17/12/2008 - 22:00

The year everything changed

17/12/2008 - 22:00

Bookmark

Upgrade your subscription to use this feature.

WE'VE gone beyond the old boom-bust cycle." How many times did we hear that comment over the past year or two? "We're in a new paradigm."

The year everything changed

"WE'VE gone beyond the old boom-bust cycle." How many times did we hear that comment over the past year or two?

"We're in a new paradigm."

"There has been a structural shift in the global economy."

That was the kind of language used with increasing frequency as the five-year resources boom rolled on.

And the short, snappy phrase that best summed up the rosy outlook we are quickly putting behind us was, "stronger for longer".

Up until a few months ago, there were many good reasons for embracing these optimistic statements.

China was roaring ahead, with a centrally planned economy that was seemingly untroubled by fluctuating growth rates in the rest of the world.

The BRIC economies - Brazil, Russia, India and China - were the new and seemingly unstoppable engines of global growth.

On the back of this growth, Western Australia was enjoying record levels of investment in a range of commodity sectors, led by iron ore, gas, nickel and alumina.

Infrastructure spending was also on the rise, though not fast enough to avoid congestion at the ports.

The biggest problem facing businesses and project developers in WA was keeping pace with the rapid expansion.

In the space of five years we had gone from substantial unemployment to a skills shortage and an all-round labour shortage.

Costs were escalating dramatically. Whether it was engineers, bulk shipping rates or office leases, costs were soaring.

Property also appeared to be in short supply, with office vacancies in the city and West Perth either at zero or near to it, and residential property prices soaring.

It was in this context that former premier Alan Carpenter made his ill-judged decision to call an early state election.

That was just four months ago. Since then, our whole outlook has changed dramatically.

We have a new state government under Liberal Party leader Colin Barnett, the resources boom has slowed dramatically, and China's economic health is under a darkening cloud.

Mr Barnett and Nationals WA Brendon Grylls must be considered two of the biggest winners from the past year.

Back in August, Mr Barnett was tending sheep on his Toodyay farm and contemplating retirement.

He seized a very risky opportunity - created by former leader Troy Buswell's personal indiscretions - to regain leadership of the Liberals.

Mr Carpenter played into his hands by calling an early election. Mr Barnett ran a shrewd and disciplined campaign that ran smoothly despite a lack of policies, while Labor lost the plot.

Mr Grylls' emergence as a powerbroker was more calculated. He devised and vigorously promoted the very shrewd Royalties for Regions proposal.

Most people in WA - meaning the residents of Perth - either didn't know of, or didn't care about, this policy, but it struck a chord with voters in regional WA.

Congratulations to Mr Grylls and his Nationals colleagues for making a principled commitment and sticking to their guns.

Despite some early wobbles, as the Liberals and Nationals battled to work out their policy details, their partnership has proved effective.

The state government is still challenged by limited depth in the ministry and a lack of detailed policies - though the latter issue could provide a great opportunity, giving ministers and their advisers more flexibility in responding to issues that arise.

Sitting above it all is Mr Barnett, who has become a dominating presence.

He gets involved in all key policy issues and has a hands-on management style - just like when he was a minister in Richard Court's government.

The danger is that Mr Barnett will try to take on too much, and will seek to micro manage the government.

The government's fortunes, indeed WA's future prospects, continue to rest with the state's largest trading partner, China.

KPMG partner Duncan Calder, speaking recently in his capacity as president of the Australia China Business Council in WA, characterised perceptions of China's economy as being like a pendulum.

They have gone from very bullish to gloomy.

Mr Calder provided some useful context for this discussion.

He acknowledged that China's growth will be slower than that achieved in recent years, and certainly down from last year's 11.9 per cent.

Mr Calder also noted the emerging consensus that China's slowdown will result in iron ore contract prices being cut by about 20 per cent next year.

On the upside, he cited forecasts that China will maintain annual growth of at least 7.5 per cent for the next two decades.

