21/03/2006 - 21:00

The next bust will be of our making

21/03/2006 - 21:00


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The ‘what if’ question posed last week is entertaining people in places far higher than that occupied by Briefcase. Our newly appointed premier, Alan Carpenter, also admits to occasional thoughts about the effect of a long-term economic boom, the opportunities such a boom creates, and the problems it will cause.

During a private chat with Briefcase last week the new man at the top confessed that he was optimistic that Western Australia had outgrown its traditional boom/bust cycle, while also claiming that this would put pressure on state finances.

Mr Carpenter’s lament was that the property market looked like it was entering “unsustainable” territory, and that government finances depended heavily on property taxes. But even that concern fails to dim his overall optimistic outlook.

“People started to suggest to me when I took over as state development minister that this could be a very long-term boom,” he said. “The rise of China, not to mention India at that stage, was akin to the rise of Japan in the late 1950s, going in to the ’60s, but you already have Japan, and you already have Korea.”

The message from that assessment was: “This is not going to be a two-or-three year bubble, but the prospect is that this boom in the resources industry will be a decade, or more, long,” Mr Carpenter said. Briefcase agrees, though still requires regular reinforcing comments to maintain its optimism, simply because WA is entering unchartered waters, and has no experience of a perpetual boom – and may even have great difficulty managing such an event.

Of course, given the choice between a never ending boom and a traditional bust, all sensible people opt for the boom. And the latest upward surge in property and stock market prices seems to suggest that we are welcoming the boom with open wallets – a situation that nags at Briefcase because it keeps getting that De Lorean sensation about being whisked back to a future, which looks awfully like 1986

For young readers, and new arrivals to Perth, 1986 was the first of two peak years in the last boom, which ended with a spectacular collapse in 1987.

If Mr Carpenter is correct, we have nothing to fear this time around because a perpetual boom means that asset values will rise forever (ho ho ho), and there will be a never-ending flow of business opportunities – an observation that really should only be trotted out on April 1.

A more likely outcome – given the nature of the people making most of the money in Perth today – is that we will rush with great enthusiasm into the boom, and create our own bust somewhere down the track, though that is perhaps about two years from now, say, sometime after the 2008 Beijing Olympics, when China enters the traditional post-Olympics hangover period.

Signs of the pressure building in the WA economy are there for anyone who wants to look. Soaring property values are a giveaway, as are posh restaurants full at lunchtime, new office development, the opening of new banks (Arab Australia in Fremantle) and international stockbroking offices (Investec), senseless stock market speculation about uranium developments in WA inside the next four years, and big ticket corporate deals that look like they’re constructed on a wing and a prayer.

Fortescue Metals Group is the classic resource project hopeful. And while it might actually develop something, the reality is that its chief executive has been accused of deceit by the government regulator, Chinese iron ore buyers have thumbed their noses at it, the world’s biggest miners are white-anting it at every turn, and it needs to borrow more than $2 billion to make it happen. And all at a time of rising interest rates.

In terms of replicating past booms, Alinta’s tilt at AGL is not far behind – even to the point of public relations spokesmen taking issue with Briefcase for saying critical things about the deal.

It was just reminiscent of the heady days of the 1980s.

And then there’s the curious fact that WA has a former journalist as a premier, just as it did in 1986. Hopefully, this one has judgement better than most journalists, and doesn’t simply react to the advice of the last person he spoke to, as most journalists do (trust Briefcase on this one, it’s true).

Ahh, for the good old days. At least a scribbler has the fun of writing about it on the way up, and again on the way down.


Talking of booms past and the mess they create … has anybody else noticed the furious house cleaning under way in the basement of the Roberts family empire – as well as the attic.

At the upper level there is the obvious downgrading of the role played by dad Roberts with John consigned to a role as a sort of old man of the tribe, and the kids showing a declining level of interest in what he says (trust Briefcase on this one too with four kids who know what’s best).

In the corporate basement it’s a bit more active. Danae Resources, one of Mr Roberts’ many attempts to crack into the mining sector, finally looks like it’s been flicked on with a minor role in Rob de Crespigny’s revival vehicle, Greenwich Resources, not that the former boss of Normandy Mining rates Danae’s Zarmitan gold project in Uzbekistan very highly.

Another of John Roberts’ mining ‘plays’, Indcor, is also on the move. Re-badged as Australian Ethanol, the company, which was to have launched Multiplex into the magnesium business, is now heading for the US bio-diesel business, and a listing later this year on the secondary market of the London Stock Exchange under the guidance of former Minproc boss, Peter Anderton.

Briefcase, as always, never gives investment advice and if you act on this you’re a fool. The suggestion is to simply have a look at Anderton’s adventures – especially once the Roberts exit via a watering down process, is complete.


As a final word, Briefcase was saddened by the death of Bill Wyllie, an acquaintance of many years’ standing and a marvellous example of the self-made man. His family needs no advice on corporate matters, with the able Lee Verios and Terry Salotti providing wise counsel. But, just in case they feel the urge to do something quickly to put a new stamp on the family empire, don’t – unless selling surplus bits and pieces. The property core of Wyllie group will last generations.


“Laws are like spiders’ webs which, if anything small falls into them they ensnare it, but large enough things break through and escape.” Solon, AD225 (Does nothing change? Briefcase, 2006)


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