Here, Have Some More Idiot Economics

This is The West’s useful idiot of an economics editor Shane Wright, wondering the other day where WA’s economic growth was going to come from. If you would like to play along at home, try to strain your brain for the answer – goodness knows Shane tried to have a go:

Where is WA’s economic growth going to come from?

Over the past six months the WA economy, excluding imports and exports, grew about 1.3 per cent or a touch over $660 million.

For a State that’s gone the rounds of economic pain for so long, it was a great result.

But we’ve got to put this in some context. Domestic economic activity in WA peaked at $60.4 billion in the September quarter of 2012. The same figure for the just-completed September quarter was a smidgen under $51 billion.

In other words, there is more than $9 billion less in local economic activity running through the financial veins of WA taxpayers and businesses.

That’s the pain that we’ve all felt over the past four years.

It is hard to expect another mining boom to generate a huge lift in wealth and activity. The last boom was the biggest since the 1850s gold rushes that made Victoria one of the richest parts of the world (like the iron ore boom made WA one of the richest spots on the planet).

For instance, it took just 15 months for State final demand to climb from $50 billion to $60 billion. The quantum of that climb is what WA needs to make up just to get back where it was — but the chances of it taking just 15 months is akin to the Gold Coast winning next year’s premiership flag.

This is one of The West’s beat writers reporting the bleeding obvious WHICH HAS BEEN THE WORST KEPT SECRET GOING AROUND TOWN yesterday:

There are fresh signs of growing confidence among WA businesses, with the State’s environment watchdog reporting a return to numbers of major projects not seen since the resources boom.

Environmental Protection Authority chairman Tom Hatton has revealed the agency received about as many proposals “warranting” assessment in the five months since June as it did in each of the previous three financial years.

Treasurer Ben Wyatt welcomed the figures as “further evidence” that WA’s economy had turned the corner, while the State’s peak business lobby said they showed investment confidence was rising.

Between July and last month, the EPA moved to assess 15 proposals ranging from iron ore, nickel, lithium and copper mines to transport, agriculture and land developments.

Well blow me down with the piece of paper Shane’s economics degree is written on (assuming he has one): WA’s economic growth might just come from digging things out of the ground and using those kinds of things to build other things. Wow, what a revelation. I think I need to meditate on this.

(Hot tip Shane: you might want to have some senior HR people in your network and see where they’re recruiting and not recruiting – AND WHERE THEY’VE BEEN RECRUITING LIKE MAD LATELY. Wink, wink!).

You see, when Shane’s not busy making economic conclusions based on the global iPad and iPhone indices – and telling us that the same product should cost the same amount everywhere in the world (yes, really) – he’s busy trying to guess the answer to the world’s most obvious question. Seriously, you might as well be asking where Saudi Arabia’s economic growth is going to come from.

Of course, in typical style, when it comes to answering his own question, Shane has enjoyed mixing his apples with his oranges – beginning with WA’s Gross State Product before moving on to ‘final State Demand’ as the metric of ‘choice’. He then succeeds in putting together the most illogical and nonsensical ‘answer’ possible (i.e. to where WA’s economic growth is going to come from) by effectively concluding that:

  • the effectiveness of mining should be judged by whether it can bring WA’s ‘State final demand’ back to previous boom conditions (within the next 15 months it would appear);
  • there’s no way there could possibly be another $9 billion or so in WA mining (!);
  • WA’s previous peak ‘State final demand’ had nothing to do with WA’s economy being overvalued and is an appropriate target to aim for right now (based on what exactly I don’t know); and
  • mining can’t possibly be the answer to WA’s economic growth because we just had a boom, it couldn’t possibly happen again and therefore WA needs to look elsewhere for economic growth and stop wasting its time with mining.

Excuse me?

One can only guess that Shane thinks we need to be demanding more iPads to lift the WA economy. And just what do they make those out of I wonder?…

The problem with leftists like Shane is that they seem to think that economies are demand driven – and that you can simply drive an economy by ‘stimulating demand’, with everything else following thereafter (which is akin to watering nothing but the leaves of a plant and expecting it to grow properly). It’s why people like Shane incredibly have no idea where WA’s economic growth is going to come from. Presumably, Shane would have people dig holes, fill them up and re-dig them in the exact same spot and call it economic activity – while advanced aliens from outer space looking down on the whole affair would wonder what species of Neanderthal they were observing.

