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#31
Tradies' wages cost up as construction rises

Michael Bleby
842 words
7 Oct 2014
The Australian Financial Review
AFNR
English
Copyright 2014. Fairfax Media Management Pty Limited.

In Western Australia a bricklayer now costs more – up about 16 per cent more – than at the start of the year.

A shortage of brickies that has grown through the winter months is likely to spread to other trades, but how much isn't clear yet, says Dale Alcock, the managing ­director of ABN Group, the country's third-largest home builder.

"It's almost a day by day, week by week project to see where the ­pressure comes from and whether it will flow through to carpenters, to other trades," Mr Alcock said.

"We think it will, but we're only guessing what the breakout in costs will be."

Still, Mr Alcock, whose Perth-based company made 4142 housing starts last year, the third-largest number after apartment builder Meriton and Perth rival BGC, isn't too worried.

The WA housing market is booming, but is doing so on the back of a slowing resources-based construction economy in the state's north that would have otherwise made the pricing competition sharper.

"We're fortunate that we didn't have this situation three or four years ago," he said. "It would have been a really huge problem."Skilled bricklayers cost more

In Perth, where the majority of dwellings are detached homes and made of double brick walls rather than the brick veneer that is common elsewhere, bricklayer price inflation is roughly double the national ­average of about 8 per cent, according to the Housing Industry Association.

Construction-industry wage growth remains benign – 2.8 per cent overall as of June – in an environment in which contractors have ­concentrated on winning work and replenishing depleted order books. And even though some markets are returning to life, construction ­industry wage inflation is a long way from getting economists worried.

"There was a lot of slack in the ­market that is still yet to be fully absorbed," HIA chief economist­ ­Harley Dale said.

That slack is being absorbed, ­however. A Master Builders Australia index tracking the difficulty builders report in finding skilled trades – ­particularly brickies, carpenters and site managers – has picked up for the first time since conditions slowed in 2010. "Residential construction was ­languishing for three years," MBA chief economist Peter Jones said. "The extended slowdown masked underlying skill shortages and these will inevitably resurface in some markets."

In NSW, the housing boom is ­combining with a commercial ­construction pick-up to bring ­competition back into the pricing. Over the past six months roles such as foremen, project managers, construction managers and contract admin staff have come into short supply, said Adam Shapley, the regional director for NSW of recruiter Hays.Counter offers flow

"What we've seen is increase in the amounts of candidates being counter-offered significantly higher than what they were on, whereas a year ago, that wasn't the case," Mr Shapley said.

Peter Campbell, the chief executive of Clarendon Residential Group, the state's sixth-largest home builder, says costs – including bricklayers – are rising, but under control.

"The demand is there, the cost pressures are there, but so far they've appeared to be manageable," Mr Campbell said.

In part, it is due to the far greater proportion of foreign workers active in the market than was the case ­during the state's last housing boom between 2001-03, he said.

"These people are doing a job ­Australians don't want, or there are not enough Australians to do them," he said.

While Hays' latest quarterly report says the growing infrastructure spend in NSW is creating a level of demand in the consulting and construction markets not seen since 2010, Mr Campbell isn't worried about costs getting out of hand in the ­residential market.No shortages

"I don't have my people coming back to me and reporting looming shortages of any of our materials or labour," he said.

The national construction ­economy is patchy. Master Builders Victoria director Radley de Silva said some larger contractors are moving Victoria-based staff to busier markets in NSW and Queensland.

The ­Victorian market itself is likely to pick up, but not even this will ­necessarily lead to wage inflation, says director Kane Devitt of contractor L. U. Simon which specialises in commercial and multi-residential projects. "I'm probably the most optimistic I've been for while," Mr Devitt said. "In anything from the $20 million to $50 million and $50 million  to . . . $100 million range, there seems to be a lot more out there."

The onset of work is likely to be slowed, however, by the November state election and natural break that comes with the end of the year.

Even then, however, the construction timelines of the commercial and multi-res projects that he deals in are unlikely to push prices of the so-called finishing trades – plasterers to tile-layers, carpet-layers and joinery workers – up any time soon, he said.