This means that, in 10 years' time, China's economy will be double its present size and potentially double again in two decades.

That continues to be an enormous opportunity for WA. "WE'VE gone beyond the old boom-bust cycle." How many times did we hear that comment over the past year or two?

"We're in a new paradigm."

"There has been a structural shift in the global economy."

That was the kind of language used with increasing frequency as the five-year resources boom rolled on.

And the short, snappy phrase that best summed up the rosy outlook we are quickly putting behind us was, "stronger for longer".

Up until a few months ago, there were many good reasons for embracing these optimistic statements.

China was roaring ahead, with a centrally planned economy that was seemingly untroubled by fluctuating growth rates in the rest of the world.

The BRIC economies - Brazil, Russia, India and China - were the new and seemingly unstoppable engines of global growth.

On the back of this growth, Western Australia was enjoying record levels of investment in a range of commodity sectors, led by iron ore, gas, nickel and alumina.

Infrastructure spending was also on the rise, though not fast enough to avoid congestion at the ports.

The biggest problem facing businesses and project developers in WA was keeping pace with the rapid expansion.

In the space of five years we had gone from substantial unemployment to a skills shortage and an all-round labour shortage.

Costs were escalating dramatically. Whether it was engineers, bulk shipping rates or office leases, costs were soaring.

Property also appeared to be in short supply, with office vacancies in the city and West Perth either at zero or near to it, and residential property prices soaring.

It was in this context that former premier Alan Carpenter made his ill-judged decision to call an early state election.

That was just four months ago. Since then, our whole outlook has changed dramatically.

We have a new state government under Liberal Party leader Colin Barnett, the resources boom has slowed dramatically, and China's economic health is under a darkening cloud.

Mr Barnett and Nationals WA Brendon Grylls must be considered two of the biggest winners from the past year.

Back in August, Mr Barnett was tending sheep on his Toodyay farm and contemplating retirement.

He seized a very risky opportunity - created by former leader Troy Buswell's personal indiscretions - to regain leadership of the Liberals.

Mr Carpenter played into his hands by calling an early election. Mr Barnett ran a shrewd and disciplined campaign that ran smoothly despite a lack of policies, while Labor lost the plot.

Mr Grylls' emergence as a powerbroker was more calculated. He devised and vigorously promoted the very shrewd Royalties for Regions proposal.

Most people in WA - meaning the residents of Perth - either didn't know of, or didn't care about, this policy, but it struck a chord with voters in regional WA.

Congratulations to Mr Grylls and his Nationals colleagues for making a principled commitment and sticking to their guns.

Despite some early wobbles, as the Liberals and Nationals battled to work out their policy details, their partnership has proved effective.

The state government is still challenged by limited depth in the ministry and a lack of detailed policies - though the latter issue could provide a great opportunity, giving ministers and their advisers more flexibility in responding to issues that arise.

Sitting above it all is Mr Barnett, who has become a dominating presence.

He gets involved in all key policy issues and has a hands-on management style - just like when he was a minister in Richard Court's government.

The danger is that Mr Barnett will try to take on too much, and will seek to micro manage the government.

The government's fortunes, indeed WA's future prospects, continue to rest with the state's largest trading partner, China.

KPMG partner Duncan Calder, speaking recently in his capacity as president of the Australia China Business Council in WA, characterised perceptions of China's economy as being like a pendulum.

They have gone from very bullish to gloomy.

Mr Calder provided some useful context for this discussion.

He acknowledged that China's growth will be slower than that achieved in recent years, and certainly down from last year's 11.9 per cent.

Mr Calder also noted the emerging consensus that China's slowdown will result in iron ore contract prices being cut by about 20 per cent next year.

On the upside, he cited forecasts that China will maintain annual growth of at least 7.5 per cent for the next two decades.

This means that, in 10 years' time, China's economy will be double its present size and potentially double again in two decades.

That continues to be an enormous opportunity for WA.

STANDING BY BUSINESS. TRUSTED BY BUSINESS.

Subscription Options