Comments on: Gambling with issue strengths

By: M J Warby

M J Warby — Thu, 15 May 2008 13:09:03 +0000

If we are going to discuss inflation, shouldn’t the Reserve Bank get a mention at some stage? After all, action earlier by them would have reduced inflationary pressures.

By: NPOV

NPOV — Tue, 13 May 2008 01:28:38 +0000

Well sure, and BHP and its ilk are surely at least partly successful because they’ve done a good job at anticipating difficult-to-predict markets, and presumably would be better at than governments.
Are labour shortages and infrastructure bottlenecks a big problem in other significant commodity exporting nations? Or is something peculiar to Australia?

By: Andrew Norton

Andrew Norton — Tue, 13 May 2008 01:08:05 +0000

On the other hand Australia is not the only player in the international mining market. I’m no expert on the mining industry, but presumably companies don’t start building multi-hundred million dollar facilities unless they are very confident of customers at a good price.

In the ABS series, between 2002 and mid-2005 they were spending about $2.5 billion a quarter on capital expenditure - still a lot of money. It then rapidly increased, to $5.8 billion in the September 2007 quarter.

I don’t have any brief for the management quality of the mining industry, but I do resist the idea that things as complex as international commodity markets or even local labour markets are easily predictable.

By: NPOV

NPOV — Tue, 13 May 2008 00:55:41 +0000

Hmm…China has been growing its industrial base at a very rapid rate since the late 1990’s, so it’s a little hard to see what’s so surprising about the surge in demand for commodities in the last few years - was it generally expected that China would have enough commodities of its own?

By: Andrew Norton

Andrew Norton — Mon, 12 May 2008 23:47:20 +0000

NPOV - The current boom in commodities demand seems to have taken everyone by surprise in its scale. Apparently tonight’s budget will have yet another upgrade in revenues from this source. According to ABS mining statistics, quarterly capital expenditure starts rising massively in mid-2005. Presumably planning for that must have started some time before. But it has more than doubled in less than 3 years, which unsurprisingly has put massive strains on the available labour force for both construction and operation of new facilities.

By: NPOV

NPOV — Mon, 12 May 2008 23:35:32 +0000

(BTW, is it just me, or is everybody seeing GMT date/time stamps?)

By: NPOV

NPOV — Mon, 12 May 2008 23:34:53 +0000

Andrew, how far ahead do most large corporations (e.g. mining companies) project their expected labour requirements? And does this information find its way to universities and TAFEs when determining allocations?
I would have thought that, for instance, 5 years ago BHP would have a reasonable idea of what sort of labour reuirements they’d have by now - and surely 5 years is long enough to train up the average BHP employee?

By: Andrew Norton

Andrew Norton — Mon, 12 May 2008 02:56:54 +0000

Conrad - If the solution is so obvious, easy and inexpensive then NPOV’s tax breaks are unlikely to make a difference. While I think higher ed policy is deficient in putting constraints on supply, I would not argue that every skills shortage is the result of policy failure. Sometimes demand for labour will shift faster than supply possibly could (given multi-year apprenticeships and degrees even for entry-level jobs, let alone the many jobs for which experience is necessary).

By: conrad

conrad — Mon, 12 May 2008 01:51:41 +0000

Andrew,

1) Companies might be reluctant to do that, but the problem now is that some people possibly moving to another company is better than having no people to start with or having huge wage bills.

2) I don’t see why decent management strategies can’t be used to get around this. Many places have incentives to stay after training (e.g., withholding bonuses etc. until goals have been met etc.).

3) At least for industries like mining (some of the biggest complainers), I don’t really see how subsidizing your competitors a small amount makes much difference, excluding the cost involved in training (which must be diddleys for companies like BHP), unless their extra production somehow depresses prices, which for things like coal, seems rather unlikely or perhaps causes higher prices in associated service industries (again, a problem that should be easy to get around).

By: Andrew Norton

Andrew Norton — Mon, 12 May 2008 01:13:45 +0000

NPOV - ABS stats suggest that about a quarter of postgrads and about 7% of undergrads have employer financial support (which would be tax deductible), though presumably this would be almost entirely at third-party education providers. Often employers will oblige employees to stay with them for a certain number of years, or have to pay back the money spent on them.

Unless the employer has some comparative advantage in education or training I don’t see that they should be encouraged to enter this market themselves. There will be benefits from specialisation and economies of scale if 3rd party providers do the job instead.