"It's not going to have a snowball effect all the way though," he said.


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#32
RBA holds interest rates steady amid growing China fears
THE AUSTRALIAN OCTOBER 07, 2014 4:17PM

Adam Creighton

Economics Correspondent
Sydney

THE Reserve Bank of Australia kept interest rates on hold for the 14th month in a row today.

In a statement accompanying the decision, governor Glenn Stevens retained his familiar line that the “most prudent course is likely to be a period of stability in interest rates”.

Low interest rates would support demand and help economic growth to strengthen, he said.

Although the Australian dollar had fallen recently, it was still offering “less assistance than would normally be expected in achieving balanced growth in the economy”, he said.

The Australian dollar has taken a dramatic fall in the past month, falling from US94c to a low of US86.43c.

But Mr Stevens said the exchange rate remained high by historical standards.

IN FULL: Glenn Stevens’ statement

In the statement, governor Stevens said growth in the global economy was continuing at a moderate pace.

“China’s growth has generally been in line with policymakers’ objectives, though some data suggest a slowing in recent months,” the statement said.


“Weakening property markets there present a challenge in the near term. Commodity prices in historical terms remain high, but some of those important to Australia have declined further in recent months.

“Volatility in some financial markets has picked up in recent weeks. Overall, however, financial conditions remain very accommodative.”

JP Morgan economist Ben Jarman said the RBA’s statement showed it was paying close attention to falling commodity prices and China’s weakening property market.

That means interest rate hikes were likely still a way off, he said.

“It seems like that’s well and truly on the backburner, if anything the way that the concerns are evolving towards external issues like Chinese commodity prices suggests they are being more cautious,” Mr Jarman said.

Concerns about a possible housing bubble did not appear to be weighing heavily on the RBA’s mind, he added.

“It seems very premature to jump to the conclusions that housing would be giving the RBA an itchy trigger finger on rate hikes,” Mr Jarman said.

Investors in financial markets are expecting no change to Australian official interest rates for the next 12 months.

But the end of US quantitative easing this month along with signs the US economy is improving — the US unemployment rate has fallen below 6 per cent for the first time since the GFC — will fan speculation the Federal Reserve will lift US rates.

Economists are therefore expecting greater volatility in currency and equity markets in coming months.

Thursday will see the release of the September jobs figures, which are expected to show a decline in total employment to offset last month’s massive, unexpected increase in jobs.

The unemployment rate is expected to remain at 6.1 per cent.

With AAP
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#33
Bullish Hockey has faith in boom
THE AUSTRALIAN OCTOBER 10, 2014 12:00AM

David Crowe

Political Correspondent
Canberra
SURGING demand for Aus­tralia’s commodity exports will continue for years, according to a bullish outlook from Joe Hockey, despite a price slump that has undercut his budget forecasts and sparked warnings that the resources boom is finally over.

In a provocative claim at a global economic gathering in Washington, the Treasurer described talk of an end to the boom as “market trash” that ignored powerful factors driving up the demand for iron ore, coal, gas and other resources.

The assurance came as Mr Hockey’s counterparts from other resource nations, including Nigeria and Indonesia, declared the boom already over and talked of diversifying their economies into manufacturing.

The Treasurer’s confidence in the boom is central to the economic forecasts in next month’s budget update but it revives a political debate about whether Australia must invest in new industries to prepare for a slump in gas and mining exports.

“The bottom line is the world’s going to want commodities because of the emerging middle class, particularly in Asia but also in Africa and various other ­places,” Mr Hockey said during a panel discussion hosted by the International Monetary Fund.

“I don’t think there’s any commodities (downturn) — I think that’s market trash. I think we’ve got to deal with the reality of where the world’s going to be in the next 30 years. They’re going to want commodities.”

Mr Hockey made the comments after Indonesian Finance Minister Muhamad Chatib Basri, an economist and former trade consultant, said his country had to invest more in manufacturing rather than depend on resources for two-thirds of export revenue.

