Ferguson's mistimed mumble
JUST when the Government thought it was finally time to enjoy a few minutes of hard-earned sunshine, that old party pooper Martin Ferguson had to come along and spoil the fun. "The boom," announced our Mnister for Resources and Energy, "is over."
Naturally, the Labor Party being the Labor Party, his colleagues scrambled to explain that he had not actually meant that the boom was over. Far from it, explained Finance Minister Penny Wong. Well, not really, soothed Communications Minister Stephen Conroy. And even the Prime Minister felt the need to get in on the act: what Martin had intended to imply was that commodity prices were not what they used to be, not that it was time to stack up the canned food and head for the shelters.
The head of the Minerals Council Mitch Hooke enthusiastically agreed: there was plenty of life left in the old banger. Well, he would say that, wouldn't he? But then the Governor of the Reserve Bank, Glenn Stevens, chimed in with the definitive put down: as far as he was concerned, the boom was definitely not over - at least not yet, so there.
At which the government drew a collective sigh of relief, because the last thing it wanted was for any minister, let alone the one with the portfolio responsibilities, to start pouring Roundup on the fragile garden of business and consumer confidence. After all, some had long enough memories to remember the last time that happened, and it was not pretty.
It was in fact way back in 1986, when the brash young treasurer, Paul Keating, in the course of a radio interview about the mounting foreign debt, made the incautious remark that if things did not improve Australia could be in danger of becoming a banana republic. The phrase hit the money market like a bomb, and with the prime minister Bob Hawke out of the country, none of his colleagues had the clout, or the nerve, to suggest that the treasurer might be a bit over the top.
Next day Hawke, who was on an official visit to Japan, was asked by the travelling press if he agreed with Keating. Hawke replied tersely: "No, I don't," and having conceded that his treasurer's remarks, if taken out of context, were "rather horrific", went off to a banquet. This apparently insouciant attitude did nothing to calm the situation at home, and eventually Hawke was persuaded to ring the deputy prime minister, Lionel Bowen, and direct him to set up a cabinet meeting for next Monday morning, which he would address by telephone. But he did not make his decision public.
This was on the Friday night. Hawke spent the Saturday playing golf and watching sumo wrestling before flying to Beijing the next day. He declared himself "too busy" to make any further comment on the controversy until told by his staff that the travelling press were preparing articles for Monday's papers criticising his apparent lack of leadership, at which point he broke cover.
Monday's papers thus carried headlines like: "Hawke moves against Keating" and "Hawke pushes Keating aside," which prompted an expletive-filled phone call from the outraged treasurer. Things eventually calmed down, but the financial panic triggered by that single ill-considered phrase became part of Labor's folk lore.
Fortunately there was little risk of a repeat performance last week. When Keating talked, people sat up and listened. When Ferguson mumbles, the reaction is more likely to be: "What did he say?"
And in any case, Gillard's efforts to defuse any potential crisis had some unexpected help from Tony Abbott, still determined to blame everything - and we mean everything - on the carbon tax to the exclusion of all else. Thus when BHP-Billiton announced that it was postponing the planned expansion of its huge Olympic Dam project because of "current market conditions including lower commodity prices and higher capital costs" - the very conditions that led Ferguson to his pessimistic conclusion about the boom - Abbott said no, of course the real reason was the carbon tax, with a little help from the mining resources tax.
Well for starters the minerals mined at Olympic Dam are uranium and copper, neither of which is subject to the mining resource tax, and in any case the company's statement said explicitly, "the tax environment for this project has not changed at all since we started working on it six or seven years ago" - back in the Howard years.
So, asked Leigh Sales on the ABC's 7.30 report, had Abbott actually read the statement? He said no. Next day, he said he had, but he thought the CEO of BHP-Billiton, Marius Kloppers, was just being polite to the government; he knew as well as anyone else that it was actually the carbon tax. In other words, not only was Kloppers wrong, but he was deliberately lying about it.
The hard fact is, of course, that even if the boom is not yet over, it is definitely winding down, mainly because demand is falling and the competition from other newly developed suppliers is becoming stronger. This combination is forcing down prices, but costs, driven largely by the high Australian dollar, are rising.
Our resources won't go away but their exploitation will be less frenetic and less profitable in future and it will deliver a lot less revenue to a needy and dependent government. Ferguson's hyperbole should be read as a timely warning. This may not be the end, or even the beginning of the end, but it is certainly the end of the beginning.