One can only imagine the bunch of flies that must be buzzing around in Shane’s brain when he sees that it’s the supply side yet again doing the heavy lifting and driving the rest.

Keep gettin’ dem cheques Shane!

PS: try to guess where Shane is a regular panelist (you’ll need to click the yellow ‘show more’ button a couple of times).

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31 Responses to Here, Have Some More Idiot Economics

  1. Bruce of Newcastle

    Where is WA’s economic growth going to come from?

    I know, I know! Let’s ban fracking, which has made the US a powerhouse oil producer!
    Let’s tax gold miners. And other miners. And banks, da ebil banks where da money is kept!

    Hey where did all the golden geese go? Did I say something bad?

  2. Roger

    PS: try to guess where Shane is a regular panelist (you’ll need to click the yellow ‘show more’ button a couple of times).

    Oh, that bloke.

    “Shane Wright is the Economics Editor of The West Australian. He joined the Canberra Press Gallery in 2000, working initially for Australian Associated Press. Prior to Canberra he had kept track of the nation’s economic machinations from The Border Mail, The Daily Advertiser and The Cootamundra Herald.”

    If, as Seneca said, luck is a matter of preparation meeting opportunity, Shane is a very lucky fellow.

  3. RobK

    And now the state government is closing down country highschool residential collages, school of the air and country camp schools in order to save 64mill over 4 years. It will build a new city based school for gifted and talented children for …….64mill but that’s a coincidence the minister says. The government of WA is so city centric(like the Journo perhaps), it may as well replace the city of Perth.

  4. manalive

    Applying my ‘litmus test’ Shane Wright is a dismal failure, naturally he’s a big fan of so-called renewables and Elon Musk: “… solar power, for instance, has enjoyed an 80 per cent reduction in costs this decade. Batteries, starting from a much higher price, have fallen by a similar level …”.
    As Alan Moran says “ …supporters of renewable energy continue to claim – as they have for the past 30 years – that wind/solar is or soon will be cheaper than energy from coal generators …”.
    Wright also thinks that government requiring wind and solar generators guarantee base load power is a subsidy to coal-fired generators (The West Australian Oct 23).
    Never mind that without the government mandated RET there would be no ‘renewables’.

  5. Infidel Tiger 2.0 (Premium Content Subscribers Only)

    One day WA will finally diversify into a global powerhouse for whale whispering and basket weaving.

    Damn this mining stuff.

  6. JC

    One day WA will finally diversify into a global powerhouse for whale whispering and basket weaving.

    Damn this mining stuff.

    That was Wodger’s big business plan. Remember Wodge.

    Tourist ships to follow whalers and then eat the whale carcass.

    I couldn’t imagine even the biggest carnivore on the planet wanting a whale steak after witnessing all that blood in the water.

    Lord he’s such an idiot.

  7. Marcus

    And now the state government is closing down country highschool residential collages, school of the air and country camp schools in order to save 64mill over 4 years. It will build a new city based school for gifted and talented children for …….64mill but that’s a coincidence the minister says. The government of WA is so city centric(like the Journo perhaps), it may as well replace the city of Perth.

    Why not? They’re already trying to pass a law so they can fire Lisa Scaffidi.

    Meanwhile, they’ve already blown out the deficit, they’re borrowing more, spending more and taxing more than the Barnett government did (all in the name of “budget repair”), and they’ve been caught covering for a backbencher who makes Sam Dastyari look like Honest Abe Lincoln. The next election is probably just out of reach for the Libs, but I’m looking forward to the hammering the smug gits are going to cop already.

  8. Art Vandelay

    Where is WA’s economic growth going to come from?

    If you think that’s bad, the political and media class in SA are promising that an economic boom in Adelaide will be brought about by…. you can’t make this up …. the NDIS.

    Yep, apparently we’ll all become rich by providing services like mowing lawns, physio and housecleaning (all funded by the taxpayer) to those with disabilities.