“I do believe that the resource boom is over,” Mr Basri told the event held at George Washington University. It really hit us in terms of tax revenue and export revenue. It’s 65 per cent of our export revenue — energy and commodities.’’

South African Finance Minister Nhlanhla Nene backed the idea of preparing for change by shifting into processing rather than exporting raw materials.

“Our reliance on exporting unprocessed mineral resources has actually been our biggest downside,” he said.

Nigerian Finance Minister Ngozi Okonjo-Iweala, an economist and a former World Bank managing director, concurred.

She said her country’s future lay in spurring its domestic demand rather than relying heavily on oil and gas exports.

“We’ve decided that we just can’t take the risk of being a ­commodity-based economy. We have to diversify,” she said.

Confidence in the boom has been a key issue in Australian politics in the past.

Former treasurer Peter Costello sparking controversy in 2006 by declaring the boom was over and Kevin Rudd also argued repeatedly last year, upon returning to the Labor leadership, that the “China resources boom” was over.

Mr Hockey said the dour forecasts did not take into account the long-term demand from the rise of a prosperous middle class in Asia. “I don’t buy this argument that the commodities boom is over. I’m naturally an optimist. Prices might have come off for iron ore but our volumes are up.”

Mr Hockey said he wanted China to build more infrastructure and noted that Indian leader Narendra Modi wanted to raise $1.1 trillion for new infrastructure over the next four years.

“We’re in the middle of the biggest boom in the history of humanity and, frankly, commodities are going to help to make that happen,” Mr Hockey said.

“Ten years ago Australia had a relatively small gas industry. In five years’ time we’ll be the biggest exporter of gas in the world.”
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#34
Nation on the brink of new wave of mineral finds
THE AUSTRALIAN OCTOBER 15, 2014 12:00AM

Robin Bromby

Business columnist
Sydney
SEEMINGLY endless depths of iron ore, rich coal seams in the eastern part of the continent, a quarter of all the zinc and one-third of all the known lead in the world — that has been Australia’s making.

But the country is now on the brink of a new wave of mineral exploitation.

Sure, the volumes and the money earned will never match the bulk commodities such as iron ore, but it is a welcome diversification in a diversification-poor Australian economy.

The Eyre Peninsula in South Australia has been dubbed the “Pilbara of graphite”, so many have been the finds of this material that traditionally has been used in brake linings and foundries (and pencils) but is now vital for the lithium-ion battery that drives the Boeing 787 and electric cars, and for the new super material graphene.

We have dried salt lakes over much of the country that have been identified as a cheaper source than the deep underground mines of Canada and Russia of the fertiliser base, potash. In fact, Lake Chandler in Western Australia is rated by Geoscience Australia as being the world’s largest potash-bearing lake in terms of grades.

Something for the future is thorium, the “safe” nuclear fuel. Thorium reactors have a passive, molten salt-cooling system that operates naturally if the reactor shuts down. There is no steam pressure, so the reactor cannot explode like at Chernobyl, nor is there hydrogen to explode like at Fukushima.

There’s also minimal hazardous waste.

According to Geoscience Australia, Australia has the largest identified thorium resource — 485,000 tonnes — followed by India, Turkey and Brazil. Then there are new mines coming for rare earths, lithium, antimony, tungsten — and we may also restore our prominence in tin output.
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#35
Business confidence slumps for two months in row in September
THE AUSTRALIAN OCTOBER 15, 2014 12:00AM

Adam Creighton

Economics Correspondent
Sydney
LOW interest rates might be spurring housing prices but business confidence, profitability and hiring intentions all deteriorated for the second month in a row in September, almost reversing the recovery in business sentiment since the Maybe budget.

National Australia Bank’s monthly survey of about 400 firms also showed spare capacity rose to almost 20 per cent, above its long-run average since 1997 of 18.9 per cent, and forward orders, an indicator of future demand, dropped to its lowest level since April.

“Households are cautious due to fears of rising unemployment, and firms are unwilling to hire or invest until they see compelling evidence that a demand recovery is in place,” said Ben Jarman, an economist at JPMorgan.

Across sectors construction, propped up by the significant pipeline of new homebuildling thanks to low interest rates, was the only bright spot.

