08/06/2015 - 16:30

Dollar dip not enough for miners

08/06/2015 - 16:30


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SUNRISE, SUNSET: The non-mining sector is outpacing mining nationwide. Photo: Mark Strozier

Mining company profits have fallen for the fourth consecutive quarter, taking their decline in the year to March to 25.7 per cent, according to the latest business indicators released by the Australian Bureau of Statistics.

The 5.2 per cent drop for the quarter reflected the impact of lower commodity prices, according to St George Bank senior economist Jo Horton, and comes despite the depreciation of the Australian dollar.

From a position where $1 Australian bought more than US90 cents in March 2014, the currency fell to levels of around US76 cents in March this year.

Wages and salaries in the mining sector fell, too, down 2.1 per cent for the quarter, although the sector increased in size overall, with sales rising 3.5 per cent.

The numbers suggest that higher non-wage costs are eating into profits for the nation’s miners, given the industry’s high capital intensity.

Outside of mining, the national economy was generally soft.

“Non-mining profits rose 2.4 per cent in the March quarter and 2 per cent in the year to the March,” Ms Horton said.

“Wages and salaries retreated 0.1 per cent in the March quarter, the first quarterly decline since the aftermath of the GFC.”

There was some good news last week, however, with national GDP growth for the March quarter coming in above forecasts, according to Commonwealth Bank economist Savanth Sebastian.

“The Australian economy grew by 0.9 per cent in the March quarter after a 0.5 per cent increase in the December quarter,” he said.

“Forecasts had centred on 0.7 per cent growth in the economy.”

Growth in Western Australian state final demand, effectively domestic spending, was negative for the 10th straight quarter, falling 0.9 per cent.

Nonetheless, adding the impact of exports meant the state grew 1.3 per cent, indicating that WA is still very reliant on its external balance.

Limited wage growth and lower domestic spending didn’t stifle job creation, however.

Two private services jobs have been created for every mining job lost in the past year, according to recent research by Deutsche Bank.

“Over (the past 12 months), public sector-related employment in WA has increased by 20,000 jobs,” the bank said.

“And construction jobs have also picked up.

“Reflecting this, overall employment has expanded in WA by 2.1 per cent over the year to April, which is the second fastest pace of growth across the states.”


Stats favour WA spuds

WESTERN Australian potato growers enjoyed the second highest yields of any state in 2013-14, but were still the second lowest producers by weight, according to recent analysis by the Australian Bureau of Statistics.

With a yield of more than 47 tonnes per hectare, WA was second only to Tasmania, at 52t/ha.

At that rate, WA’s land productivity is 22 per cent higher for growing spuds than the biggest producing state, South Australia.

Nonetheless, due in part to the state’s substantial restrictions on growing the vegetable for domestic consumption, production in WA was less than 78,000t.

About two thirds of this tonnage is produced under the heavily regulated fresh potato market.

By contrast, South Australia produced more than 350,000t in the 2013-14 year.

Queensland, which had the nation’s lowest average yields, produced 77,300t of potatoes.

For WA, yields were up 4 per cent on the 2012-13 year.

Meanwhile, wheat growers performed well in the first full financial year after abolition of industry regulation, with yields up around 42 per cent.

Strong rainfall contributed to a bumper crop of around 10 million tonnes.


UWA’s super research find

SUPERANNUATION funds with trustee directors who sit on multiple boards are likely to perform worse than those with more focused directors, according to recent research from the University of Western Australia.

Finance lecturer Elizabeth Ooi analysed the performance of 249 superannuation funds against the networks of their trustees.

She said many funds were connected by their boards.

“These connections are created in two ways; by directors simultaneously sitting on more than one super fund board, and by professional trustee companies who act as the trustee boards of numerous super funds,” Ms Ooi said.

“The study’s results show that when a super fund reduces its number of connections to other funds, overall fund returns increase and fund expense ratios decrease.”

Different types of connections would have a differing impact, however.

Ms Ooi said multiple directorships might reduce the amount of time a director could devote to a particular fund, reducing performance.

The research comes after debate in the sector about fund governance spurred on by the 2010 Cooper Review.

“While Australian regulators and policymakers should be commended for their actions thus far, there is still much that can be improved, and future academic research is likely to provide insight into potential solutions,” Ms Ooi said.

A good, flexible guideline would be that directors should be on about two or three superannuation fund boards, Ms Ooi recommended.


Wage freeze best for jobs: CCI

FREEZING the state’s minimum wage in the coming year will provide better job security for workers amid the economic slowdown, according to a submission by the Chamber of Commerce and Industry WA to the state’s annual wage review.

It came in advance of the Western Australian Industrial Relations Commission’s annual state wages hearing last week, which will set the state’s wage framework for the coming financial year.

“Employees are increasingly concerned about job security and future job prospects,” the CCI paper said.

“Maintaining minimum wages at their current levels will help ease the cost pressure on employers and thus provide greater certainty for their employees.

“It will also help to provide greater opportunity and incentive to employers to increase hours of work and employment opportunities.”

At $665.90, the current WA minimum wage is already some $25 per week higher than the national minimum, driven by strong economic growth during the boom years.

Greater wage restraint is expected this year, however, due to a softening of the state’s labour market, and the consumer price index predicted to run at around 2 per cent.

Despite this, other recommendations were for increases as high as 4.5 per cent, around $30 per week, from the Western Australian Council of Social Services and Unions WA.

Both bodies said a larger increase was needed to help lower income earners catch up to cost of living increases during the boom.

The CCI said Australia had the highest minimum wage in the OECD.

That would have implications for competitiveness, and could prevent lower skilled workers having access to jobs, and consequently opportunities to upskill, according to the CCI.

“For unskilled unemployed people to remain competitive in the market, entry rates must also remain competitive,” the submission said.

“In instances where an unskilled candidate is in competition with a skilled or semi-skilled candidate for employment, if the costs are the same the employer will, every time, employ the more skilled candidate.

“Keeping minimum rates of pay low will keep potential entrants to the workforce competitive.

Commerce Minister Michael Mischin shot for an increase in line with CPI, around $13.30 per week.

In its submission prepared with the Treasury, the Commerce Department gave an outlook for a softer labour market.

“Western Australia’s unemployment rate is forecast to rise to 5.5 per cent in 2014-15 before peaking at 6.25 per cent in 2015-16, as domestic economic conditions continue to soften (especially in the resource sector),” it said. 


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