  9. Marcus

    If you think that’s bad, the political and media class in SA are promising that an economic boom in Adelaide will be brought about by…. you can’t make this up …. the NDIS.

    Well, if I was Nick Xenophon I wouldn’t mind having someone being paid to mow my lawn either.

  10. testpattern

    Here is my first critique of Wyatt’s failed gold royalty hike reposted from October

    ‘Wyatt’s a lazy Minister with lazy staff. Neither he nor McGowan made a genuine attempt to explain and sell the gold royalty to the public. They relied on ‘We’re Govt we have a mandate blah blah’ reminiscent of their Perth Modern disaster.

    Wyatt and staff should’ve gone through the 50 odd gold producers with a microscope eg Regis which operates the old Famous Blue, renamed Gloster. Regis produced some 300,000 ounces and made an after tax profit of $138 mill. $3.5 mill isn’t going to stop expansion unless the price drops, stop them raising capital, or lose jobs. Wyatt’s staff could’ve presented heaps of examples like this. They didn’t, lazy pricks.

    Miners’ lobby groups were extolling both WA and Turnbull Govts just days before Wyatt’s budget regarding assistance for explorers ie WA’s Exploration Development Incentive (EDI) and Canberra’s Junior Mineral Exploration Tax Credit (JMETC). JMETC allows investors to credit 30% of greenfield expenditure, similar to Canada eg Saskatchewan and Manitoba. Employment is predicted to decrease by some 75% in 15 years, some 70% of ex at the moment is just extending old mines and some 80% of production comes from deposits found before 1980. In the March quarter expenditure on greenfields ex fell 21.4% and brownfields fell 13.8%

    Most greenfields ex is done by small explorers, not producers. Making investment in junior ex more attractive to potential investors will result in more greenfields and jobs. Even if the gold price stays over $160 most brownfields will close by 2030 and jobs will be lost.’

    He took the advice and had a second go, what did he do? Repeat the first mistake. He can’t or doesn’t want to sell a policy to the public. Why wasn’t an indepth research paper distributed to friendly business journos [like Wright] so they could verify independently, explain the case for an increase in the press, and generate some public support to put pressure on Nahan at least a week before he talked to the peak lobby groups? Didn’t he want any public support? If he’s serious he should now try a third time. This time do it right. There were always plenty of options and now that he’s ditched the one size fits all approach he should refocus to encourage future job creation not subsidising the jobs that are going to be lost soon anyway. Because it’s starting to look like he was never serious and just wants another excuse to blame the Libs for his budget cuts.

    “It is fantastic that the Western Australian Government is committed to investing in the future of the industry though the latest round of co-funded mineral exploration drilling,” said Warren Pearce, Chief Executive Officer, Association of Mining and Exploration Companies (AMEC).

    “The EIS has supported the discovery of Camelwood nickel deposits, the Yeneena copper deposits, and Dusk til Dawn gold discovery, as well as gold at Gruyere and the nickel discovery at Emily Ann deposit near Lake Johnston.”

    “One of the co-funded drill holes announced today may be the next Nova Nickel mine, which was discovered using EIS geophysics data and co-funded drilling in 2011-12.

    https://www.amec.org.au/Public/Media/News_Releases/2017_News/Government_must_commit_to_continue_the_EIS.aspx

    Ben Wyatt MLA‏Verified account
    @benwyatt
    24h24 hours ago

    Keep in mind that those WA National Party and Liberal Party MPs complaining about the education budget voted AGAINST an increase in the gold royalty

    @benwyatt
    8h8 hours ago

    Ben Wyatt MLA Retweeted Shane Wright
    Yeah thanks Shane.Ben Wyatt MLA added,
    Shane Wright

    @swrightwestoz
    Just a heads up to both @benwyatt and @DeanNalder – NSW mid-year budget update shows a $600m improvement. Surplus of $3.3 billion

  11. testpattern

    and –

    ‘The mine would generate revenue of $596.1 million over its life and surplus operating cashflow of $167.9 million, based on a gold price of $1600/oz and all-in sustaining costs of $1038/oz.

    Kin noted the projections included the assumption that the State Government’s proposed 50 per cent gold royalty hike would be introduced.

