14/03/2006 - 21:00

History may prove pessimists wrong

14/03/2006 - 21:00


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Economists are born pessimists. That’s why some of them are warning that the boom times being generated by China’s demand for commodities will not last. Briefcase, with a habit of being contrary, thinks those same economists ought to start looking at the ‘what if’ scenario of an enduring boom driven by what really is a Chinese industrial revolution, not just a turn of the economic cycle.

Government-employed economists, and their ministerial masters, are the people who should be looking most closely, because while China is causing Western Australia’s private sector to swell rapidly, government services look like being left miles behind.

The good news first. This comes from the remarkable 10.4 per cent growth rate posted by WA in 2005, especially in the final quarter when the state expanded at 4.5 per cent, which if you haven’t got a calculator handy is a truly astonishing annualised 18 per cent.

Statistical aberrations will have played a part in the December quarter data, though there is an abundance of evidence to demonstrate that WA really is exploding rather than simply expanding. Anyone trying to find a car park in central Perth these days knows exactly what spectacular growth means – there are very few places to park, and signs of rising prices for the privilege.

Briefcase doesn’t see any point in discussing why WA is growing so fast. That’s pretty obvious with Chinese (and don’t forget the Japanese, Indian and US) buyers queuing up for iron ore, alumina, nickel and natural gas.

In fact, the queue for liquefied gas (and possibly uranium in the future) is so long that the question must be asked: why will it suddenly come to an end, as our conventional economists claim? The only justification for that belief is that it always has in the past, where ‘always’ is defined as a collective economic knowledge of the past 50 years.

This time, and Briefcase hates this expression, it really might be different, because 1.2 billion Chinese and a similar number of Indians like what the Western world has to offer. They want new washing machines, fridges, cars and air-conditioning, which means they need iron, copper, nickel, aluminium and a host of other metals, which we have and for which they will happily pay.

What this means when discussing the economy is that we might soon be swapping the word revolution for cycle – even if the Chinese are dinkum about refusing to pay higher prices for their iron ore, because current prices are pretty good.

These lead to the second (and third) thoughts for this week – the effect on government services, and the media.


Government, despite the joy shown by ministers when opening new schools and roads (and perhaps even a railway one day), have a big problem on their desks. Growth at 10 per cent, or even 7 per cent, means a rapid escalation in demand for essential services.

The problem is that, even now, before the recent rapid growth really bites, it is hard to find a government service that can claim to either be up to scratch, or one in which people say: “gee, isn’t that government service terrific”.

Run your own checklist. State school education, despite the biased cheering from true believers in a socialist ideal, is failing. The wholesale drift from state to the private system screams failure at a government with deaf ears. It’s got nothing to do with money and everything to do with discipline, pride, dedication and that yawning gap in the life of modern Australians, a faith-based belief system. Laugh at that, if you will, but you can’t get past the fact that most private schools are also church/mosque schools.

To continue … hands up anyone who really likes the government-controlled water supply system? Sure, there’s been a drought, but that doesn’t excuse the poor filtering that delivers water with almost as much in solids as liquid.

Now ask the same questions of: transport (road or rail); power (high priced and struggling to keep up); police (not bad, but relying on imported Bobbies); retail trading hours (nanny state in the extreme); and even the quality of potatoes provided via a government-controlled board.

Briefcase makes no apology for criticising state government services because the list could just as easily contain federal government services, though they’re harder to judge because most people use less of them.

The point of this criticism is that if we think government services are poor today, just wait until we’ve clocked up a couple of years of 10 per cent private sector growth, and imagine what the water will taste like then, or whether the electricity supply system is up, or down.

Government, sadly, is not adapting well to a world that is moving rapidly, switching to new technology, changing the way it works, and dumping the restrictions of one-size-fits-all unionism. More rapid growth as we saw last year will cause the pips to pop out of the government lemon.


Now the media, and a quiz question, which will be easy for devotees of Sherlock Holmes who once posed the question of “the curious incident of the dog in the night-time”.

Dr Watson remarked that the dog did nothing in the night, which Holmes replied was the curious incident – curious because dogs always do something at night.

Perth’s version of this old tale is in the circulation and readership figures of its monopoly morning newspaper, The West Australian. Normally, or more accurately, when times are good, there’s plenty of crowing about such statistics. Last month, there was none – like the dog in the night.

Briefcase, in the interests of an informed readership, went hunting and found why the dog didn’t bark. Sales of The West in the Monday-to-Friday period in the six months to December 31 2005 (according to the Audit Bureau of Circulation) were down 0.8 per cent, not a lot, but the second worst of any metropolitan daily, beaten only by the Canberra Times. Saturday sales of The West were down 0.6 per cent.

What makes the sales numbers so interesting is a lot more than media navel gazing. It is all about why a monopoly paper declined at a time when the state is expanding so rapidly.

The answer, Briefcase suspects, is that we are looking at a real-life example of the Internet at work, and the globalisation effect on an isolated state like WA, which is embracing national and international services of all kinds, including the media.

The numbers also go some way to explain the fall in WAN’s share price from north of $9 little more than a year ago to recent sales around $7.60 – a 15.5 per cent fall when WA grew at 10.5 per cent. Perhaps a call to Sherlock for a solution is overdue?


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