ore deposit', one assumes. 'Alluvial?!' I hear you cry. Yes, the massive, high quality ore deposit is in an old river bed, washed out of the hills uncounted millions of years ago.)
We pulled up at the first BHP checkpoint at approximately 8.40 AM. Malcolm pushed the button several times before being connected to a charming Indian gentleman (judging by his heavily accented English.) Has BHP outsourced gate control to a call centre in Delhi? Henry asked himself. 'We are here to visit Hamersley's Yandi mine', Malcolm asserted, several times with increasing force. 'Hem ... er ... Sly? What is Hem … er. Sly?' responded the Indian gentleman 'Tell him its RIO' advised Henry. RIO struck a chord. 'What is your name?' 'Xmond' replied Malcolm. 'Xmond who? Asked the gate keeper. 'Malcolm Xmond' asserted a clearly irritated Malcolm. 'I called your general manager at 6.30 AM today. 'How many in the car?' 'Three plus me'. 'How many?' 'Four – three plus me is four.' 'What is their names?' 'Mrsd Xmond and Mr and Mrs Thornton', explained Malcolm.
The badinage continued in this vein for several minutes, the Indian gentleman demanding to know everybody's first names, but being culturally sensitive he did not refer to Christian names, which led to further confusion. Finally at approximately 8.50 AM we were allowed to drive 10 metres onto BHP's sacred soil, correction, iron ore. 'Stop before the security officer' said the Indian gentleman, 'he will check your luggage'. After peering into the back compartment of the gunship, thew security officer issue a stern warning: 'You approached the barrier faster than the mandatory 20 km per hour', he asserted, 'You will need to obey the speed signs more precisely now you are in the mine proper. There are many people checking speed, and …'. He left the precise threat unstated, but we had been ticked off and Malcolm took the wheel with even more care than after his recent speeding fine.
The next challenge was the very stylised map with Henry in the hot seat charged with navigating through a winding road with a green star at a crucial intersection. We managed to get it right but came to a second BHP security barrier. This time there was no answer when Malcolm pushed the button several times in quick succession, and now we were 10 minutes late with twenty km to go. Luckily one of the party noticed a sign providing a number to call when no-one answered the button in the Delhi call centre – our Indian friend on a wisely chosen tea break, one assumed. The phone was answered by a more senior person, who quickly raised the barrier, and on we went, pleased to be on friendly soil, correction, ore.
The final frustration was at the RIO security barrier. The acknowledgment of our presence was far faster, and in clear Aussie, but we were told to park the gunship and await a car. This arrived quickly, driven by the charming mine manager, Ms Z, confirming Henry's theory that RIO has recognised the undoubted fact that modern women are better managers than most blokes. She whisked us to her office, and provided a pleasant welcome and brisk safety briefing followed by a nice slide show on the mine, its history and planned future. We were issued the regulation vests, safety glasses and hard hats, and headed for a quick drive around the various facilities.
Then came the real treat. We were taken to the control room, where the monster ore trucks are controlled without drivers! At first some of our party misunderstood the meaning of 'autonomous working' but when we later got close to one of these trucks during a thrilling trip into the pit itself, the penny dropped - 'There are no drivers', shrieked Mrs Xmond. We acquired some understanding of how this 'automomous working' is created and managed, and other opportunities are being studied. Eventually, of course, many more industrial processes will be automated, and humans will do more challenging and creative jobs, including designing ever safer and productive mines and ore distribution.
Both the Yandi mines are the most profitable in the portfolio of BHP and RIO iron ore mines. As a rough guide, mining costs $6 per tonne, railing it to the port $2 per tonne, loading at the port $1 per tonne and shipping it to China or Japan $12 per tonne. With 50 million tonnes per annum, at an average price of $100 per tonne (or pick your own number), this is nice business to be in, even allowing for substantial capital costs. This is partly because the overburden is very thin at Yandi and also because processing is as efficient as possible.
RIO's Yandi mine has a Fly in Fly out (Fifo) operation, with 670 workers at present. As at other RIO mines in the Pilbara, there are significent numbers of indigenous and female workers, around 12 % in each catagory, though the management is working hard to raise these ratios. This is essentially because suitable white males are hard to get but also because promoting diversity is an important corporate goal.
We drove on to our final Pilbara destination, Port Hedland, from whence a fair proportion of BHP's iron ore is exported, presumably after a stern interrogation of every load.
The news as we caught up was full of interest. Caaarlton! is out of the race for the finals due to an overconfident, even complacent, defeat by the Suns, though watching Hawthorn's inspired victory over the Swans in a bar in Newman suggested it is probably just as well. Mick Malthouse is favourite to coach the Blues next year, despite his 'not interested' on the footy show using a lie detector.
John Howard has entered the fray on industrial relations, and Henry is forced to concur. Mr Abbott, please ask the Prime minister what is wrong with allowing people the freedom to negotiate their own contract with companies in a world where skilled workers are highly valued and hard to get, and if they are too hard to find, or too hard to deal with, robots and expert systems will replace humans. 'Freedom' is, after all, a strong Liberal value.
Julia Gillard has announced that, in 2015, our carbon tax will be linked with the European emissions trading scheme, with a flexible carbon price. This might get Julia Gillard out of a difficult situation, with Europe in a state in which its carbon price may be very low for years. Tony Abbott's 'direct action' is preferred by the miners Henry has been mixing with, and he will presumably stick to his guns.
The sea ice in the Arctic is melting faster and further than ever before, and scientists are worried that the Greenland ice cap is sliding into the water faster than ever before. Still the skeptics say this is a socialist plot, but Henry remains committed (like Rupert Murdoch) to giving the planet the benefit of the doubt.