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Mined, Sealed, Withered: WAs resource boom aftermath

Matt Brennan

The fate of WAs future is in a precarious and somewhat exciting state. There is more tension

surrounding the mining boom and post mining boom than in the final episode of survivor season 24.The key to the existence of the boom is iron ore. Iron ore is the barometer for growth, as the vast

majority of iron ore (The Harvard Business Review estimates 95%) is used in the manufacturing of

steel, which in turn, is essential for the building & construction industry. Following an enquiry from

the International Monetary Fund (IMF) as to how China was growing so fast, this sector was revealed

as a major proponent ofChinas record growth rates. The spot price of iron ore measures extra

demand required to quench a nations thirst that is not already satisfied by long term contracts and

this in turn represents the real value of the commodity, as this price is not softened to keep our pals

from the Orient happy.

Between February 2006 and March 2008, the spot price of iron ore more than tripled, going from$65.20 a tonne to $197.12, which undoubtedly is well beyond normal range. During this period the

ASX adopted a Pauline Hanson approach, asking the leading iron ore produces; BHP, RIO, Fortescue

(FMG) and Atlas Iron (AGO) on numerous occasions to please explain the sharp spikes in their share

prices. The best answer came from the company secretary of Atlas, Tony Walsh, when they rose 21%

in a day: Merrill lynch stated its price target for Atlas Iron as $6.00 per share, (which represents a

258% increase on the then current price.) Unemployment, according to the Australian Bureau of

Statistics (ABS) dropped to as low as 2.7% in WA which is the lowest ever recorded. I was unable to

obtain the Work Clobber sales figure for flanellete shirts over this time frame, however new anti-

hoon laws were introduced in the period, which supports the anecdotal evidence of a sharp spike in

the number of Cashed Up Bogans (CUBS) that coincided with the mining boom.

Bogan-villia: The Perth Metro area reached epidemic proportions of CUBS. Source: Google Images

The boom in WA, along with the strength and security of the financial system in Australia, are the

two primary reasons Australia did not join the vast majority of the developed world in recession.

Now though, many years on from the boom, the demand for iron ore has shrank, the ASX had to ask

these same mining companies why their share prices dropped so rapidly, and unemployment more

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than doubled to 5.5% in WA (which is still low from a national perspective), amongst the few

positives that can be salvaged are that the number of mullets and rats tails parading around the

streets of Perth, has noticeably declined.

The most alarming factor of the post-boom syndrome, however, is that ghost towns are appearing

like popped pimples across the surface of WA, as through the flurry of mine closures, major townsand hubs are just a remnant of what they once were. Like Jerry Maguire, WA should be insisting the

federal government show me the money, as the mining boom has been used as a political tool to

prop up the textile, clothing and manufacturing industry, which is centred in NSW and Victoria.

The argument of taking patriotism to the extreme is out-dated in a globalised world, the people who

pledge they will only buy Australian regardless of price. These people, even though they may drive a

car made overseas and have an attitude towards foreigners akin to Clint Eastwoods character in

Gran Torino, are given carte blanch and a voice in their bid to rally for Australias most inefficient

sector simply because they are the loudest.

Through rapid expansion of online shopping stores like Zara, Gucci & other quality labels, there is a

direct, cheaper link to better quality products designed through decades of research & development

and innovation. Additionally, the economic demise of Portugal, Italy and Spain has meant the

paradigm of cheap labour is shifting away from China who has a burgeoning middle class demanding

greater income, and into some of the fashion capitals of the world where wages have plummeted.

Why should the manufacturing industry suckle at the teat of the mining boom in WA? As Barrack

Obama said in his inaugural address as president we have the opportunity to bend the arc of history

in our favour.

Projects like the foreshore development are a good start for WA, but need additional funding forcaf strips and surrounding infrastructure, to avoid becoming desolate like the Gold Coast during

winter. The money generated from the boom should be reinvested into mining towns, learning from

Mandurah (which is now deemed as part of the greater metropolitan area). Mandurah only started

to thrive when it moved away from being a holiday house destination, receiving a huge injection of

cash for real estate projects and a rail infrastructure network which helped transform Mandurah into

an idyllic retirement village, which also does no harm in solving the issue of ageing population issue

(Mandurah in fact has the highest median age of any region in WA).

Metropolitan housing estates could also be accelerated rapidly if the WA mining boom proceeds

were available for use by WA. According to the Real Estate institute of WA (REIWA), there isenormous pressure in the under $550,000 category of houses and a genuine concern for people not

being able to meet their rent repayments, which would not be as high were there an adequate

supply of housing for WA in the 21st

Century. WA has the comparative advantage to be a

construction industry leader, with still vast reserves of iron ore, steel plants operating well below

capacity (Blue Scope Steel Financial Report 2012) and plenty of space for development. Rather than

being used solely as a quarry, WA deserves the opportunity to capitalise on its boom in a similar

manner which helped shape Victoria during the 1856-1858 gold rush.