Reserve Bank assistant governor Chris Kent recently said Australia’s cashed-up corporate sector lacked the “animal spirits” required to stimulate further investment and hiring and implied monetary policy had done all it could do.

The latest survey showed nearly 75 per cent of firms had no intention of taking on more debt. “The latest survey shows little signs of the corporate sector being willing to risk moving first, and driving a cyclic recovery,” Mr Jarman added.

Other economists were more optimistic. “While business conditions have softened in the past two months, it is from the best levels in four years. Overall it is clear that the Aussie economy remains in good shape with job ads rising, inflationary pressures contained, home building buoyant and interest rates on hold,” said Savanth Sebastian of CommSec.

Separate data showed the number of job ads in the resources sector fell almost 4 per cent in September to finish the 12 months down almost 26 per cent, including a 55 per cent slump Queensland, according to DFP Recruitment.

The agency said it had discovered a strong correlation between the number of resource job ads and the price of Australia’s main export commodities.

Opposition Treasury spokesman Chris Bowen said government’s budget had harmed confidence and conditions.

“Before the election Joe Hockey said the election of a Liberal government would ‘turbocharge’ the Australian economy,” he said.
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#36
http://www.cnbc.com/id/102092575?trknav=...:topnews:3

Australia’s economy: from mining to building
Nur Atiqah M. Hatta

Skyline of Downtown Perth, Australia.
Australia's once-booming resources sector is fizzling, but HSBC says a new engine may propel the economy: housing and infrastructure.
"The time now appears right for a renewed focus on urban infrastructure," HSBC said in a report this week. "Such activity should help to support Australia's great re-balancing act and employment growth at a time when labor and construction costs are easing as the mining boom ends."

Sales and service income in Australia's mining industry, a key growth driver in recent years, decreased 7.5 percent between 2012/13 and 2011/12, government data show, dragged by cooling demand from China, falling metals prices and sector-wide cost-cutting measures.

Read MoreWhy the tide is against the iron ore giants

Investment

In its 2014 budget, the Australian government pledged to spend A$50 billion over seven years to "deliver vital transport infrastructure".

An incentive program was also included to motivate state governments to privatize mature assets in order to raise sufficient funds for new infrastructure.

So far, a handful of privatization/recycling plans have been formally put in train under the scheme, the most prominent being the proposed lease for the Port of Melbourne.

If states fully utilize the Federal government's recycling program and the remaining funds are appropriately sourced by leveraging on private sector expertise, these measures could potentially boost Australia's gross domestic product by as much as 2 percent over the next two to three years, according to Paul Bloxham, chief economist for Australia and New Zealand at HSBC.

Challenges

The government's plans face challenges including timing and land supply, according to Ric Spooner, chief market analyst for CMC Markets.

"Large public infrastructure projects, like mining projects, have long planning and approval processes," he said. "It may be difficult to get some of these projects up and running until well after the big mining projects have come to an end."

Read MoreIs Australian housing facing a repeat of 2003?

For housing, the supply of land and expensive approval processes have been an impediment to building the new dwellings Australians need, he said, noting some of this can be attributed to political pressure.

Electorates like the idea of more affordable housing, but not the higher population density or urban sprawl that comes with it. This puts politicians in a vice between first home buyers that find it difficult to enter the market and communities seeking to maintain the character of their neighborhoods.


Employment

A decline in mining investment will likely see Australia lose 50,000 to 75,000 jobs over the next few years, Australia New Zealand Banking warned in July, but infrastructure investment could make up for job losses.

"We see a pickup in infrastructure building as a new key way to absorb many of the jobs that are likely to be lost as mining investment falls in coming years," said Paul Bloxham, chief economist for Australia and New Zealand at HSBC.
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#37
Rate cut could return to RBA agenda
AAP OCTOBER 20, 2014 4:45PM

For most economists, the question is not if, but when, the RBA will start to lift interest rates.

But Guy Bruten, AllianceBernstein's senior economist for the Asia-Pacific region, is asking what it would take to put a rate cut back on the agenda.