    The project would have a net present value of $107.4 million based on a 9 per cent discount and before corporate costs and tax, and an internal rate of return of 77 per cent.’

    https://thewest.com.au/business/mining/leonora-high-margin-signs-give-kin-mining-a-boost-ng-b88616602z

  12. RobK

    Testpattern,
    All that but the airport rail link and various other public transportation for Perth are full steam ahead. Where’s the money comming from; more to the point where’s it going. Send all the country school kids to Perth schools, FIFOs keeping Mr Saterley liquid. ALP happy.

  13. daveR

    Tip for Shane: mining is cyclical.

  14. testpattern

    ‘Send all the country school kids to Perth schools’

    SIDE is taking over frrom SOTA. E-Learning

    https://www.side.wa.edu.au/

  15. RobK

    Testpattern,
    Have you or any of your kids tried SIDE? It is also the only way kids in a town like Moora can do TER subjects. It takes a lot more discipline and is far more difficult than what was on offer.

  16. testpattern

    ‘Have you or any of your kids tried SIDE?’

    ROBK. No. We moved our kids to Perth to ensure they get the best education. We would have liked to go home to where we come from in the north but it wouldve been the wrong thing to do. So. Sacrifices. We’re waiting for Dec 18 ATAR for confirmation we made the right decision.

  17. RobK

    Testpattern,
    We moved our kids to Perth to ensure they get the best education.”
    I do understand and hope the best for your kids. I sent my kids to Moora SHS. They stayed at the residential college. It worked out well for them. One of the two completed a law degree, the other is happy with a less pressured gainful employment. The standard of the school and residential college was remarkable and it is a shame more country people feel they need to bypass the local. I note the standard offering has slipped due to government policy in the decade since our boys went through. Many of the staff are still the same.

  18. testpattern

    robk. I should have explained that we moved with the kids.

  19. Shane Wright
    Shane Wright is the Economics Editor of The West Australian. He joined the Canberra Press Gallery in 2000, working initially for Australian Associated Press. Prior to Canberra he had kept track of the nation’s economic machinations from The Border Mail, The Daily Advertiser and The Cootamundra Herald. When not reading old Budget papers, Wright listens to the music of Kate Bush while dreaming of a Collingwood premiership.

    What a grounding! What a preparation for a big thing! I wish I started in The Border Mail. All I did I only escaped across the border.

  20. Pedro the Ignorant

    Colour me astonished!

    For once I agree with testpattern and his analysis of WA Treasurer Wyatt’s feeble attempts to wring more cash out of the evil miners.

    Summary of Wyatt’s view: Look! A golden goose! Kill it quick!

  21. egg_

    PS: try to guess where Shane is a regular panelist (you’ll need to click the yellow ‘show more’ button a couple of times).

    Oh, that bloke.

    Yup, just another Insiders useful ijiot.

  22. Nerblnob

    Sensible post from test pattern shock!
    Well said all the same.

  23. Nerblnob

    About cyclical:
    I’ve given up thinking resources players have to correct the boom & bust swings.
    Now I see it as resilience of the industry. I’m a bit slow like that.

    Three spells of unemployment gradually educated me in the way the market works.
    On the oil & gas side, we never expected to see a boom like 2004-14 again, and yet, there it was.
    By then I’d learned to pay off debts, put money away etc.

    Australian media and politics did the opposite and started treating boomtime as normal. This is not just a WA problem.
    And all the time biting the hand that feeds them. Spoiled rich kid behaviour – Greens etc, that’s all they are.

  24. Token

    Yup, just another Insiders useful ijiot.

    I was surprised to hear that garbage is still on. Isn’t that the show that had journo-listers try on the idea there was a hidden extra line to TOSS famous “There will be no carbon tax…” promise?

  25. I understand that smart phones have added to productivity. But I don’t accept that upgrading ones iPhone 5 to an iPhone 6 (eg) is adding much to productivity.
    In fact I’d submit that these “upgrades” are not much different to digging a hole and then refilling it.

  26. testpattern

    See what they’re doing? SOTA cut because Nahan blocked gold royalty.

    Why did Nahan block it? Because Wyatt failed to sell it. Take responsibility Ben. If you’re incapable of selling a policy pay pr pros to do it for you. You have facts on your side. Have another go and this time do it properly.

