When I started the book, it was intended to be about my own
turbulent business experiences, but halfway through writing
it I realised it was more about Australia’s experiences than
my own.
The book covers the period from the early 1970s when
Australia had just emerged from what was called the ‘nickel
boom’, where in the game almost everyone was a millionaire.
Once the nickel boom fell over – it was like the tide having gone
out leaving all the boats stranded on the beach.
This is being repeated right before our eyes now; having
come through this remarkable 150-year event in Australia, as
detailed in the Grattan Institute Report, the tide is proceeding to
go out. As Warren Buffet says, “It’s only when the tide goes out
you can see who is swimming naked”.
Previously there has been a single major cause for a boom’s
demise, but this time it seems that there is a whole orchestra
of enemies working against Australia’s mining industry,
which although it has not quite killed the industry altogether,
has changed the shape and the direction of investment in the
industry. There are some sobering messages in this downturn
for Australia.
Australia and China are both currently confronted with a
downturn, but the attitudes of each country’s government stand
in stark contrast one to the other. You might think that we lived
on different planets.
On getting into this ‘tight spot’, the two countries have
travelled different roads. China’s government usually has an
eye to prioritising expenditure on projects that stand a chance of
generating benefits which exceed the real cost of debt, whereas
Australia’s government rarely thinks beyond ‘buying votes’ at
the next election.
Let me give you two stark examples of both governments’
attitudes to new private projects.
Kim Williams (former CEO of News Ltd) used this example
in his address to the Business Leaders Forum in Perth in
June 2013:
I am currently chair of the Business Council of Australia’s
deregulation taskforce. Some of the examples of
compliance costs on mining companies almost drain you
of the will to live. I was shocked to learn that a mining
company in Queensland submitted a document that was
46,000
pages long to meet its Commonwealth and state
regulatory obligations. Forty-six thousand pages long!
It’s preposterous.
I guarantee you that no one has read the whole
thing other than perhaps the company’s lawyers and
compliance people. Frankly, all of us, as people and
companies, only have so much energy. I am not saying
for a moment that there is no place for regulation, but
it needs to be judiciously applied and be applied with a
clear eye to its costs.
It is enough to make you weep for Australia’s prospects of
ever achieving her true potential.
Now contrast this with China’s attitude to deregulatory
legislation. Pro-development headlines are a daily occurrence
in China and are put clearly and unambiguously. One example
comes from the
National Business Daily
(
August 2013):
Cabinet to Reduce Red Tape.
The State Council, China’s cabinet, on May 16 issued a
document to abolish central government administrative
approvals on 117 items. The document made 104 of the
items public, while the other 13 remained undisclosed on
the grounds of national security. The listed items cover
projects such as investment in civil airports and urban
transportation projects. The cabinet said such projects
will no longer need government approval or will only
require review from lower-level authorities.
The move is part of the government’s reform plan
to reduce government bureaucracy and regulatory
overhang. But some experts expressed concern that easing
government controls could lead to an investment boom.
To return to the question “Is the Australian mining
boom over?” The days of companies outlaying large capital
expenditure are over – we are moving into a period of
restructuring and increased productivity. As the construction
teams move out, they will be replaced by the thousands
of operators and contractors whose challenge will be to
bring profitability to the over-budget projects in an effort to
pacify angry shareholders who are starting to demand dividends.
Booms and busts offer great opportunities, and in today’s
‘
bust’, there are some remarkable bargains around for those
with cash and who are patient enough to sit out a five-year cycle.
The secret to success for the immediate future is
survival through flexibility.