Questioning the consensus is always a useful exercise for economists -- what seems to be obviously true can often fall apart on careful examination.

It's an exercise that Mr Bruten thinks is worth doing in light of the market turmoil over the past week.

And there are a couple of plausible scenarios that would be consistent with rate cuts.

One is related to the market's currently skittish mood as the US Federal Reserve moves to wind back the stimulus program that's kept interest rates so low for years.

If that evolved into "a full-blown crisis and a global recession", then the RBA would very probably intervene by cutting the cash rate, Mr Bruten said.

But even if there is no "global Armageddon", Mr Bruten wonders whether there might be a set of circumstances that, although less spectacular, might still lead the RBA to cut interest rates again in the coming six months or so.

And for that, he says, four things would have to happen. Two already have.

The first is rising anxiety over the commodity price downturn.

"A big downturn in the mining sector's capital spending has been part of the Australian narrative for some time, and the reality of that is starting to unfold now," he said.

The second is that the RBA should have room to stimulate the economy without a blowout in inflation.

With record low wages growth, consumer price index figures this week should confirm inflation is heading toward the bottom of the RBA's two to three per cent target band, Mr Bruten said.

"And with inflation expectations and energy prices falling, there seems to be plenty of headroom for a rate cut."

But the other two criteria are as yet not fulfilled.

One is an appreciation that housing construction is losing momentum.

"Come mid-2015, the lion's share of the upswing will be done," Mr Bruten said.

But, despite signs it will flatten out, it is currently still on the way up.

The other is a failure of the jobs market to stabilise and start improving, a process that's central to the transition from mining-led growth to growth driven by non-mining parts of the economy.

There have been some worrying developments in the labour market, notably the employment component of the NAB's latest business survey.

"But it is not enough to trigger a change in the policymakers' view," Mr Bruten said.

"So at this stage, two out of the four factors look like getting a tick."

Even so, although not the most likely outcome the probably of a rate cut is rising.

"And given the surprise that this would represent to consensus expectations, developments in those other two factors are worth watching closely."
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#38
Rates to stay low despite housing surge: RBA
THE AUSTRALIAN OCTOBER 21, 2014 12:17PM

Adam Creighton

Economics Correspondent
Sydney
THE Reserve Bank expects to keep official interest rates at rock bottom lows until well into next year to stimulate Australia’s lopsided economy, as rising global financial volatility bolsters the case for caution.

The minutes of the RBA’s October board meeting, released today, also showed members were concerned that increased competition among lenders could result in the issuing of riskier loans, leaving the economy exposed to sudden falls in house prices.

The central bank’s nine-member board, which has kept the official cash rate at a record low of 2.5 per cent since August last year, said interest rates for loans had edged lower in recent months as competition among lenders increased.

“In this context members discussed the importance of lender maintaining strong lending standards,” the RBA said.

IN FULL: RBA minutes

The bank noted the increased financial volatility in September as the European Central Bank surprised investors by cutting its official cash rate to 0.05 per cent to ward off deflation. Meanwhile the US Federal Reserve wound up its QE program this month, but has undertaken to keep rates at record lows for a “considerable” period of time — generally taken to be until the middle of next year.

A week before its October meeting the Reserve Bank suggested lending standards should be toughened up to slow the rapid housing price rises in Sydney and Melbourne.

The RBA’s minutes today said dwelling investment rose by more than eight per cent in 2013/14 and is expected to strengthen in coming months, with loans for housing investors outstripping those made to owner occupiers.

“Dwelling investment had picked up and is expected to remain strong following the rapid rise in housing prices and higher levels of approvals,” the RBA said.

Credit growth had remained moderate overall but in recent months there had been a further pick up in lending to investors.

The minutes also show the RBA believes the Australian dollar still needs to fall further despite losing more than six per cent in value during September.

The RBA said that fall was mostly due to a rally in the US dollar against most major currencies.

“The recent depreciation followed a period when the Australian dollar had held up against the US dollar more than most other currencies, and meant that the Australian dollar was now around its January low against the US dollar,” the RBA said.