    Ben Wyatt MLA Retweeted

    Darren West‏
    @DarrenWestMLC
    6h6 hours ago

    Replying to @FarmerTonyWhite @MarkMcGowanMP
    Same SOTA service to be delivered by SIDE. Hostels numbers low and buildings been let run down. Plenty of capacity in Geraldton and Merredin. Tough call but purely result of blocking of gold royalty increase.

  27. RobK

    Testpattern,
    It is appalling that Labor seeks to use the refusal of the gold royalty hike to disempower the very poorest of the country families. Wyatt’s rational is a disgrace. Blue ribbon country folk generally send their kids to Perth already, as you yourself describe. Labor merely sees no votes to be gained, bugger the less privileged.

  28. testpattern

    RobK. I agree. It’s shameful. There are just two explanations for Wyatt’s double failure to secure the royalty hike a/ he is incompetent b/ it is deliberate. For the moment I’m sticking with a/. Which means that McGowan should replace him with a Minister who can sell a policy.

    Politicising children – if that’s really what we’re seeing here – would not be confined to the WA ALP, as we’ve seen with Minderoo. Yesterday on the open thread I posted a link to an ABC Kimberley story about a Broome nurse who was sacked. It was deleted by the mods. The ABC story was based on the comments of the nurse on social media and showed yet again how people can wreck their careers and reputations by being unguarded on facebook and twitter. ‘Tough call but purely result of blocking of gold royalty increase’ may just rebound on the author too.

  29. Damienski

    So Ben Wyatt thinks that decreasing government expenditure on education is justified because he failed to achieve his preferred option of increasing tax on production. Sad.

  30. Paul Farmer

    Of course if Shane Wright was a little smarter at connecting dots he would realise the current GDP weakness in the wa economy is all the more reason why a fairer gst distribution is needed so local state taxes can be reduced to help lift business investment and final consumption demand.

    However one can’t help but notice the old chestnut being the inherent problem of measuring the success of your economy solely by final expenditure / demand measures when you include large once in a multi generation capexs in your GDP results which inevitably leads to judging the performance of your economy now as really bad compared to the mining boom years. And jumping to the wrong conclusions.

    The reality is the export sector is now generating way more export volumes from this capex, so the period wasn’t a lost opportunity but a success which is continuing on now if you look at it in the right light but because we measured this transition capex just like consumption , we now only see failure because the GDP / Gsp numbers have gone tits up . In turn this thinking lends itself to stupid decisions like let’s turn the government spending tap on urgently to get back that lost 10 billion we have lost. The reality is we haven’t lost 10 billion at all.

    Moreover the state economy hasn’t in underlying terms lost that much at all, arguably only a bubble of stupid prices in Perth for real estate and paying $ 8 in various places for a cup of coffee, whereas on the positive and more lasting side of the last boom’s ledger rather we did gain huge productive capacity. I know there is a lot of fifo workers pissed off as they are not getting three hundred K per year to do fuck all now but that’s life, they will bounce back I am sure and besides most of them were from over east anyway so the money didn’t stay in wa anyway.

    The question should be what do we need to do now to generate more productive capacity….. mmmm and in wa there is only one industry that is going to do that for you and that is mining followed by agriculture and food production a distant second. Yet we get homilies on tourism and education, stuff that might help a bit but won’t go anywhere near bridging the 10 billion per annum mr wright is so concerned about.

    The best thing to drive your economy forward is people , and people come when there are jobs , and jobs come when businesses invest. Tourists come but don’t stay and similar with international students . The latter only stick around too when there are jobs but that puts us back at business investment where we started. Look there mr smith if you want to ultimately re- find your missing 10 billion. It was the same answer by the way in wa in the 1880s, 1960s, 2000’s and will be the same I am sure through most of this century.

    And again that is why you need a fairer gst distribution because it helps to facilitate a better distribution of services to encourage mobility of population to where real jobs are actually created , so next time a mining boom comes to wa you don’t have have to pay $ 8 again for a cup of coffee or $ 100,000 per year if your a non mining business to find someone to clean a toilet or mop a floor.

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