What a year it has been.
What a year it has been.
I’m sure all of us will look back at 2006 with some kind of awe, admiring the power of convergence with all the economic forces coming together at one time.
But let’s hope that, as the Ashes win at the WACA Ground completes an amazing year, we don’t get too complacent.
Having said that, I have been somewhat surprised that the good times have ushered in a period of reform – liquor licensing, daylight saving and the break-up of Western Power are all things this paper has asked for with varying degrees of vigour.
There’s still more to be done, so let’s hope the boom continues.
Below I have tried to highlight some of the significant developments this past year, as well as my view of them.
This year, iron ore has truly emerged from the land of the giants to a broad-based sector that is more familiar to the West Perth types, who’ve typically played at the gold or nickel-type precious metals and niche commodities end of the market.
Rising prices driven by global demand has reversed the consolidation process of the past two decades, with most of Western Australia’s iron ore in the hands of two multi-national titans – BHP Billiton Ltd and Rio Tinto Ltd.
This pair, of course, still dominates the scene, especially after massive expansion programs to feed the needs of China’s steel mills.
But in a short-time we have also seen a plethora of junior players in this sector, complete with the stock market battles, regulatory challenges and name calling that tends to follow the smaller end of the market.
I welcome this change. It may not last long, and we are already seeing consolidation, but it makes for a more dynamic and exciting environment for investors and those operating these companies, as well as opening up previously uneconomic resources.
Speaking of the junior miners and explorers, none is as speculative as the uranium players, with a dozen or so having arrived on the stock market this year alone.
This is the ultimate role of capital markets as investors plunge their dollars into these entities, based on a belief that the twin threats of high energy prices and global warming will raise the market share of nuclear power.
Again, commodity prices have done the job – the laws of supply and demand at work – with uranium jumping after around three decades of poor performance.
Unlike iron ore, however, the uranium industry has to wear the hair shirts of our fear of terrorism and waste disposal, which makes developing operational mines much more difficult.
Despite billions being invested in WA uranium companies, Premier Alan Carpenter refuses to allow mining on the basis that it will inevitably lead to a requirement that the waste be returned here.
This is not something I agree with. Whatever your views on nuclear energy, I struggle to see the link between exporting a raw fuel source and a requirement to take back waste.
Waste has always been the responsibility of the end user. Unfortunately, with other popular fuels that we export, we pay the price for their waste emission whether we like it or not.
I think that is a different debate. Australia has exported nuclear fuel for decades and I have yet to see a boatload of waste arrive back.
Oil prices spiked to levels unseen since the catastrophic peaks of the early 1970s as the globes economic engines went into overdrive.
There was a difference though. The price hikes did not bring the world to a standstill.
Instead, business and consumers alike began to understand that prices were climbing to new levels and, possibly, they may never return to their previous levels.
As global warming became increasingly a mainstream consideration, cheap oil became a distant memory and even the current prices, now well below this year’s peaks, are seen as something that is unlikely to last.
Again, all this has helped stimulate both ends of the market, with the global majors and our local giant, Woodside, pushing ahead with huge developments such as Gorgon and Pluto. And those at the junior end have enjoyed the payola that came from years of risk capital in one of the most expensive industries to enter.
High oil and gas prices have also stimulated investment in renewable energy, notably biofuels, but also a wide range of more long-term power sources.
Like an auctioneer weaving their magic, the real estate industry has talked up the price of housing – with statistics, if you can believe them, showing Perth prices have closed in on Sydney’s.
As an air of smugness clouds the city and many regional outposts, the false sense of wellbeing driven by high home values has created a very real threat to our boom.
We are swiftly pricing ourselves out of the market for economic growth, with land shortages (can you believe that?) being blamed for the fact that the very thing that once helped attract skilled workers here – the cost of buying a home by the sea – is now turning them away.
Whether this is a lasting problem or not is a moot point. Both directions at this fork in the road will have a negative impact – sustained high prices keep people away while a collapse in high prices bursts the bubble of confidence that has enveloped our state.
This has been a manta we have repeated for more than three years. Despite all the talk, too many of our industries have faced problems getting the staff they need.
From oil companies to restaurants, the cry is the same.
Wages have followed the same supply and demand curves that have pushed our commodities to new peaks. Unlike raw materials traded on the London Metals Exchange, though, there are political constraints to finding new sources of skills.
Media ownership changes
I have been on the record stating that I don’t believe consumers have anything to fear from the deregulation of media ownership. Ultimately, just like our commodities, demand will create new supplies, especially as the internet provides a more direct route to market for publishers – just look at our Daily Business Alerts, launched 12 months ago, as an example.
Anyway, media giants don’t have to merge to play ball together. Just watch The West Australian newspaper and the Packer empire work together, with our local near-monopoly daily newspaper supplying what seems be the public relations and lobbying needs of the Burswood Entertainment Complex.
Would it be any different if WA Newspaper Holdings Ltd was owned by the Packers?
Western Power break-up
The break-up of Western Power was a brave move which faced considerable opposition. Checking the power of monopolies is a very important role of government, even when they own it.
It’s a pity the same approach wasn’t taken with Telstra. In the short term, the new energy players will struggle to find their places in the market.
Ultimately, though, these businesses will need to be set free and privatised, so they can compete for capital and drive energy prices down.
This year marked the arrival of very new era for WA, a corruption watchdog that was active.
The result has been much pain for the government but, in the end, this process will benefit us all.
If bureaucrats and politicians feel they aren’t paid enough, they can go and join the private sector. Graft and corruption for personal or political gain has no place in the state – it’s just a pity we’ve taken so long to learn the lessons of the late 1980s.
Like daylight saving, this one was a surprise package.
Whatever the reasons for global warming’s arrival on the political mainstream, the tipping point was reached just a month ago and its now in play.
What needs to be done
The reform agenda sweeping WA and beyond needs to be harnessed. Sometimes wealth breeds indifference but, in this case, I truly believe people see we need to seize the day to make the most of new found good fortune.
What is the point, people are thinking, of being rich if I work until its dark or can’t buy a drink when I want to. They are also asking why they can’t use the river foreshore for recreation, why they can’t get a seat at sporting events, and why they can’t get a taxi.
Mark my words, this was a very important initiative and, given its widespread support, it’s a wonder it has never been tackled before.
I guess it goes to show how regulating markets to give one type of business an advantage simply fuels profits into funding to maintain that advantage.
While I admire WA’s hoteliers for the exciting things they have done without the windfall of gambling, it is time they realised they don’t deserve special treatment. Here’s cheers to change.