“The exchange rate remained high by historical standards — particularly given the decline in commodity prices — and was offering less assistance than would normally be expected in achieving balanced growth in the economy.

With AAP
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#39
Business confidence steady in Q3: NAB
OCTOBER 23, 2014 12:30PM

Mitchell Neems

Business Spectator Reporter
Melbourne
Not even super-low interest rates are tempting consumers and businesses out of spending hibernation, according to a private survey.

Business confidence held steady in the September quarter, while conditions edged slightly higher,

According to the National Australia Bank's quarterly business survey, business confidence held steady at 6 points, in line with the result in the previous quarter.

Business conditions rose slightly to 3 points, from 1 in the previous quarter, while expected business conditions in the next 12 months also edged higher, lifting to 25 from 24 in the prior quarter.

NAB chief economist Alan Oster said expectations of any significant rebound in domestic demand were premature.

"Both consumers and business remain cautious about spending, despite encouragement from very low interest rates, which is unsurprising given slower rates of income growth," he said.

"Consequently, corporate leverage ratios are low and household savings rates remain high, although there have been signs of improvement more recently."

On the plus side, strong residential construction, boosted by low interest rates and strong investor demand, including foreign investors, would have flow-on effects to the rest of the economy, Mr Oster said.

Recent falls in the Australian dollar would also help export competitiveness, but could have a negative impact for some businesses, he said.

"With the Australian dollar expected to continue on a downward track over 2015, importing firms are likely to experience renewed pressure from purchase costs," Mr Oster said.

NAB did note that the recent large depreciation in the local currency occurred after the survey period, so is not reflected in the survey.

"However, for now, the removal of the carbon tax and lower energy costs are providing some relief for firms," Mr Oster said.

NAB said sentiment was mixed across the states and industries, but noted continued strength in interest rate-sensitive sectors, particularly construction, performing well due to low interest rates and strong investor demand (including foreign investors).

Service industries also remained relatively positive.

"Outside of the services and construction sector, business conditions remain soft in levels terms," NAB said.

Forward orders eased, suggesting sluggish domestic demand to continue in the near term.
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#40
Lots of life left in mining

NATHAN WOULFE Recruitment editor
383 words
25 Oct 2014
The Daily Mercury
APNDAM
English

Copyright 2014 APN Newspapers Pty Ltd. All Rights Reserved

MASSIVE PROJECTS: Vote of confidence for Australian resources

WHEN the mining and resources industry was being hailed as the saviour of the Australian economy, it wasn’t because the sector was creating massive employment.

It was making money, and lots of it, for our state and federal governments, but in terms of raw job creation, the industry has never really been that large.

Before February 2011, according to figures from the Australian Bureau of Statistics, the mining industry had never topped 200,000 workers.

In comparison, also in February 2011, there were twice as many people working in financial and insurance services.

Over the past three years, the mining sector has seen peaks and troughs in total employment levels, and currently employs about a quarter of a million people.

Based on those numbers, the industry’s shift from construction to operations hasn’t had a massive impact on employment levels, at least not yet.

Even accounting for the changing direction of the sector on the whole, there are still plenty of projects around the country with promising employment opportunities.

Western Australia has about $160 billion worth of projects in the pipeline, despite the transition into record exports with few new major projects in line to replace the major Gorgon LNG and Roy Hill iron ore mine.

The Northern Territory, meanwhile, is emerging as an oil and gas hub.

Yet if you want to talk coal, it’s always going to be Queensland.

The latest mammoth project – the $6 billion China Stone thermal coal mine in the Galilee Basin west of Mackay – is expected to export 38 million tonnes of coal annually, for half a century.

The project will have similarly large neighbours, in India’s Adani and GVK, both of which are constructing their own projects in the Basin.

All three will dwarf operating export facilities anywhere in the country.

Ignoring the 3900 construction jobs and 3400 ongoing operational roles, the fact that Meijin Energy is pushing ahead with the project despite sliding prices and other mines shuttering their operations, is a strong vote of confidence in the future of the mining industry, not just in Queensland but nation-wide.


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